What if a home is worth less than what I owe on it?

Real Estate Agent with Vas Group - Reliance Realty Group

Recently someone called me about a home they purchased several years ago and the home was now worth less and they wanted to refinance it.  This home is in San Mateo County and a neighboring home sold over 60k below what they paid.  

This is what is called 'underwater' and means that the home is worth less then the loans on it.   If the owner sold the home, they would likely need to bring money to the table.  They have the option to re-fi it and depending on the appraised price, equity they have in the home, they might be able to re-fi it but again would have to bring money at the close of escrow if they didn't have too much equity. 

 I have been seeing more of these types of situations and it's best to wait it out if possible.  As more homes are sold and as appreciation occurs, this situation will correct itself.  It can hurt some that got 90-100% LTV loans and the rates are scheduled to go up.   If you began to start falling behind in payments, you can have your RE Agent approach the lender and try to negotiate a short sale.  You can also try calling the lender and see if they can work with you and buy some time to wait the market out.  Unfortunately, most lenders won't even talk to you until you start missing payments. 

Comments (1)

William Johnson
Retired - La Jolla, CA

Hi Raj, Thanks for this great post and it also reflects what has happened in our market as well. This is a well written post and hope to read more form you.

Most Sincerely,


Jul 08, 2009 09:09 PM