A short sale involves selling a property for what circumstance?

A short sale refers to a financial transaction in which a property is sold for less than the amount owed on the mortgage. This situation typically arises when a homeowner is unable to continue making mortgage payments, and the lender allows the property to be sold for a lower price to avoid foreclosure. The lender agrees to accept the proceeds from the sale as full satisfaction of the mortgage debt, even though the sale price does not cover the full amount owed.

This arrangement is often beneficial for both the homeowner and the lender; the homeowner can avoid a foreclosure on their credit report, while the lender can recoup some of the losses that would otherwise be incurred if the property went into foreclosure. The other options do not accurately describe the conditions under which a short sale occurs.