Even in this case, isn’t there a reasonably good chance the person could have sold it for 10% more than ($X+$Y+$Z)[1] at the time of the crisis? The lender and the loaner will part with the equity based on the mortgage payments over the years.

Based on cursory look into Redfin data, homes in the Bay Area are vanishing in 5-12 days, selling at 100-300K above the listed price.

[1] I hope we don’t cite recession here.