Split the difference in RSM

As we head past the Labor Day mark and head into fall, it will be interesting to see what happens to sales. Will the government incentives still be enough to lure even more buyers?

It's a common negotiating tactic to try and split the difference - particularly if it works to your advantage. Say you bid $100,000, but the seller comes back with $200,000. You were planning to pay $175,000, but you see an opening. So, you say: "Why don't we meet in the middle at $150,000." That sounds fair, so the seller agrees and you've got a deal.

Here's a property that's splitting the difference in another way ... when we compare the 1999 price to the 2004 price that is...

8 Freesia, RSM 92688
Asking price: $649,000

Beds:	4
Baths:	3
Sq. Ft.:	2,877
$/Sq. Ft.:	$226
Lot Size:	5,000 Sq. Ft.
Property Type:	Single Family Residence
Style:	Mediterranean
Stories:	2
View:	Hills
Year Built:	1999
Community:	Las Flores
County:	Orange
MLS#:	S576384
Source:	SoCalMLS
Status:	Active
On Redfin:	98 days

From listing: Fantastic Location on a beautiful CUL-DE-SAC. Upgrades include GRANITE COUNTERS, MAPLE CABINETS, AND A DOUBLE OVEN in the Kitchen, TRAVERTINE, IRON AND WOOD STAIRCASE, CUSTOM WINDOW COVERINGS, BUILT IN BBQ, CUSTOM SHUTTERS, CUSTOM ITALIAN TYPE TILE FLOORS, BUILT IN CABINETS IN THE GARAGE, CEILING FANS IN MOST OF THE ROOMS, LARGE WALK IN CLOSET IN THE MASTER, RETREAT/LOT AREA OUTSIDE THE MASTER, UP STAIRS LAUNDRY ROOM, PROPERTY BACKS THE NATURE PERSERVE.

They say nature "perserve." We think wilderness. This property came onto the market about three months ago asking $715,000. With no sale, it's now down a bit to the current asking price of $649,000.

What the heck did we mean when we said "split the difference"? Well, this property sold for $406,500 in October 1999. Just five years later, it sold for $835,000. Yes,it doubled in price in half a decade.

Now, the asking price is just about in between. Call it a 2002 and-a-half price in the $600,000 range. Will it go for the asking price in the middle? Only the lender knows for sure. Assuming it does, we're looking at a depreciation of 22% off the 2004 sales price, not including any transaction or other costs.

Celebration time in RSM

No. 82 on CNNmoney.com's Best Places to Live 2009...RSM! A nice achievement, but these lists always make us chuckle. Louisville is No 1. Louisville, Colorado that is. Also on the list:Papillon, Nebraska (it's not just a dog breed any more).

In honor of that achievement, today's property is in Rancho Santa Margarita.

27 Via Encanto, 92688
Asking price: $499,900
Asking price/ sq ft: $263
Purchase price: $484,000
Purchase date: 12/22/03
Size: 3 beds, 3 baths, 1,900 sq ft (built in 1994)
MLS: S575944 (53 days on Redfin)
HOA dues: $175
Type: Single Family Residence
Style: Mediterranean
Stories: 2
Lot size: 2,893 Sq. Ft.
From listing: BEAUTIFUL 3 BEDROOM + LOFT SINGLE FAMILY DETACHED HOME WITH A CANYON VIEW!! This home is located in a Tijeras Creek Golf Course Neighborhood and features a living room with a fireplace, formal dining room, a bright, spacious kitchen, plantation shutters and a laundry room. The spacious master bedroom has its own private balcony with a view of the canyon and a master bathroom with a large tub and stall shower. Enjoy the fenced backyard with a View Of the Canyon! There is an Association Pool within the neighborhood, plus enjoy all the Rancho Santa Margarita amenties - Pools, Tennis, Parks, Lagoon & Lake!

Check out the price history of this property:

Originally bought in 1994 new (roughly near the bottom of the previous housing downturn) for $200,000.

Sold in 2003 - a little more than a decade later - for $484,000, an increase of $284,000 or 10.2% per year. Real estate really does double in value every 10 years! Or at least, it did here.

Now, about five and a half years later, the asking price is virtually the same as the sales price in 2003. We went from 10.2% yearly appreciation to virtually 0% appreciation. The bubble bust'll do that to ya.

Monday doldrums

Hate Mondays? We do too. Here's a condo in RSM that's really down and out on its luck...

142 California Court, 92688
Asking price: $169,900
Asking price/ sq ft: $189
Purchase price: $400,000
Purchase date: 9/14/05
Size: 1 bed, 1 bath, 900 sq ft (built in 1994)
MLS: S572250 (44 days on Redfin)
ZipRealty price tracker: Price Reduced: 05/21/09 -- $189,000 to $169,900
HOA dues: $226
Type: Condominium
Style: Carriage House
Stories: 2
Lot size: 3,049 Sq. Ft.
From listing: No need to preview this charming carriage unit at California Court. This home is ready for a buyer to move in. Clean and nicely painted in designer colors. Lovely wood flooring. Cozy fireplace in living room flows into dining area which opens to a balcony creating a wonderful ambiance. Cool breezes through your home when opened up. Unit is close to community pool and spa. Near shopping, dining, toll road, theaters and Lake Mission Viejo. Though you have access to all of these amenities, you get the feeling that you are in a remote area.

Always a bonus to get the animals and wedding picture in the photo - very professional and non-personal there...

We're sure this place is amazingly amazing and ready for a buyer to move in...but we know the bank has the real say considering it's a short sale.

And how bad of a short sale is it? Pretty bad. Redfin says this place went for $400,000 during the bubble. Can you imagine thinking a sub-1,000 sq ft condo in RSM is worth $444 per square foot?

Assuming the property sells for the current asking price...the loss would be huge in percent terms, barely noticeable in real dollar terms compared to some other properties around here. As it stands, the asking price is 57% below the previous sales price. The loss, including 6% sales costs, would be around $240,294.

Debt-loaded in RSM "won't last long!!!!"

Sure...this short sale preforeclosure in RSM won't last long, as the agent claims. Either it will quickly move through the short sale process or it will become a full-fledged foreclosure.

You be the judge when you take into account some additional background on this property...

8 Via Corbina, 92688
Asking price: $530,000
Asking price/ sq ft: $214
Purchase price: $498,000
Purchase date: 4/30/03
Size: 5 beds, 2.5 baths, 2,473 sq ft (built in 1999)
MLS: S574992 (13 days on Redfin)
Zillow Zestimate: $562,000
HOA dues: $94
Type: Single Family Residence
Style: Spanish
Stories: 2
Lot size: 4,713 Sq. Ft.
From listing: Fantastic Deal!!!Won't last long!!!! Beautiful 5 bedrooms 2.5 baths home. Warm and welcoming curb appeal with mature trees and cozy porch. Designer paint through out the family and formal living areas. Upgraded ceramic tile as well as carpeting through out. Enjoy the low maintanance back yard featuring custom built-in BBQ with an L-shaped bar,perfect for entertaining and covered by an oversized patio. Huge master suite with light and bright bath. Custom Plantation shutters through out and much more.

Our auto spell checker saw two spelling errors, plus we quickly saw a spacing error and an obvious grammar error. We didn't feel like looking closer for more.

Theoretically, the owners should have some equity in the property considering the asking price. After all, they bought in 2003 and paid $32,000 less than they are hoping to get. They also supposedly would be paying down the debt on their mortgage(s) for six years. We won't even go into whether the property should even be worth the asking price.

The problem is the additional debt. When they current owners took possession of the property, they used 99.9% financing and only had to put $250 of their own money into the transaction. A refinance in 2007 yielded two loans from Homecomings Financial totaling $747,000. Assuming the property sells for the current asking price, and we take into account sales costs, that's a blow to the lender of more than $200,000. The owners never really put any of their own money into the property to begin with, and they ended up extracting a significant amount of equity.

Given what you know now - owners with absolutely no skin in the game; loans well in excess of the asking price; short sale; preforeclosure (notice of trustee sale, scheduled sale date June 5 at the Santa Ana courthouse with an opening bid of $650,396) - what do you think is going to happen?

The good and the bad in RSM

This REO in Rancho Santa Margarita features plenty of good news as well as bad news. We'll share it all with you in today's post.

16 Calle Bieldo, 92688
Asking price: $449,000
Asking price/ sq ft: $282
Bank purchase price: $74,297
Purchase date: 2/11/09
Size: 4 beds, 2.5 baths, 1,591 sq ft (built in 1988)
MLS: Y901317 (32 days on Redfin)
Zillow Zestimate: $470,000
HOA dues: $55
Type: Single Family Residence
Stories: 2
Lot size: 4,220 Sq. Ft.
From listing: This is a must see!! Highly upgraded with expanded luxury master bath. Extensive use of granite, custom cabinetry, wainscotting and crown mouldings. That's the good news. The bad news is that this is an REO with missing items i.e. light fixtures, 2 toilets, dishwasher and stove. The former owner poured literally thousands into this home and with a little effort it can become a jewel again.

This property is currently accepting backup offers. The previous owner used 100% financing to buy the property for $305,000 in 2000. The problem came when the two loans they later took out - totaling $450,000 - both went into default in October 2008.

Let's look at some of the positives:

• Since it's an REO, we know the property can actually be sold.
• The listing description tells us there is "extensive use of granite, custom cabinetry, wainscotting and crown mouldings...The former owner poured literally thousands into this home..."
• The asking price was $449,000. Houses on this street were going for $530,000+ in 2004, making us believe this is a 2003 rollback. Instant equity! (Just kidding)

But the listing description also tells us the bad news: "...this is an REO with missing items i.e. light fixtures, 2 toilets, dishwasher and stove." They took the stinking toilets?

This is an interesting property to us - indicative of the current real estate market. Here we have a property that's well above rental parity (if we generously assume this property can rent for $2,500 per month, it should be valued by an owner-occupant at $400,000 assuming a GRM of 160) and in serious need of money-costing repairs.

If one were to simply run the numbers, it's obvious this is not an amazing deal by any stretch. Yet, the bank still apparently had no trouble finding a buyer. Looks like the knife catchers are still out there.

Appreciation in Las Flores?

Today we find out that the DataQuick stats for February show a blip up in the median OC home price for the first time in eight months. That's good news for this seller, who is trying to sell the home after holding it for less than a year.

2 Chaparral Ct, 92688
Asking price: $1,100,000
Asking price/ sq ft: $294
Purchase price: $910,000
Purchase date: 4/30/08
Size: 6 beds, 4.5 baths, 3,746 sq ft (built in 1997)
MLS: P659720 (154 days on Redfin)
ZipRealty price tracker: Price Reduced: 11/06/08 -- $1,200,000 to $1,100,000
Zillow Zestimate: $888,000
HOA dues: $100
Type: Single Family Residence
Style: Contemporary
Stories: 2
Lot size: 0.41 Acres
From listing: Fabulous Design and Floor Plan in Highly Desirable Las Flores. Nestled in the Hills between Ladera Ranch and Coto-De-Caza. Ideal location at the end of a quiet and private cul-de-sac. Open and Bright with Large Spaces and Vaulted Ceilings throughout. Two fireplaces with Marble Hearths. Front and Rear balconies for relaxation and city light views. Large oversize bedrooms including a Wonderful Master Suite with Balcony, Custom Finished Large Walk-in Closet, Jetted Tub and Separate Shower. Bedroom and Bath on the main floor plus main floor Office or 6th bedroom. Custom Designed Pool and Spa with Rock Slide and Waterfall. Large Backyard with Lawn, Patio for Entertaining and Barbeques, and a firepit to enjoy evenings with family and friends. Last neighborhood comparable sale in August 2008 closed escrow $1,230,000.

So the last close sale was for $1.23 million - seven months ago. That probably means it's very hard to tell exactly how much this home is really worth today. The owner (or agent) has conceded that it has probably depreciated by - $130,000 considering the asking price. Of course, that assumes our subject property would have sold at an identical price to the comp back in August.

That would mean our subject property appreciated from $910,000 (its April 2008 sales price) to $1.23 million in August in line with the other sale. If the property sells for the current asking price, the owner stands to gain somewhere around $125,000, depending on the sales costs involved. We think it's more likely this property will continue to stay on the market for a little longer.

More than 50% off in RSM

This Santa Margarita property-turned REO proved to be poison for its previous owner. The street name, Hemlock, also happens to be the name of a deadly plant. Odd coincidence, or cruel twist of fate?

15 Hemlock #199, 92688
Asking price: $193,900
Asking price/ sq ft: $194
Bank purchase price: $251,121
Purchase date: 1/16/09
Size: 2 beds, 2 baths, 1,001 sq ft (built in 1987)
MLS: S565997 (1 day on Redfin)
Zillow Zestimate: $238,500
HOA dues: $247
Type: Condominium
Style: Contemporary
Stories: 1
From listing: Gorgeous! End unit, bright interior, Priced to SELL! 2 bedroom, 2 bath, wood floors, fresh white wood blinds, custom paint, Large enclosed patio with high fence. Detached one car garage with built-in work bench and storage shelving. Close to RSM beach club,lake and shopping center.

The lower end has really been clobbered, and by this point we are guessing most of the drastic price declines are over for this subset of housing.

We'll estimate you could rent this out for about $1,400 a month. An owner-occupant looking for a general breakeven point would want to pay about $224,000, assuming a GRM of 160. Since the asking price is below that threshold, on the surface we would say it achieves rental partity.

However, it is unlikely this quasi-apartment would be a long-term living solution. We could see an investor becoming interested if the price were low enough, and it doesn't appear to be there yet for this type of property in a location that is far from major job centers.

The previous owner paid $400,000 in 2005 using 90% financing from Expanded Mortgage Credit Wholesale. This lender - now defunct - did a lot of subprime and Alt-A. In late 2006, he liberated $29,150 of his downpayment with a $389,000 refinancing through First Franklin. We've seen many more egregious examples of re-fi abuse than this, so we'll let it pass in this case without too much criticism.

The property went into default in mid-2008, and went back to the bank earlier this year.

Assuming the condo sells for the full asking price, it would mean 52% off the bubble price of $400,000, and 41% off the 2004 price of $330,000. Those are some serious discounts.

Luxury $179/sq ft in RSM

On its face, a rollback like this is pretty unremarkable given the times. But, this property in RSM was once a million-dollar home, so the decline is a bit more intriguing.

9 Arbor Walk Ln, 92688
Asking price: $689,900
Asking price/ sq ft: $179
Purchase price: $809,000
Purchase date: 9/11/08
Size: 5 beds, 4 baths, 3,858 sq ft (built in 2000)
MLS: S550236 (111 days on Redfin)
ZipRealty price tracker: Price Reduced: 11/12/08 -- $819,900 to $774,900
Price Reduced: 12/17/08 -- $774,900 to $749,900
Price Reduced: 01/26/09 -- $749,900 to $689,900
Zillow Zestimate: $773,000
HOA dues: $85
Type: Single Family Residence
Style: Contemporary
Stories: 2
Lot size: 5,848 Sq. Ft.
From listing: Incredible Price Reduction! Perfect 10 Home!!! This gorgeous home has a superb floor plan. Gourmet kitchen with a large granite covered center island that is perfect for holiday gatherings!!! Open floor plan, family room has built-in fireplace and media niche. 5 large bedrooms and 4 bathrooms. Large Master Suite with walk-in closet and sizeable master bath. Rear yard has a nicely sized swimming pool great for barbeques.


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As the bubble reached its peak in 2006, this property sold for $259/sq ft. Now, since it is offered at $689,900, that means the property has depreciated 31%.

Would it also be too much to ask for an updated listing description, particularly since the current one mentions "holiday gatherings." Now that we're almost into February, the next holiday for most is President's Day.

Coincidentally (or not, since we were the one who selected today's property), we were in RSM this past weekend. There are few if any good deals to be had at the Circuit City liquidation out there. We do like the area - except the fact that it's warmer than by the coast, and considering the awful commute one would have to make each day.

And, there's something that makes us shake our head when we see a million-dollar home - like this once was - where you can't take a picture of the front without seeing neighbors crammed in on each side. That is a huge paradox in RSM - huge open space, yet jammed-in housing units.

16% below '03 price in RSM

Here we have a condo in RSM that is well beyond a 2003 rollback. It's also about 44% below the 2006 bubble price.

18 Dianthus, 92688
Asking price: $267,500
Asking price/ sq ft: $223
Bank purchase price: $291,565
Purchase date: 12/3/08
Size: 2 beds, 2 baths, 1,200 sq ft (built in 1988)
MLS: U8005499 (3 days on Redfin)
Zillow Zestimate: $304,500
HOA dues: $240
Type: Condominium
Style: Mediterranean
Stories: 2
From listing: OUTSTANDING LOCATION AND AN OUTSTANDING UNIT IN THE SOUGHT AFTER CITY OF RANCHO SANTA MARGARITA. THIS IS A TWO BEDROOM PLUS LOFT, TWO BATHROOM CONDO THAT FEATURES CLOSE TO 1200 SQUARE FEET OF INTERIOR LIVING SPACE. YOU WILL ENJOY THE PRIVATE DECK THAT IS JUST RIGHT FOR ENTERTAINING. THE ASSOCIATION FEATURES NICE COMMAON AREAS, CLUBHOUSE, POOL, SPA, TENNIS AND SO MUCH MORE, IT IS LIKE LIVING IN A RESORT. THE LOCATION IS IDEAL, YOU ARE CLOSE TO ALL THE GOOD THINGS IN THE CITY; SCHOOLS, PARKS, RECREATION, SHOPPING AND ENTERTAINMENT. SO COMEHOME TO RANCHO SANTA MARAGRITA, AND START LIVING THE ORANGE COUNTY LIFESTYLE TODAY.

Only three typos. They probably should have tried harder to spell the city name right at the end of the description.

Here's one of your stereotypical 100% financing deals from the bubble years. Bankrupt subprime Brea-based lender ResMAE - bought by Citadel in 2007 - is the one to blame this time.

If we assume the bank will unload the property at the current price, it would be 44% below the 2006 price of $480,000 and 16% below the 2003 price of $320,000. Can you imagine this property going for almost half a million dollars? To legitimately afford that using normal lending standards, you should be making about $120,000 per year.

With a 20% downpayment, you're also likely at rental parity, since the principal and interest payment would be $1,148 per month with a 5% interest rate. Your rate could easily be different. Of course, this is before other associated dues, fees and the tax break.

A tough go in RSM

Here's some interesting analysis from The Great Loan Blog. It suggests the higher end is due for even more pain as lending standards appear to be tightening still:

"Over the summer we experienced a restriction in lending guidelines that moved most jumbo mortgages to a minimum of 20% equity requirement. Within the last week we have seen many of our investors move to a minimum of 25-30% equity either for a refinance or a purchase loan in most major markets."

What could the effect be?

"...expect to see continued price pressure on the luxury market as buyers wake up to an even more restrictive lending environment. It will continue to tighten or rates will increase(to compensate for risk) until the loans perform and the foreclosures slow."

It most likely means, then, that there will be fewer buyers for this kind of property. Today's happens to be in RSM.

31 Ledgewood Dr, 92688
Asking price: $850,000
Asking price/ sq ft: $278
Purchase price: $1,075,000
Purchase date: 7/18/06
Size: 4 beds, 3 baths, 3,060 sq ft (built in 1997)
MLS: S553640 (10 days on Redfin)
Zillow Zestimate: $763,000
HOA dues: $100 + $2,336 yearly MR
Type: Single Family Residence
Style: Mediterranean
Stories: 2
Lot size: 6,724 Sq. Ft.
From listing: One of the BEST streets in Las Flores! Downstairs bedroom with built in desk. Italian Marble floors through-out downstairs and bathrooms, granite kitchen counters, built in kitchen table, TV room with built in shelving. The most incredible views from the master bedroom, bathroom, kitchen, family room, dining room and living room. Laundry shute from upstairs to laundry. Master walk in closet with closet organizer. Located on a Cul de Sac. School system is Las Flores K-8 and walking distance to Tesoro High School.


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Even Zillow says this property has lost 29% of its value since 2006. Million-dollar house no more.

Google maps shows us the street is indeed very nice looking, though it doesn't really seem like a cul de sac house considering we can't see the end of it.

If the property can be sold for its full asking price, it would be a loss of $276,000 off the previous sales price, including 6% sales costs.

Nearly an '01 rollback in RSM

This property in Rancho Santa Margarita is asking only a few thousand dollars above the price it went for new in 2001. Don't worry though - the owners certainly got the bank's money's worth out of the experience...

37 Arbor Walk Ln, 92688
Asking price: $694,000
Asking price/ sq ft: $201
Purchase price: $686,500
Purchase date: 6/22/01
Size: 4 beds, 3 baths, 3,450 sq ft (built in 2001)
MLS: S548521 (37 days on Redfin)
Zillow Zestimate: $899,500
HOA dues: $46
Type: Single Family Residence
Style: Mediterranean
Stories: 2 Levels
Lot size: 7,177 Sq. Ft.
From listing: Awesome End of the Street Las Rosas Home! This Property Features a Massive Pool Sized Side Yard. There is Tons of Potential with this House. Travertine Flooring, Open Kitchen with Island Sink, a Generous Upstairs Loft, a Bedroom with Full Bath Downstairs. Wonderful Master Bedroom with Balcony and a Fire Place. The Enormous Master Bath Features Two Vanities, Two Walk in Closets Stall Shower and a Roman Tub. This Property is a Must See. What a Deal!

The current owners purchased the property new from K Hovnanian in 2001. They obtained a $412,850 loan and put $273,650 (about 40%) down.

In 2004, WaMu gave them a loan for $692,000, which extracted all their downpayment plus a bit more. In 2005 they refinanced into a $740,000 loan. The next year, they took on a $750,000 loan, and in November 2006 they went back for a $200,000 second. That means total debt on the property was $950,000.

The property went into default in June, and the notice of trustee sale was filed in September against the first loan in the amount of $782,975. If we were to assume a sale could go through for the asking price of $694,000, then it would be $256,000 less than the total of the two loans on the property. We know the amount owed on the $750,000 loan is now above the original amount because of unpaid interest and other fees.

A sale for the current asking price would also be just $7,500 above the original price seven years ago.

2003's the year in RSM

Today's property, located in Rancho Santa Margarita, is one example of the types of homes that are finding buyers. It's currently in the "backup offers" stage.

It's also a 2003 rollback with an upgraded kitchen that's seemingly in very good condition. Think about it: This property is low on price - after a few price reductions - and high on quality and features. That's what it took to find a buyer after months on the market.

It's the reality these days...

8 Pinzon, 92688
Asking price: $425,000-$450,000
Asking price/ sq ft: $243
Purchase price: $447,500
Purchase date: 8/6/03
Size: 3 beds, 2.5 baths, 1,749 sq ft (built in 1989)
MLS: S531534 (113 days on Redfin)
Asking price history: May 06, 2008: $499,900
May 28, 2008: $474,905
Jun 20, 2008: $450,000
Jul 05, 2008: $425,000
Zillow Zestimate: $472,500
HOA dues: $239
Type: Condominium
Style: Mediterranean
Stories: 2 Levels
Lot size: 3,319 sq ft
Status: Backup Offers Accepted
From listing: Orange County's Best Golf Course Buy! Amazing Tijeras Creek golf couse Views & wonderful settings of this Private 3 Bedroom, 2.5 Bath, 2 Car Garage, 2 Story Home. This home features Cathedral ceilings,updated kitchen with granite counters,new cabinets,tile floors,stainless steel appliances & recessed lighting. Enjoy your morning coffee from your private yard overlooking the 4th tee & fairway. Fantastic Lake and Pool amenities included. Close to shops, parks & school. Must See!

Customized financial info:
Minimum Income Requirement (using 30Y Fixed): $102,000, assumes no other debt/obligations.
Downpayment needed: $12,750
Monthly Payment on 30Y Fixed at 6.375% with property taxes and mortgage insurance estimated: $3,183.90
Minimum Income Requirement (using 5Y fixed): $97,200, assumes no other debt/obligations.
Monthly Payment on 5Y fixed at 5.75% with property taxes and mortgage insurance estimated: $3,017.78
Disclosure: All rates offered to the client with 1 point cost. Rate quotes assume a purchase transaction with the required minimum down payment, 720 credit score, full income qualification and required reserves. Rates are subject to fluctuation. Custom rate quotes and rate lock advice are available by visiting www.thegreatloan.com.

Notice the income requirements for this property (at the bottom of the asking price range). As we found out yesterday, the median household income in Orange County is $73,263. To qualify to purchase this property - a nice but fairly modest townhouse-style condo far from the county's main employment centers - a person/family would need to be making almost 40% more than the average OC family.

Yes, there is a bit more money in South County, but also remember this math assumes they have no other debts or obligations. If our prospective buyer has any monthly debts (like credit card bills, school loans, car payments or child support) then the income requirements rise.

Assuming the property makes it all the way to closing and sells for $437,500 (the mid point in the asking price range), it would mean a loss of $36,250, including 6% sales costs off the mid-2003 sales price.

REO on the links

What fun the bubble was. Want a $700,000 property but don't have much money to put down? No problem. Still short on case? Pull out some money now, ask question later.

This REO in a RSM golf course community is a perfect demonstration of what happens when "later" comes knocking...

27 Via Caseta, 92688
Asking price: $599,900
Asking price/ sq ft: $278
Income requirement: $149,975
Bank purchase price: $612,722
Bank purchase date: 6/17/08
Size: 3 beds, 3 baths, 2,160 sq ft (built in 1994)
MLS: S542163 (7 days on Redfin)
Zillow Zestimate: $612,000
HOA dues: $100
Type: Single Family Residence
Style: Mediterranean
Stories: 2 Levels
Lot size: 2,950 sq ft
From listing: Corner home in the golf course community of Villavante. Upstairs features a large loft, Master Bedroom with walkin closet, and two other bedrooms. Bedroom downstairs has been converted into a office, full bath downstairs. Walk to parks, schools, hiking, pool, and golf course.

The previous owners purchased the home for $700,000 in 2005. They put $100 down and First Franklin threw in the remaining $699,900. In August 2006 they decided it wasn't worth keeping their cash tied up in the investment any longer, so they refinanced into $795,000 worth of loans from Nationpoint.

Then they stopped paying the $636,000 first mortgage. A notice of default was filed in January 2008, and the final notice of trustee sale followed in May in the amount of $678,462. The bank discounted the opening bid on the property to $522,130 at auction, but there were no bidders and it went back to the bank for that price.

If the home sells for the current asking price, it would mean a decline of $100,100, or 14% off the peak price - not including any sales costs. Remember, though, thanks to the magic of refinancing, the actual loss to the lender would be significantly more.

Major rollback in Trabuco Canyon

Was it a bad idea for Countrywide to extend 100% financing to the owner of this Trabuco Canyon property in 2007?

Let's see: One year later, the house is in preforeclosure and the owner is hoping to sell at more than a 30% discount off the previous sales price.

What a disaster. And, what a common Orange County real estate bubble story.

20341 Sycamore Dr, 92678
Asking price: $399,000
Asking price/ sq ft: $468
Income requirement: $99,750
Purchase price: $579,000
Purchase date: 6/11/07
Size: 2 beds, 1 bath, 853 sq ft (built in 1948)
MLS: P636378 (83 days on Redfin)
Zillow Zestimate: $543,500
Type: Single Family Residence
Style: Ranch
Stories: 1 Level
Lot size: 5,000 sq ft
From listing: Located in the beautiful community of Trabuco Canyon. This country home offers and artist studio/ workshop plus a large tack shed and room for a horse or playground. With 2 bedrooms plus office, this home has a versatile floorplan. Spaciosu living room with bay window, skylight and cozy wood stove. Community horse rena and trails. Neighborhood elementary school.

This type of property obviously offers a different type of lifestyle than other parts of South OC, but the depreciation is startling nonetheless. The house is obviously dated but perhaps the large lot has potential. We would be wary of the fire danger.

The current owner did not have to put any money down to take possession of this property in June 2007. A notice of default was filed against the property in early July in the amount of $16,087. There are also some unpaid property taxes.

Assuming the property can be sucessfully sold for the full asking price (we wouldn't be surprised if this property was priced artifically low to attract bids), it would mean a loss of $203,940, including 6% sales costs. Or, not including sales costs, it would equal a depreciation of 31% in a little more than one year.

One-upmanship in RSM

HAPPY FOURTH OF JULY!

We previously posted back in March about this rollback condo in RSM. That property is still on the market with a notice of default and notice of trustee sale to its credit, but now it's got some serious competition.

Presenting another 2002 rollback:

108 Flor De Sol #72, RSM, 92688
Asking price: $169,900
Asking price/ sq ft: $206
Income requirement: $42,475
Purchase price: $230,000
Purchase date: 11/13/03
Size: 2 beds, 2 baths, 825 sq ft (built in 1986)
MLS: S537514 (11 days on Redfin)
Zillow Zestimate: $224,000
HOA dues: $250
Type: Condominium
Style: French
Stories: 1 Level
From listing: lower end unitwith 2 bedrooms and 2 baths,inside laundry,walking distance to community lake,shopping center, and more

This property is not showing up in ForeclosureRadar as a preforeclosure, but we assume it is a short sale. It was purchased in 2003 using 100% (85-15) financing.

Judging by the list of nearby properties for rent, we expect you would be able to find a tenant willing to pay about $1,500 a month to live here. That means this property would be worth around $240,000 to an owner-occupant who wanted to buy and achieve rental parity. To an investor, this condo is likely worth about $150,000-$165,000.

Assuming the property can be sold for the full asking price, it would mean a decline of $60,100 off the 2003 price and a depreciation of $2,600 from the 2002 price, not including any sales costs. You also may be interested to know properties like this in the same complex were selling for a bit more than $350,000 in 2005. This one is more than 50% off the neighborhood peak.

A decline like this is not unique to the complex - it's happening to properties all around RSM. We've also noticed more anecdotal examples of 2003 rollbacks in areas like Laguna Niguel, Aliso Viejo and Mission Viejo. Larger properties are coming into the mix as well.

You are now excused to attend to your patriotic duties:

Agent's trick in RSM?

Any time we see something like this - a property new to the market asking significantly (and we mean significantly) less than the previous sale price - we are tempted to assume the real estate agent or owner who ultimately had the final say on the price decided to come in low and hope to drive up the price through a bidding war.

Today's subject property with that characteristic is a single family home in RSM that has recently come on to the market...

3 Via Felicia, 92688

Asking price: $400,000

Asking price/ sq ft: $276
Income requirement: $100,000
Purchase price: $625,000
Purchase date: 6/18/04
Size: 3 beds, 3 baths, 1,447 sq ft (built in 1986)

MLS: P633064 (4 days on Redfin)

Zillow Zestimate: $561,000
2007 property tax: $9,006
HOA dues: $39
Type: Single Family Residence

Style: Mediterranean

Stories: Two Levels
From listing: View of Saddleback Mountains-large corner lot. Large front yard, and a good size back yard. Very well maintained property.

(The photo to the left is from the previous listing in 2004)
The asking price is just $50,000 above the 2002 price. It is clear, then, that the owner who held the property from 2002-2004 might as well have hit the real estate jackpot. After buying the home for $350,00, they sold for $625,000 in June 2004. That represented a gain of $275,000 before sales commissions and money spent on upgrades.

Think about it - the home "earned" them $137,500 a year for two years of ownership.

The current sellers will probably soon be dealing with a competitor in 12 Via Felicia, an REO that went back to the bank for $435,281 at the end of March that also happens to be the same model as our subject property.

And, considering the amount of debt on 18 Via Felicia (a $468,000 first loan that is now in default, plus a $117,000 second and a $24,900 credit line as well that may or may not be tapped), it is possible that down the road this other property could be joining the sad parade of foreclosed homes as well.

You could rent a property like this for about $2,300 per month. So, if the property were actually able to be sold for $400,000, we would already have achieved rental parity, because a GRM of 160 values this property at $368,000. The question is whether the property is able to be sold for the current asking price.

Assuming a successful sale for the asking price, it would mean a loss of $249,000, including 6% sales costs. It would also be a depreciation of 36% off the 2004 price, not including sales costs.

Endurance award winner in RSM

This RSM condo has been on the market for more than a year. It's also now ventured into 2003 rollback territory.

8 Coralino, 92688

Asking price: $199,900

Asking price/ sq ft: $289
Income requirement: $49,975
Purchase price: $202,000
Purchase date: 8/19/03
Size: 1 bed, 1 bath, 692 sq ft (built in 1989)

MLS: S481242 (373 days on Redfin)

ZipRealty price tracker: Price Reduced: 6/28/07 -- $310,000 to $299,900
Price Reduced: 9/06/07 -- $299,900 to $270,000
Price Reduced: 11/10/07 -- $270,000 to $199,900
Zillow Zestimate: $245,000
2007 property tax: $3,132
HOA dues: $251
Type: Condominium

Style: Contemporary/Modern

Stories: One Level
From listing: Spacious one bedroom condo located in the heart of Rancho Santa Margarita. Within walking distance to shopping, schools, recreation and the Lake. Quiet upper interior location features cathedral ceilings, two-tone neutral paint and flooring. Ready to move-in!! Includes built-in murphy bed with dressers and desk. Walk in closet has closet organizers and mirrored doors. Dual sinks, oval tub with glass doors, upgraded shower head and separate toilet room in the bathroom. Ceiling fan and fireplace!!!

Is it time yet to waive the white flag? This property was first listed in March 2007. The seller chased the market down, and now it appears that the market has permanently left them in the dust.

Other 1-bedroom condos nearby are asking $179,999 and $180,000. That first comp is asking only a few thousand more than its January 2003 sales price, and about $85k below its previous sales price. The second comp is 42% below its peak price in 2005.

If we assume our subject property sells for the full asking price (doubtful to say the least), the loss off the 2003 price would be $14,094.

A rental unit of similar size came on to the market recently asking $1,250 per month. This would roughly indicate a owner-occupant target value of $200,000 (assuming they are hoping for a GRM of 160). For an investor looking for a GRM of 120, this property would pencil out to being worth about $150,000.

2002 short-sale pricing in RSM

We're starting off the week with a short sale/preforeclosure in RSM that could easily be headed for full-blown foreclosure. The asking price is virtually the same as the one the property sold for in May 2002 - that's almost six years ago.

95 Via Vicini, 92688

Asking price: $310,000

Asking price/ sq ft: $200
Income requirement: $77,500
Purchase price: $305,000
Purchase date: 5/22/02
Size: 3 beds, 3 baths, 1,550 sq ft (built in 1999)

MLS: C08032456 (27 days on Redfin)

ZipRealty price tracker: Price Reduced: 3/22/08 -- $440,000 to $310,000
Zillow Zestimate: $453,000
2007 property tax: $4,856
HOA dues: $142
Type: Attached, Condominium

Style: Traditional

Stories: 2 Level
From listing: Turn key home ready for move-in. This was a model home that was used to sell the other units. This a 3 bed, 3 bath, wood floors, high ceiling, upgraded kitchen, community pool, low assoc dues, attached 2 car garage with built in closets. Accross from major shopping centers. Also very close to the 241 toll road. Properity needs to be sold, lowest priced home in the area, subject to short sale approval.

This "properity" (see the listing for the spelling) was first listed for sale at $440,000, but was quickly slashed to the current asking price of $310,000.

There are a handful of other properties for sale in this neighborhood, and the competition can't be happy about this price - or more, likely, some will write this one off as an impossible-to-complete short sale that won't have any affect on anybody else.

Those other properties range in price from $372,500 for a smaller two-bedroom to an absurd $525,000 also for a two-bedroom. The closest comp in terms of size is asking $475,000.

If it were possible to complete a sale at the current asking price, the loss would be $13,600 off the 2002 price, including 6% sales costs. That equates to almost six years of ownership with nothing to show for it...

Closer to '90 price than '04 price in RSM

As the headline suggests, the low asking price of this Rancho Santa Margarita condo is closer to the sales price in 1990 than the amount paid by the current owner in 2006. Makes one wonder just how far the price will in fact fall - is it even remotely possible that things could get so bad that we could approach a 1990 rollback?

104 FLOR DE SOL #60, 92688

Asking price: $175,000-$210,000

Asking price/ sq ft: $276-$332
Income requirement: $52,500
Purchase price: $325,000
Purchase date: 6/23/06
Size: 2 beds, 1 bath, 633 sq ft (built in 1986)

MLS: P621724 (23 days on Redfin)

2006 property tax: $3,855
HOA dues: $264
Type: Condominium

Style: Traditional

Stories: One Level
From listing: BEUTIFUL CONDO, CLOSE TO CHURCH AND SHOPPING CENTER. ASSOCIATION POOL. 'SHORT SALES SUBJECT TO LENDER APPROVAL'

This property has been on the market a little more than three weeks and has not sold yet. Not surprising considering it's a short sale - they're notoriously difficult to navigate through to closing.

Speaking of difficult, notice how the listing description says nothing tangible about the condo itself ("beutiful" doesn't count), but does mention it's close to church and a shopping center? Do you think a prospective buyer would want to know something about the place before they take the time to go out and visit?

Assuming a successful sale at the high end of the asking price, the loss would be $127,600 including 6% sales costs, or 35% off the previous sale, not including sales costs.

If the property were to sell at the bottom of the price range, the loss would then be $160,500, including sales costs, or 46% off the previous price without including transaction costs.

The party ends in RSM

As the headline suggests, today's subject property is more evidence that the wild South OC real estate party has ended - and we are now witnessing the blurry, painful aftermath (as this photo on the listing coincidentally illustrates).

21591 Partridge, 92679

Asking price: $899,000

Asking price/ sq ft: $272
Income requirement: $224,750
Purchase price: $1,133,000
Purchase date: 6/12/06
Size: 4 beds, 3.5 baths, 3,500 sq ft (built in 1994)

MLS: S507723 (145 days on Redfin)

ZipRealty price tracker: Price Reduced: 12/21/07 -- $929,000 to $899,000
2006 property tax: $7,634
HOA dues: $230
Type: Single Family Residence

Style: Contemporary

Stories: Two Levels
Lot size: 0.28 acres
From listing: Fantastic Walden Pond Home, This fantastic home is located on a single loaded culdesac street, large oversized lot, approx 12,000 square feet, with panoramic views. Exceptional home inside and out, granite counters, upgraded cabinets, downstairs travatine flooring, newer stainless steel appliances. Bacyard is highlighted by custom spa with waterfall, built in gazebo, all with panoramic views, on a clear day you can see to catalina. .

Props to the owners who bought this place in 2003 for $690,000. They were able to turn around and sell the property three years later for a whopping $1,133,000 and made about $375,020 in profit (including sales costs) before deducting any money spent in upgrades. The owner who bought in 2006 obviously was not as fortunate in terms of timing.

It's disappointing that whomever wrote the listing description can't spell "backyard" or "travertine."

The property has been sitting on the market for more than four months, so no hurry to rush out and buy here. It is mentioned on the listing that the owners will consider a lease, but we won't even begin to speculate what their monthly shortfall would be if they were able to rent this out at market rate.

Assuming a surprise sale at the current asking price, the loss would be $287,940 including 6% sales costs. It would also be a 21% depreciation, not including transaction costs.