High-end loss in Aliso (update)

This property in Aliso Viejo, which we first posted on back in September, is of the million-dollar variety. As you will see, the amount of debt coupled with a declining market is making it very hard for the current owners to get out cleanly. It's still on the market and is now a preforeclosure.

36 Endless Vis, 92656
Asking price: $1,099,000
Asking price/ sq ft: $306
Income requirement: $274,750
Purchase price: $1,350,000
Purchase date: 1/31/06
Size: 5 beds, 5 baths, 3,600 sq ft (built in 2000)
MLS: S501452 (257 days on Redfin)
ZipRealty price tracker: Price Reduced: 9/29/07 -- $1,349,900 to $1,274,900
Price Reduced: 10/11/07 -- $1,274,900 to $1,100,000
Price Reduced: 1/10/08 -- $1,279,000 to $1,199,000
Price Reduced: 2/16/08 -- $1,199,000 to $1,099,900
Zillow Zestimate: $1,109,000
2007 property tax: $11,779
HOA dues: $96 + $41
Type: Single Family Residence
Stories: Two Levels
Lot size: 6,600 sq ft
From listing: Huge Price Reduction!! Best Value in Aliso! Fabulous Estate Home in the Exclusive Gated Oak View Enclave. Luxurious Interiors * Elegant Long Driveway * Large Living Room with Soaring Ceilings + Fireplace * Elegant Dining Room with French Doors * Gourmet Kitchen with Island + Stainless Steel Appliances * Family Room with Fireplace * Pool Sized Yard with Built-In BBQ with Tons of Privacy * 5 Bedrooms + Large Loft(could be converted to 6th Bedroom) * Mainfloor Bedroom with Private Bath * Master Suite with Dual Walk-In Closets with Custom Built-Ins. Truly a Must See!

The current owners bought at the peak in early 2006 for $1.35 million, using 90% financing (80/10) from Washington Mutual. The couple who sold them the property truly struck real estate gold, as they made $520,000 in profit, before sales costs and other expenditures, simply by holding the home for less than three years.

A little less than a year later, our new owners re-fied into a $1 million first loan and a $235,000 2nd. A month after that, a $276,500 line of credit was added from National City Bank.

Six months later, the owners decided to place their home on the market. They listed for $1,349,900 - essentially the same price they had paid. But the market had already begun to turn, and there were no takers.

The $1 million loan from WaMu went delinquent, and a notice of default was filed in early March in the amount of $24,916. The property is still on the market, though the price has been lowered four times to $1,099,000. - that's a total reduction of $250,000.

Assuming the property is (somehow) sold for the current asking price, the loss would now be $316,940, including 6% sales costs. It also would mean a depreciation of about 19%, not including any transaction costs.