How is a short sale generally characterized?

A short sale is characterized as a transaction in which the proceeds from the sale of a property are less than the amount owed on the mortgage. This situation commonly arises when a homeowner is facing financial difficulties and is unable to continue making mortgage payments. Instead of going through foreclosure, the homeowner negotiates with the lender to allow the property to be sold for less than the outstanding mortgage balance.

The lender must agree to accept the reduced amount because they typically would lose more money in a foreclosure process, making a short sale a more viable option for both parties involved. This condition distinguishes short sales from other real estate transactions where properties are sold at or above market value, or where the sale is completed without lender consent. Therefore, the essence of a short sale lies in the sale price being insufficient to cover the remaining mortgage, validating the accuracy of the answer provided.