What is a "short sale"?

A "short sale" refers to a situation where a property is sold for less than the total amount owed on the mortgage. This occurs when the homeowner is in financial distress and unable to continue making mortgage payments. In order for the sale to happen, the lender must agree to accept less than what is owed to them on the loan, which typically requires the bank to approve the short sale process. The goal is to avoid foreclosure, allowing the seller to walk away from the debt with less damage to their credit and the lender to recoup some of their losses.

In contrast, the other options do not capture the essence of what constitutes a short sale. A quick sale or discounted price is too vague and not necessarily related to the mortgage amount owed. A sale involving multiple offers could occur in a normal market; it does not specifically define a short sale. Lastly, a transaction where a buyer assumes a seller's mortgage pertains to a different type of transaction altogether, focusing on the assumption of debt rather than the equity situation that defines a short sale. Thus, the choice relating to proceeds being less than the mortgage amount correctly identifies the unique nature of a short sale.