Simple. The house will cost far more than it will be worth to render it habitable, there's no scope for building a new property there because of planning restrictions, and it will cost more to restore the land to a condition fit for agriculture than the land is worth as agricultural land.
"Excluding legal fictions" is the bit that you snipped. The example I gave was of listed building status, but planning restrictions are also a legal fiction.
It would also have to be an unusual situation indeed for a garden to cost more to restore to agricultural use than its value as such. Maybe if the owner had covered the garden in several inches of reinforced concrete....
What it means is after the house is sold, you still owe money on it. Basically you paid more than the market value (including fees, etc) hoping price inflation would make that ok. And, of course, in some areas prices actually dropped.
Being in negative equity may not matter if you can afford the mortgage and don't want or need to move.
Plenty in mining areas affected by subsidence. Also I remember some on land that was contaminated with arsenic. (Nearby gasworks.) Also buildings with asbestos problems. (Cost of removal) Buidlings on the edge of an eroding coastal cliff. Buidlings in areas very prone to flooding. Extensive dry rot in a building can make it and the land worth less than the cost of demolition.
Exactly what happened to lots of people in America. They thought that if they couldn't pat the mortgage, it didn'tmatter, They could still sell and make a profit. But the price of property crashed.
True, but what if they let you borrow more than you can afford to pay back, which is what happened to a lot of people....
Or, IME, by buying a home when you need somewhere to live, rather than waiting for the (Then rapidly rising) prices to fall again, followed by the local house prices falling due to circumstances beyond your control, such as the house price crash before this one.
Not everyone buys a property just to try and make a profit. Some of us buy a house just to live in. The house I'm in at the moment, I wasn't actually intending to move out of until I was too unfit to use the stairs. If I make a profit when I sell, that's all well and good, it will mean I can afford a larger, more comfortable replacement than would otherwise be the case, or I can pay the rent on a rented replacement for longer before runing out of savings.
Owners that have buildings that have been effectively abandoned for decades and have become uninhabitable often can't get permission to make them habitable, never mind build a replacement property.
It can only happen if a lender lends more than the value of the house. And that was happening - regardless of any crash in house prices which just makes it worse.
It was a two way thing. Self certification let some 'inflate' what they actually earned - and therefore what they could pay back. And the lender didn't do adequate checks.
It's entirely possible for the lender to lend less than the value (at the time of the loan), yet that value to then drop below the value of the house due to a market slump.
I'm not quite sure what the problem is, though - virtually every other kind of secured loan, especially cars, is in negative equity almost by definition.
As with changing cars, surely unless you're at one end of the market or the other, then it's the cost-to-change that's relevant, not the price tag?
It can happen even if the lender lends less than the current value. Lets face it, even now house prices are far higher than they should be. If they ever drop to sensible prices a lot more people will be in negative equity.
Lenders (and borrowers) were pretty stupid when they were offering 110% mortgages as some were.
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