What is a short sale?

• A. A sale that is completed without a mortgage
• B. A sale of a property where the sale proceeds exceed the mortgage balance
• C. A sale of a property where the sale proceeds are less than the balance owed on the mortgage
• D. A sale completed in less than 30 days

Answer: (C)

A short sale refers to a transaction in which the sale proceeds from a property are insufficient to cover the outstanding balance on the mortgage. This typically occurs when the property's market value has declined, leading the homeowner to sell it for less than what they owe to the lender. In such cases, the lender often agrees to accept the lower amount as full settlement of the debt, which helps the homeowner avoid foreclosure.

This option clearly captures the essence of what makes a transaction a short sale. Homeowners facing financial difficulties might pursue this route as a way to sell the home quickly without further damaging their credit score, as long as the lender consents to the sale at the reduced price.

The other definitions do not accurately represent a short sale: selling a property without a mortgage does not involve a short sale scenario, nor does selling a property for more than the mortgage balance qualify as a short sale, since that would result in a profit for the seller. Additionally, the timeframe of completing a sale, such as finishing it in less than 30 days, does not determine whether a sale is classified as a short sale or not.