What term describes the practice of selling a property at a price below market value to avoid foreclosure?

The term that describes the practice of selling a property at a price below market value to avoid foreclosure is a short sale. This process typically involves the homeowner negotiating with the lender to accept a sale price that is less than the outstanding mortgage balance. This arrangement can be beneficial for both the lender and the homeowner; the homeowner can avoid the more damaging process of foreclosure, and the lender can recover some of their investment without going through the lengthy and costly foreclosure process.

In a short sale, the homeowner often demonstrates financial hardship, making it necessary for them to sell the property quickly at a lower price. This arrangement helps minimize losses for the lender, as they may accept a smaller amount than they would receive in a foreclosure, which could incur additional costs and time.

While other options mention alterations to sale price or pre-foreclosure contexts, they do not capture the specific legal and financial nuances of a short sale, making it the correct term for this scenario.