Huge price reduction in Mission Viejo

OC Haircuts tipped us to this Mission Viejo short sale property, and man, is it a beauty...

22591 Loyola, Mission Viejo, Calif., 92691
Size: 3 beds, 2 baths, 1,300 sq ft (built in 1974)
MLS: P577045 (140 days on Redfin)
Asking price: $465,000
Asking price/ sq ft: $358
Income requirement: $116,250
Purchase price: $553,000
Purchase date: 3/28/2006
Other sales history: 9/20/1999: $206,000
4/8/1992: $177,000
*UPDATED with help from reader*
1st mortgage: $470,050
2nd mortgage: $82,950
Downpayment: $0
ZipRealty price tracker: Price Reduced: 06/11/07 -- $629,000 to $550,000
(the latest price drop is not showing up yet, but we know it was $85 grand - from $550,000 to $465,000)
2006 property taxes: $2,337
HOA dues: $0 (optional monthly lake access fee $17)
Zestimate: $566,691
Lot size: 7,056 sq ft
Type: Single Family Residence
Style: Contemporary
From listing: Short sale approved. Short sale approved. Submit your offer. Quick closing.No waiting period. Appraised for $515000. Totally upgraded with hardwood flooring. Upgraded bathroom and kitchen.You wont be disappointed if you show this home you will sell it. Sellers moved out. Vacant lock box on front door. Get this sold. No association dues, no mello roos and optional lake dues for a minimum charge of $17.00 per month.
This is a nice-looking property, and could be a great home for the right family - its cost is still probably a barrier to many, though. UPDATE: We have learned from another helpful reader that this property is actually an add-on (used to be 2-bedroom, 1 bath) with no real yard and backs to a busy street (Los Alisos).

OCH also made an interesting point in saying this price for this type of house in Mission has not been seen "in ages."

Let's get this straight: The property appreciated by just $29,000 between 1992 and 1999.That's 2.1 percent per year for each of the seven years. Factoring in selling costs, that equates to virtually nothing.

Over the next seven years, though, the property went on to increase in value by $347,000 - that's an appreciation of 16.4 percent per year. Sound a little screwy to you?

Also interesting how the listing mentions the house was appraised for $515,000. I'll briefly mention the fact that appraisals are only meant to be accurate as of the date they were completed, so this does not mean the appraised value is what the house is worth now. My main question for the sellers is: If the house was appraised for $515k, why the heck were you trying to sell it for $550k just a short time ago? That wouldn't sit well with a potential buyer's lender. Did the property really fall in value that quickly?

This is truly a desperation, "beat the bank"-like scenario...except the sellers have been waiting for almost four and a half months for someone to come in and take this off their hands. Now, apparently, they just couldn't wait any longer and moved out. It's a little odd seeing balloons in the picture of the inside. Wonder what the occasion was.

If we figure a sale at the current asking price, and deduct 6 percent for selling costs, the loss would be $115,900.