what exactly is a short sale when selling a house?

Answer 1

A short sale occurs when... A property is sold for less than what is owed on it. For instance: A house has a first mtg of 125000 and a second mtg of 35000. A buyer offers to purchase the property for 150000 which is 10000 less than the loans. Of course you will need the approval of the lenders to close the transaction.

You normally see this situation when the property is in foreclosure or the payments are not being made. The lender's attitude usually is "Better to get most of the outstanding balance and not have to foreclose and take back the property".