A short sale in real estate is an offer of a property at an asking price that is less than the amount due on the current owner's mortgage.

A short sale is usually a sign of a financially distressed homeowner who needs to sell the property before the lender seizes it in foreclosure.

All of the proceeds of a short sale go to the lender. The lender then has two options—to forgive the remaining balance or to pursue a deficiency judgment that requires the former homeowner to pay the lender all or part of the difference. In some states, this difference in price must be forgiven.