08/11/2026
What happens when you buy a property in a peak real estate market, much like what occurred during the pandemic, and are trying to sell in today's market?
This is a fairly commonâand financially painfulâsituation when someone buys near the top of a rising market and then needs to sell after prices flatten or decline.
The key issue is equity.
What can happen;
Suppose someone:
* Bought the house for $600,000
* Put 10% down ($60,000)
* Mortgage = $540,000
* A few years later, the market slows and the home is worth only $525,000
Even though theyâve been making payments, they could still owe close to $520,000â$530,000. Then you have the costs of sellingâbrokerage compensation, attorney/title costs, transfer taxes, etc.
So they may discover that:
$525,000 sale price â mortgage payoff â selling costs = little or no money left for them.
The CFPB specifically warns that when home values decline, homeowners can lose equity or even end up owing more than the home is worth.
The bigger problem: they may have to bring money to closing:
In that situation, the owner generally canât simply sell for $525,000 and walk away. They would need to either bring approximately $35,000 to closing or explore another solution.
But they arenât necessarily trapped;
There are several possibilities:
1. Wait it out.
If they can comfortably afford the mortgage, sometimes the best financial decision is simply to stay in the property. Over time, the mortgage balance comes down and the market may recover.
2. Sell and bring cash to closing.
If they have enough savings, they can pay the difference between the net sale proceeds and mortgage payoff.
3. Negotiate the price aggressively.
If the property isnât selling, the market is ultimately telling you what buyers are willing to pay. Sometimes pricing it correctlyâeven substantially below the original purchase priceâis what gets it sold.
4. Short sale.
If the home is worth less than the mortgage balance and the owner canât cover the difference, a short sale may be possible. The mortgage servicer has to approve it.
5. Rent the property instead of selling.
If the numbers work, renting can allow the owner to hold the property until the market improves. But this only makes sense if the rent, expenses, vacancy risk, maintenance and mortgage payment make financial sense.
One important thing people misunderstand:
Buying at the peak doesnât automatically mean the homeowner âlost moneyâ just because comparable homes are now selling for less.
If they bought for $600,000 and the house is now worth $550,000, thatâs a paper loss in market value. It becomes an actual financial loss when they sell for less than their total investment/equity position.
And because mortgage principal is paid down relatively slowly during the early years of a loan, a homeowner who bought recently can be particularly vulnerable to a market decline.
Thereâs also a psychological trap;
This is where sellers sometimes say:
âI canât sell for that. I paid $600,000.â
Unfortunately, what they paid is no longer what determines the current market value.
If comparable properties are selling for $525,000, the seller essentially has two choices: sell at todayâs market and absorb the loss, or keep the property and wait for the market/equity position to improve.