What are the implications of a short sale?

A short sale has specific implications primarily related to the financial aspects of a property's sale. When a property is sold for less than the outstanding mortgage balance, this transaction allows the borrower to avoid foreclosure, but it requires the lender's approval because they are accepting a loss on the loan. In this scenario, the lender must agree to accept less than what they are owed and typically assesses the situation to ensure that they have no better alternatives for recovering the amount due.

This process distinguishes short sales from standard property sales, where the selling price is typically above the mortgage balance. The nature of a short sale also means that the borrower is not gaining equity in the property; rather, they are working within the constraints of negative equity. Additionally, while a short sale may help the borrower avoid the more severe consequences of foreclosure, it can still impact the borrower's credit score, although not as significantly as a foreclosure would.

The approval from the lender is a crucial step in this process, as it must be confirmed that they would accept the reduced sale price in order for the transaction to proceed. Thus, option C comprehensively captures the essence and implications of a short sale.