There's more to it

4 Quebec in Aliso Viejo is located in a gated community called Victoria. On the surface, the owners of this property are in an unfortunate position - they bought during the peak in 2005 and are now needing to sell. Here are some financial details:

Asking price: $588,000
Asking price/sq ft: $406
Purchase price: $611,000
Purchase date: 11/9/2005

If we were to assume a sale at this price, the loss would be $58,280, assuming 6% selling costs. This is bad enough, but it doesn't tell the whole story. Here is the listing description, with my emphasis in bold:

Over $50,000 in recent upgrades. Every light fixture, hardware, all new kitchen cabinets, granite kitchen counters. Cherry wood flooring downstairs, upgraded carpet, all designer paints in warm contemporary colors. Upstairs both bathrooms have granite counters and master has new mirrors, fixtures and cabinets. This home is a must see in a gated community across from award winning oak grove elementary school. Many 'say' turn key but this home is truly just that!!!

Since the owners spent more than $50,000 in upgrades, it means they're even further underwater than the sales price alone indicated. Even though we would be underestimating, let's assume the owners only spent exactly $50k. In reality, the loss on this property would be in upwards of $108,280 if we take into account the cost for renovations.

This isn't the only sad tale in the neighborhood. Here are the other properties on the market in Victoria, along with potential losses/gains assuming a sale at the current asking price and subtracting 6 percent for selling costs.

An interesting note is that the property with the lowest asking price is also the biggest - a 4-bedroom, 2 bath, 1,700-sq ft model that happens to be REO. The rest of the properties are all smaller and are asking for more money, leading me to believe prices on the others would need to come down. Will the two properties whose owners (we assume) have equity to spare cut their prices to induce a sale? Will the banks step in and lower their prices? Or will all the properties continue to sit on the market?

51 Cape Victoria (REO) - Asking price: $535,500; Purchase price: $690,000; Loss: $186,630

3 Montreal - Asking price: $549,500; Purchase price: $136,000 (questionable since last sale was in 2004); Gain: $380,530

1 Alberta (REO) - Asking price: $549,900; Purchase price: $599,000; Loss: $82,094

21 Cape Victoria - Asking price: $549,500; Purchase price: $365,000; Gain: $151,530

7 Quebec -Asking price: $575,000; Purchase price: $547,000; Loss: $6,500