Which explanation correctly defines the term "short sale"?

A short sale occurs when a property is sold for less than the amount owed on its mortgage. This typically happens when the homeowner is facing financial difficulties, such as the threat of foreclosure, and the lender agrees to accept a reduced payoff to avoid the costs and time associated with the foreclosure process. The agreement between the homeowner and the lender allows the sale to proceed even though the sale price does not fully satisfy the outstanding loan balance.

In this context, the other options do not accurately define a short sale. A purchase agreement at full market value refers to a typical transaction where the price matches the property's market value, which is not characteristic of a short sale. A sale with no liens attached would imply that there are no debts against the property, which contrasts with the nature of a short sale, where an existing loan balance complicates the sale. Lastly, a rental agreement ending in purchase does not pertain to the concept of a short sale, as it describes a different real estate arrangement entirely, focusing on shifting from a rental situation to ownership rather than selling at a loss.