What term describes a situation where a seller cannot sell property for a price that covers their debt to the lender?

The correct term that describes a situation where a seller cannot sell property for a price that covers their debt to the lender is a "short sale." In a short sale, the lender agrees to allow the property to be sold for less than the outstanding mortgage balance. This typically occurs when the homeowner is in financial distress and is unable to fulfill the mortgage obligation, but the property value has decreased significantly. The lender accepts this arrangement to minimize their losses instead of pursuing a foreclosure, which can be a lengthy and costly process.

In contrast, foreclosure refers to the legal process by which a lender takes possession of a property after the borrower defaults on a mortgage, often resulting in the property being sold at auction without regard to the original loan amount. The second market involves the trading of financial assets, such as bonds or stocks, which does not pertain to property sales specifically. Adverse possession is a legal doctrine that allows a person to claim ownership of land under certain conditions, typically involving continuous and open possession of the property without permission from the owner.

Thus, a short sale captures the essence of selling property for less than the owed mortgage, making it the appropriate term in this context.