Washington State Real Estate Practice Exam 2025 – All-in-One Guide to Master Your Real Estate License!

A short sale occurs when a homeowner sells their property for less than the amount owed on their mortgage, with the lender's approval. In this scenario, the lender usually agrees to accept a reduced amount to alleviate their losses, as going through a foreclosure can be more costly and time-consuming.

The implications of a short sale often lead to the lender losing money, which is the reason why this choice is accurate. Foreclosures incur additional expenses, including legal fees and carrying costs for the property, making a short sale a more favorable option for lenders looking to minimize their losses.

While the seller may avoid foreclosure through a short sale, they are typically not making a profit, as they are selling the property for less than what they owe. The buyer, on the other hand, often purchases the property at or below market value due to the circumstances surrounding the short sale, which contradicts the idea that they pay above market value. Lastly, a short sale is distinctly different from foreclosure; in a foreclosure, the lender takes possession of the property after the owner defaults on their mortgage, whereas a short sale is initiated by the homeowner in collaboration with the lender.