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Further sticking with houses, if the officially appraised value of that house drops 40% since the said mortgage was issued, and comp sales in that neighborhood
by turar 15y ago
Further sticking with houses, if the officially appraised value of that house drops 40% since the said mortgage was issued, and comp sales in that neighborhood are 50% lower, the house's real value is nowhere near $500K, no matter what the formula says.
You'd still owe $300K in mortgage, and be out $200K of cash, but that doesn't mean the house is worth $500K.
P.S. And what's up with downvoting?
- pbreit 15y agoBut no one is going to spend $200k for a $300k mortgage if the house's value is significantly less than $500k. The price you would be willing to pay is basically the house's value minus the outstanding mortgage.
- turar 15y agoWell, it could decline in value after you buy it. The point is that having debt of $N doesn't always mean the value of the house is automatically adjusted by $N. Value is in the eye of beholder, or buyer in this case.