"Shouldn't be" short sale in Laguna

This Laguna Beach property is not the "bought at the peak and is now upside down" type of short sale. It's the other kind - when refinancing and mortgage equity withdrawl come home to roost.

533 Lombardy Lane, 92651
Asking price: $799,000-$849,000
Asking price/ sq ft: $695
Income requirement: $212,250
Purchase price: $494,045
Purchase date: 9/20/00
Size: 2 beds, 1 bath, 1,150 sq ft (built in 1927)
MLS: S515870 (209 days on Redfin)
ZipRealty price tracker: Price Reduced: 3/11/08 -- $899,000 to $849,000
Zillow Zestimate: $1,072,000
Type: Single Family Residence
Style: English
Stories: 2 Levels
Lot size: 1,800 sq ft
From listing: APPROVED SHORT SALE!!! LOOK AT THE PRICE ON THIS SFR IN HIGHLY SOUGHT-AFTER LAGUNA BEACH!!! The last word in style & charm this unbelievable home is tucked on a quiet street in great neighborhood. A perfect 10 in curb appeal you will fall in love with this great home from the moment you see it. Dramatic living room entrance showcases rich hardwood flooring, exposed beams, custom lighting & massive brick fireplace with elegant oversized mantle. Nifty chefs' kitchen with clean tile countertops, garden window & access to formal dining area. Main floor bedroom - a great perk! Other great features include: large office/den + enormous loft - an easy 2nd/3rd bedroom! This home will not stay on the market long - totally turnkey and priced to sell fast! WOW!



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As you can see from the purchase price, this property should not be in this situation. Shoulda, coulda, woulda right? The owner purchased this property in 2000 for $494,045 using $458,150 worth of financing in two loans. So far, so good.

But she refinanced in 2003 into a $640,000 loan. Between May 2004 and July 2005, $230,000 more worth of credit/loans were added to the property - one or both may be HELOCs and we don't know for sure if they were fully tapped.

But, it seems likely the money was pulled out since another loan for $200,000 - we think a standalone second - appeared in April 2006. Assuming all the cash was used, the total amount of loans added to the home over the course of just two and a half years could be as high as $1,070,000.

To give you an idea of the significance of tapping the house for money: If the owner never refinanced or pulled any additional money out, and they could sell the home for $849,000, they would earn a profit of about $300,000, including 6% sales costs.

Instead, the owner is underwater and had to lobby the lender(s?) for a short sale, which we know from the listing has been approved.

The $640,000 loan also is now delinquent, and a notice of default for $26,394 was filed against the property in May. Too bad the home did "not stay on the market long" as the listing proclaimed.