Short Sale Definition
Short Sale: In real estate, a short sale is when a bank or mortgage lender agrees to discount a loan balance due to an economic hardship on the part of the mortgagee.
Extenuating circumstances delegate whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market climate and the individual borrower's financial situation.
A short sale typically is executed to prevent a home foreclosure. Often a bank will choose to allow a short sale if they believe that it will result in a smaller financial loss than foreclosing.