In what situation is a short sale likely to occur?

A short sale is likely to occur when the loan balance is greater than the property value. In this situation, the homeowner owes more on their mortgage than what they can realistically sell the property for in the current market. This often happens during economic downturns or in markets with declining property values, where sellers are unable to obtain enough funds from the sale to pay off their existing mortgage. As a result, the lender may agree to accept a payoff amount that is less than the outstanding loan balance in order to avoid the lengthy and costly process of foreclosure. This arrangement benefits the seller by allowing them to avoid foreclosure, while also providing the lender with an opportunity to recoup some of their investment rather than none at all.