Which of the following terms describes a situation where a property is sold for less than the amount owed on the mortgage?

A short sale occurs when a property is sold for less than the outstanding mortgage balance, and this process typically requires the lender's approval. In a short sale scenario, the homeowner often faces financial hardship and cannot keep up with mortgage payments, prompting them to seek alternatives to foreclosure. When the property is sold, the lender agrees to accept a reduced payoff as a way to mitigate their losses, allowing the transaction to proceed despite the deficiency.

The term short sale aligns precisely with this situation as it emphasizes the selling price being "short" of the debt owed. Understanding this terminology is crucial for real estate professionals, as it impacts the sale process, negotiations with lenders, and the overall transaction dynamics.