When someone owes significantly more than the property's value, this is referred to as?

When someone owes significantly more than the property's value, this situation is referred to as negative equity. This term specifically describes a scenario where the outstanding mortgage balance exceeds the current market value of the property. It is a common condition in real estate during financial downturns when property values decline due to various factors such as economic conditions, local market shifts, or property-specific issues.

Negative equity can create significant challenges for homeowners, as they may find it difficult to sell their property without incurring a loss and may be less likely to refinance their mortgage. This term is widely recognized in real estate finance and is critical for understanding some of the risks associated with homeownership and real estate investments.

The other options do not accurately define this financial situation. Market depreciation refers to a decline in property value over time due to economic or market factors, but it does not specifically address the debt-to-value ratio. Underwater value is a colloquial term that can be synonymous with negative equity, but it is not as commonly used in formal discussions. Excessive liability does not specifically relate to real estate but rather refers to a broader category of liabilities that may arise in various financial contexts.