When evaluating the risk a lender has to measure a property's loan to value ratio by dividing existing mortgage value by the selling price. (mortgagebrokerstore.com)
At the same time, the banks can't afford to just write down existing mortgage values by what ever amount / percent local house - values have fallen by. (allfinancialmatters.com)
To do this you must divide mortgage value by the sale value of similar properties in that market. (mortgagebrokerstore.com)