What Was the Real Price?

What Was the Real Price?

A homeowner owes $250,000 on their house, but the market indicates that it is only worth $200,000.

They need to sell, so they sell it short, or for $200,000.

They are forgiven the $50,000 difference.

Recap: They had a house and owed $250,000 on it; they now do not have a house and now owe nothing.

Was the price $200,000 or $250,000?

To the Buyer of this house it was worth $200,000, but to the Seller it was worth $250,000.

When appraisers look at this house for future price comparisons, they look at the $200,000 sales price as the value.

In a normal market, this house may be ignored as a comparable, because it was a distressed sale. In today's market, 50% or more of the sales are distressed so they have become the norm.

If 30% of homeowners own their homes free and clear, and if 94% of those with mortgages are not behind, then nearly 96% of all homeowners, if they chose to sell their homes, would not need to sell their homes as distressed properties.

Can you blame the Sellers from this group of 96% of homeowners, if they want to get the higher price of $250,000, for a house similar to the house above, rather than a price of $200,000 which was caused largely by the 4% of homeowners, who became distressed sellers?