Kovats Real Estate School Practice Test 2026 - Free Real Estate Practice Questions and Study Guide

In a short sale scenario, the lender agrees to accept less than what is owed on the mortgage due to the homeowner's financial hardship. This often occurs when the homeowner is unable to make their mortgage payments and is facing foreclosure. The lender would typically evaluate the situation and determine that accepting a lower amount is in their best interest, as it may prevent the costs associated with foreclosure proceedings and related losses.

This situation benefits the homeowner by allowing them to sell the property for less than the outstanding mortgage balance, which can alleviate some of their financial burden. The process is more complex than a traditional sale, as it involves negotiations with the lender and often requires approval of the sale price before the transaction can be completed. In summary, the essence of a short sale is centered around the lender's willingness to settle for a reduced payoff rather than pursuing a more costly foreclosure process.