Negative equity on a house is not a problem at all till the time comes when you wish to sell your home for fast cash. For instance, if you are in possession of a property whether mortgaged or not you may remain indifferent to the price fluctuations of real estates in the market. But if for some particular reason you wish to sell off your home for emergency cash then negative equity is a problem. What is negative equity? Your home is said to be in negative equity when the actual value of the property is far less than the amount you paid for possessing it or the loan that are still outstanding on it. In such a situation you will not be able to realize the money you owe to your lenders by selling it. In order to sell your house quick you need to adopt other tactics.
Sudden drop in prices
It is quite common to find buyers of properties suddenly finding that the price at which they had purchased their homes a year or so back now in negative equity. This means that their purchase rates have been slashed by 10% or even more due to recession. If they need sudden cash then they get only an amount that is far less than what they actually paid or less than what is outstanding to their lenders.