Question

Fredrick purchased a property worth $150,000 on mortgage. He had paid $30,000 as a down payment on this property. However, because of a recent slump in the real estate prices, the property is worth only $110,000, forcing Fredrick to sell the property. Assuming that no mortgage payments have been made by Fredrick, this sale is termed a(an) _____.
a. fixed mortgage sale
b. real estate short sale
c. real estate declining equity
d. shrinking principal sale
e. indexed equity

Answer 1

Answer:

b. real estate short sale

Explanation:

In this situation it seems that this sale would be termed "real estate short sale", if no mortgage payments have been made by Fredrick. A short sale is when the amount the seller gets for selling a piece of real estate is not enough to cover the debts gathered by the liens. This is the case in this scenario since after placing the 30k downpayment Frederick owed 120k in mortgage. Since he only sold the house for 110k this left him in debt for 10k.