The sale of an asset at less than its market value (or intrinsic value) in order to obtain funds as quickly as possible. A business, that has trouble paying its debts and other obligations, may not be able to continue its operations while insolvent and hence it becomes vital, for its continuity as a going concern, to obtain funds quickly to help pay off due debts. A distressed asset sale allows a business to increase its available funds in a rather quickly manner, while buyers can avail ownership of such assets at cheaper prices.
In relation to stocks and investments in stocks, a distressed sale involves the case where investors short sell their stock portfolios (short selling), even at a loss, when a stock drops below the stop-loss level (lowest bearable price), in order to protect their investment value dropping down to zero or very low levels.
In another specific context, a distressed sale may also relate to the case of a mortgage in which the borrower (would-be owner of the underlying real estate/ property) stops making the mortgage payments. After the delinquent borrower (mortgagor) has missed a number of payments, distress sale initiates by the lender (mortgagee) recording a notice of default against the property.
