What is a short sale in real estate?

A short sale in real estate refers to a situation where a property is sold for less than the amount owed on the mortgage. In this scenario, the seller is typically facing financial hardship and unable to keep up with their mortgage payments. The lender agrees to accept a lower amount than what is owed as a way to avoid the more costly process of foreclosure. This allows the homeowner to sell the property and settle their debt, albeit at a loss to the lender.

The other options do not accurately define a short sale. For example, the notion of the lender taking over the property describes a foreclosure, not a short sale. Similarly, a transaction where property values rise does not align with the concept of a short sale, which specifically involves selling below the owed mortgage amount due to financial distress. Lastly, a type of foreclosure process without lender involvement is not representative of a short sale, which inherently requires the lender's agreement to accept less than the owed amount. Thus, the correct choice clearly aligns with the definition and context of a short sale.