What is the fundamental principle behind the strategy of a short sale?

The fundamental principle behind a short sale is to sell a property for less than the amount owed on the mortgage, taking advantage of the property’s declining value or the owner's financial distress. In this context, the strategy "buy high and sell low" reflects the concept of a short sale because the seller is effectively losing money on their investment; they owe more than the current market value of the property. This situation typically occurs when a homeowner can no longer afford their mortgage payments and must sell their home quickly, often resulting in an agreed-upon sale price that is lower than the outstanding mortgage debt.

This practice is designed to prevent foreclosure, allowing both the lender and the borrower to mitigate losses associated with a default. The lender must approve a short sale, as they are accepting less than the full amount owed, further illustrating the practical application of the principle of selling for less than what is owned.

The other options don’t accurately represent the nature of a short sale. The idea of "buy low and sell high" typically describes a profitable investment strategy, while investing more into property repairs does not apply directly to a short sale scenario. Additionally, marketing a property exclusively through agents reflects a strategic decision related to sales processes rather than the core concept behind short sales.