Professional Legal Training Course (PLTC) Real Estate Practice Exam

A short sale is specifically characterized by the fact that the property is sold for less than the amount owed on its mortgage. In such cases, the seller is seeking to sell the property to avoid foreclosure, but the proceeds from the sale do not cover the outstanding mortgage balance. This process typically requires lender approval, as the lender is agreeing to accept a lower amount as settlement of the mortgage debt.

In a short sale scenario, the seller is often facing financial difficulties, making it necessary to negotiate with the lender to allow the property to be sold for an amount that is short of the mortgage obligations. This contrasts with other situations in real estate transactions, such as sales below market value, which do not necessarily involve financial hardship or lender involvement. Additionally, short sales do not include cash incentives from sellers to buyers or take the form of real estate auctions, which have their own distinctive procedures and characteristics.