When a property is sold at foreclosure for more than what is owed on the mortgage, the homeowner is supposed to receive that difference. But what happens when the bank sells the home for hundreds of thousands of dollars less than what it is worth?

That’s what happened to a San Francisco man, who is currently fighting eviction from the home that has been in his family for 50 years.

The property was purchased at a May auction for $705,000. Similar homes in his area go for around $1 million, and even the buyers of the home admit to the San Francisco Chronicle that the property is worth between $950,000 to $975,000.

So had the homeowner, who had trouble keeping up with mortgage payments after a medical condition left him unable to work, sold the house on the real estate market rather than spend months trying in vain to seek a loan adjustment, he would have been able to pay off the mortgage and have cash in hand to use for another home.

Instead, he now has a check for the $13,000 difference between the mortgage and the sale price and is waiting for the inevitable knock at the door from the Sheriff’s office.

“Home equity is highly illiquid,” an Oakland real estate attorney explains to the Chronicle. “The tragedy is, people may say, ‘I have $300,000 equity in my home,’ but if you cannot get at that equity and don’t have the income to service your current debt, it doesn’t do you any good. They end up squandering their equity trying to save their equity.”

There is no incentive for the bank, Wells Fargo in this case, to get anything more than enough money to cover the balance of the mortgage. So homeowners who can’t make loan payments but who have equity would be advised to consider the possibility of selling on the market rather than taking the risky road of applying for a mortgage modification.

“Rather than modifying the loan and waiting to be paid back over time, the investor can get paid tomorrow” an attorney with Oakland’s Housing & Economic Rights Advocates explains, adding that even though the homeowner in this case spoke to various third parties about avoiding foreclosures, “no one seems to have said, ‘The reality is you’re unlikely to get a modification; the rational thing here is to just sell. The more time goes by, the more equity is eaten away by the (missed payments and penalties) accruing.’ ”

Want more consumer news? Visit our parent organization, Consumer Reports, for the latest on scams, recalls, and other consumer issues.