Negative equity often occurs when a homeowner purchases a house using a mortgage and then theÂ economy starts to slow or home prices start to drop.Â After the houseÂ purchase, the value of the homeÂ decreases below the value of the amount owed on the mortgage, causing negative equity.
First,Â negative equity numbers represent nothing more than the percentage of homeowners who are in negative equity. Itâ€™s true that not every person who is underwater on their mortgage will default
To sell a home while underwater means the seller must pony up the difference between the mortgage and the current value, or negotiate aÂ with their Mortgagee..Therefore, negative equity does open a lot of homeowners up to risk they would not otherwise encounter, and itâ€™s important to understand the total universe of homeowners who have this increased risk
Effect of Under Water (negative equity) Properties
The effect is not nearly as important as the fact that the standard approach to computing negative equity does not incorporate the costs of actually selling a property. Considering these costs, which can be six to eight percent of the price of the home and must be subtracted from the sale proceeds before a seller can take any equity that might remain, would significantly increase the number of homeowners who are effectively in negative equity should the need arise for them to sell their home.
We may BUY Under Water (negative equity) Properties
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