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A "short sale" is defined as a sale where the proceeds from the sale of a property are less than the amount owed on the mortgage. In this situation, the lender agrees to accept a reduced payoff to facilitate the sale, allowing the homeowner to avoid foreclosure. This commonly occurs when a homeowner is under financial distress and cannot keep up with their mortgage payments. The process often requires the lender's approval, as they must agree to accept less than the full amount owed.

This definition is crucial for understanding various real estate transactions and the implications for both sellers and lenders. Knowing that a short sale occurs under these specific financial circumstances helps individuals involved in real estate to properly assess the risks and benefits associated with such transactions.