NBREA Real Estate Practice Test 2025 - Free Real Estate Practice Questions and Study Guide

A short sale in real estate occurs when a property is sold for an amount that is less than the outstanding balance of the mortgage on that property. This situation typically arises when a homeowner is facing financial difficulties and can no longer afford their mortgage payments. They seek the lender’s approval to sell the home at a lower price, which the lender must agree to, effectively allowing the homeowner to avoid foreclosure while potentially recouping some of the loan amount.

In this context, the crucial aspect of a short sale is that it involves negotiating with the lender to accept less than what is owed. This process often requires documentation of the homeowner's financial hardship and an agreement from the lender that they will forgive the remaining balance after the sale if it goes through.

Understanding this concept is essential for both buyers and sellers in the real estate market, as it not only affects the sales process but also the financial implications for the seller and potential negotiations involved.