Jim, we see a lot of this here in Colorado.  I encourage first time home buyers not to pull equity lines of credit from their home, I think it is a big mistake and unwise!  I cannot believe how high the appraisals would come in for lines of credit, that should not have been allowed by the lender.

Colorado Springs Realty Patricia Beck - Same here.  I was at a party in a neighborhood where I had sold quite a few homes in the 239K - 250K range.  Most of the neighbors were telling me their homes were worth well over 325K in spite of the fact the highest sales were mine.  Well new agents listed the homes in there for over 330K and they sat on the market forever.  The homes are still selling but in the 269K range!  Did they drop in price?  No!  Sellers and homeowners were just plain stupid, and did not want to hear the fact that they made a major mistake!

Some of the sellers listened to the banks a couple years ago when the bank willingly gave them 125% loans so they could buy that new, big SUV. The worst example I've had was with a seller who would have to bring over $30K to closing on a home that would probably sell for $130K. The bank's appraiser had valued it at $185K 6 months before. Totally irresponsible - and it was a big, national, well-known bank!

I call it loss of flyer box equity when the home owner thinks the value you is based on the highest sale on record,, determine from the flyer in the box... not based on the most recent sale or the tax recorded reports of the clearly CMA markers.

In their mind they say... 123 main sold at 300+ and I know so because I have the flyer right here and my house is equal or better so I should price at 301+

Elaine Reese, REALTOR® in central Ohio    It is sad, but the homeowners is sadder!

Eric Reid Lawrenceville,GA  I know!  They take it as a fact!  Very foolish!

You are blogging machine and so far 3 of your posts are coming up on the tops of this group. Congrats!

Megan McGonigal  Thanks!  These are some observations I've had on my mind for the last week or so.  I cannot believe how many homeowners got themselves so deep into debt and trouble and never thought out the scenario.  Their marriage, and family and entire lives could suffer from a foreclosure and bankruptcy!

Hi Jim,

Your 4 points at the bottom of your post are tried and true, and just what I tell buyers.  Then their loan officer usually convinced them otherwise.  I never understood how a buyer would take a loan salesperson's advice of "you can just refinance in 2 years and....(I get paid again)". 

 -Mark

That is such a crazy picture!

Heather Black :)   Yes but a lot of home owners are very upside down!