Final answer:
The bank is foreclosing on an FHA-insured property and will likely sell it because the sale price is higher than the owed amount. Similar examples show how the market value and debt influence foreclosure decisions.
Step-by-step explanation:
A bank is foreclosing on an FHA-insured property with a loan balance of $85,000 and $5,000 in other charges. Considering the situation, since the property could be sold for around $92,000, the bank will probably sell the property to recover the amount due. This is because the sale price exceeds the sum of the loan balance and the additional charges.
For example, if we look at similar scenarios, like Freda's house which is valued at $250,000 and she owes zero to the bank, her equity is the entire value of the house. Similarly, in the case of Frank, whose house is valued at $160,000 and he owes $60,000 to the bank, his equity is $100,000.
These examples illustrate that the current market value of the property and the remaining debt are critical in determining actions during foreclosure.