What does the term "short sale" mean in real estate?

The term "short sale" in real estate specifically refers to a situation where a homeowner sells their property for less than the amount owed on the mortgage. In this arrangement, the lender agrees to accept the reduced amount to help the seller avoid foreclosure. This process is typically initiated when the homeowner is in financial distress and is unable to keep up with mortgage payments.

In the context of the other options, while a commission might be involved in many real estate transactions, it is not a defining characteristic of a short sale. The option regarding proceeds being used to pay off taxes does not accurately describe a short sale either, as it focuses more on the tax implications rather than the terms of the mortgage. Lastly, while a sale might occur quickly in a competitive real estate market, this speed does not define a short sale; rather, the defining aspect is the financial situation regarding the mortgage balance. Therefore, the correct answer highlights the essential concept of a short sale being about the sale price being less than the mortgage balance.