Look out below in Ladera

Some might say this Ladera Ranch REO represents everything that went wrong with the real estate market in previous years: an inflated price, overdone interior with granite and stainless steel in the kitchen, ceramic tile everywhere, exorbitant lender-enabled financing, and then the inevitable foreclosure.

Now, it's back on the market and looking for its next buyer.

65 Laurelhurst Dr, 92694
Asking price: $599,800
Asking price/ sq ft: $255
Bank purchase price: $546,833
Purchase date: 2/13/09
Size: 4 beds, 3 baths, 2,356 sq ft (built in 2000)
MLS: S571242 (45 days on Redfin)
ZipRealty price tracker: Price Reduced: 05/22/09 -- $612,800 to $599,800
Zillow Zestimate: $675,500
HOA dues: $175
Type: Single Family Residence
Style: Contemporary
Stories: 2
Lot size: 6,200 Sq. Ft.
From listing: This home is on a private flag lot offering additional parking and a gated driveway. Perfect for kids play area. Upgraded interior, spacious living areas. Built-in desk and entertainment unit in family room & loft. Walk to park and Oak Knoll Village clubhouse.

The bank already cut the price once by $13,000. The previous owners paid $639,500 in 2003 using 95% financing from Greenpoint Mortgage...which went belly-up in 2007. Not to worry, though, by then they already had refinanced into $924,500 worth of loans through Countrywide in 2005.

Those loans meant a total equity extraction of $285,000 - their $32,000 downpayment plus $253,000. As you can see, the house turned into an extra breadwinner. Things began crumbling a few years later, and the house went into default in 2008.

Assuming this 2003 rollback is sold for the current asking price, it would mean a depreciation of $39,700 off the sales price six years ago. The actual loss though, was so much more.

Is this really happening in Laguna?

Props to the OC Register's South Coast Homes blog for coming across this Laguna Beach property. Here's the summary: the house is a $9.5 million short sale. It's also a preforeclosure, as we'll show you today...

24 Lagunita Drive, 92651
Asking price: $9,495,000
Asking price/ sq ft: $1,315
Purchase price: $5,500,000
Purchase date: 8/31/00
Size: 5 beds, 5.5 baths, 7,220 sq ft (built in 1983)
MLS: S564400 (52 days on Redfin)
ZipRealty price tracker: Price Reduced: 03/10/09 -- $11,990,000 to $9,900,000
Price Reduced: 04/06/09 -- $9,900,000 to $9,495,000
Zillow Zestimate: $4,895,500
HOA dues: $140
Type: Single Family Residence
Style: Contemporary
Stories: 3+
Lot size: 8,580 Sq. Ft.
From listing: AN INCREDIBLE OPPORTUNITY FOR A LAGUNA BEACH, 'OCEAN FRONT' RESIDENCE! ON THE SAND, LOCATED IN PRESTIGIOUS LAGUNITA! CUSTOM HOME WITH 5 BEDROOMS AND 5.5 BATHS! PANORAMIC OCEAN VIEWS FROM NEARLY EVERY ROOM! ELEGANT MASTER SUITE ON TOP LEVEL WITH FIREPLACE, RETREAT & LUXURIOUS BATH! ENTERTAINMENT ROOM WITH WAT BAR! GOURMET KITCHEN WITH CUSTOM CABINETS, GRANITE COUNTERS AND CENTER ISLAND! LIGHT AND BRIGHT WITH VAULTED CEILINGS AND LARGE VIEWING WINDOWS! ADDITIONAL AMENITIES AND UPGRADES INCLUDE...CUSTOM LIGHTING, 2000 SQ FT MASTER SUITE, INFINITY EDGED SPA, BEACH FRONT TERRACES, 4 QUEST SUITES WITH LIMESTONE BATHROOMS, WALKING DISTANCE TO THE MONTAGE RESORT AND SPA, 24 HR GATED COMMUNITY, AND MORE!! TROPICAL LANDSCAPING AND CUSTOM HARDSCAPE! MUST SEE!

There were a total of $11 million worth of loans made against this property in 2007 - one for $10 million in August, and another for $1 million in September. The $10 million loan is currently in default and also is the reason this property is a short sale.

The notice of default - which came in March - is for more than $240,000. Yikes. Who said the rich are all truly rich?

There's not much to be learned here, except that $10-million loans can come back to get you if you're not careful. We don't know who made the loan, but we can guess they're seriously regretting the decision right about now.

Ladera preforeclosure's one of many

We recently drove through Ladera Ranch and again were impressed by the interesting architecture of the buildings (both residential and commercial). So, why not take another look at how one of South OC's boom-era developments is doing.

Foreclosureradar.com shows 228 properties in the 92694 ZIP code as being in some stage of foreclosure. Of those, 35 are bank owned; 71 are approaching auction; and 122 are preforeclosures. Here is one of the preforeclosures that has an interesting story to tell:

7 La Salle Ln, 92694
Asking price: $665,000
Asking price/ sq ft: $289
Purchase price: $593,000
Purchase date: 5/30/03
Size: 4 beds, 2.5 baths, 2,300 sq ft (built in 2003)
MLS: S567883 (14 days on Redfin)
ZipRealty price tracker: Price Reduced: 03/20/09 -- $780,000 to $680,000
Price Reduced: 03/25/09 -- $680,000 to $665,000
Zillow Zestimate: $653,500
HOA dues: $196
Type: Single Family Residence
Style: Cape Cod
Stories: 2
Lot size: 5,870 Sq. Ft.
From listing: Highly upgraded home on a huge lot within walking distance to Award winning Ladera Ranch Elem. and middle school. Near community library, Avendale club house, trails, park, pool, water park and tennis courts. Very central location on a quiet kid friendly culd a sac. This home is perfect. It is the end house on the street so it only has a neighbor on one side. Upgrades include plantation shutters, wood blinds, designer drapes, granite kitchen and stainless steel appliances including refrig., surround sound in family room, alarm system. Beautiful hardwood floors throughout the home, custom closets, marble in master bath, designer nuetral paint, apoxy garage flooring with built in cabinets for storage. Crown molding, raised baseboards, built in barbq and fire pit in over sized very private backyard. Home includes washer and drye. This is a must see home.



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How predictable was this situation? Very. The current owners - whose primary residence is listed as another address in Ladera Ranch - purchased this property new from the builder in 2003 for $593,000 using 80% financing. Assuming this was a fully amortizing loan, they would have been paying down the $473,700 principal for the past five years and likely wouldn't be in a short sale situation.

But they didn't keep their $119,300 downpayment trapped for long. In late 2004 they took out a $299,773 second from Countrywide. The real kicker was in March 2006, when they refinanced into two loans totaling $965,000 from Countrywide. Are you freaking serious?

That would mean Countrywide believed the property had appreciated $372,000, or 63% in less than three years to be sufficient collateral for the loans. A notice of default was filed in January against the first loan.

Redfin says the median home in Ladera right now is valued at $270 per square foot. If we assume this goes for our subject property, it should sell for $621,000. Would BofA take that? Since this is a second residence (investment property), the rules say our tax dollars shouldn't get wasted paying for this debacle.

Assuming the short sale can get completed for the current asking price, it would mean a loss in excess of $300,000 before sales costs and lost interest and fees.

REO Laguna cottage

How would you like to pay $850 per square foot to own a small renovated cottage in Laguna Beach? We know, it's all about location.

The bank was hoping to get $999 per square foot up until recently, so consider today's price a deal!

1641 Glenneyre St, 92651
Asking price: $849,900
Asking price/ sq ft: $850
Purchase price: $1,162,906
Purchase date: 12/12/08
Size: 2 beds, 2 baths, 1,000 sq ft (built in 1922)
MLS: P676524 (32 days on Redfin)
ZipRealty price tracker: Price Reduced: 03/09/09 -- $999,000 to $849,900
Zillow Zestimate: $1,066,545
Type: Single Family Residence
Style: Cottage
Stories: 1
Lot size: 2,500 Sq. Ft.
From listing: PICTURE PERFECT BEACH COTTAGE with a peek a boo view! Extensively remodeled top to bottom! Gorgeous private courtyard with custom fireplace, landscaped with lighting and water fountain. Covered patio area that has a built in ladder to climb and sit to enjoy the Ocean View! Remodel includes: distressed hickory hardwood floors, master bedroom and bathroom with private entrance. Master bath with drop in spa tub and skylight, 2nd bath has frameless glass doors with travertine shower and granite sink top. Gorgeous! Gourmet kitchen with granite counters, breakfast bar, micro/convection oven, stainless Range & appliances. Seperate Breakfast Nook. New Furnace & A/C. Over 1500 Sq. Ft of inside/outside living space! Ocean & Catalina Sunset rooftop views!


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The remodel appears to have turned out very well. We're trying to picture the type of person who would have the money and the desire to buy this property: Empty nesters who want to settle on the beach? Successful bachelor/bachelorette who doesn't need very much space and wants a ready-to-move in property close to the water?

The previous owner - whose primary residence is in another South OC city - paid $1,107,000 in 2005 using 100% financing from American Home Equity Corporation in Irvine. He later refinanced into about $1.25 million worth of loans in July 2006.

By late 2007, the parade of notice of defaults began. The house went back to the bank in December 2008.

Assuming the property sells for the current asking price, it would represent a decline of $257,100, or 23% off the 2005 bubble price.

$900k+ debt to REO in LH

This Laguna Hills property didn't stand a chance - not while its previous owner was pulling out the kind of cash he was. Now, it's an REO and a 2003 rollback.

25251 Barents, 92653
Asking price: $595,900
Asking price/ sq ft: $176
Bank purchase price: $648,000
Purchase date: 10/15/08
Size: 5 beds, 2.75 baths, 3,394 sq ft (built in 1977)
MLS: S554084 (52 days on Redfin)
Zillow Zestimate: $711,000
HOA dues: N/A
Type: Single Family Residence
Style: Cape Cod
Stories: 2
Lot size: 0.26 Acres
From listing: 5 BEDROOMS, 3 BATH BANK OWNED ON CORNER LOT IN CUL-DE-SAC. OPEN FLOOR PLAN, CLOSE TO SHOPPING, SCHOOLS AND FREEWAYS.


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We'll spare you the details on all the re-financing, but the bottom line is the previous owner paid $668,500 in 2003 and purchased the property using 90% financing. The loans at that point totaled $601,650.

By August 2006, the total debt was up to $945,000 thanks to two loans from Greenpoint Mortgage Funding. That company blew up in mid 2007. The property began the foreclosure process when a notice of default was filed on the first loan in April 2008. The bank took back the property in October.

Assuming a sale for the current asking price, this property would have gone for $72,600 or 11% less than its November 2003 price, not including any additional costs or fees.

Take three in Laguna Niguel

The previous owners tried to sell this property twice since early 2007. Now that the bank is in control, we expect things to move a bit faster.

29652 Coral Cv, 92677
Asking price: $299,900
Asking price/ sq ft: $234
Bank purchase price: $399,419
Purchase date: 11/26/08
Size: 3 beds, 2.5 baths, 1,280 sq ft (built in 1973)
MLS: S557318 (1 day on Redfin)
Zillow Zestimate: $389,000
HOA dues: $350
Type: Condominium
Style: Ranch
Stories: 2
From listing: WHAT A VALUE! Three bedrooms! Living room with fireplace, dining area or family room attached to the kitchen, front and back patios. Bedrooms upstairs with two baths. Half bath downstairs. You will like this one! Neat and clean too.

The previous owners used 100% financing to purchase the property in 2004 for $400,000. Then, $450,000 worth of loans were made in 2005. In July 2007 - after they unsuccessfully put the home on the market for $585,000, WaMu gave them a loan for $468,250. You can guess what would happen with that loan.

This property then came on the market for $479,900 in February 2008 - $79,900 above the 2004 price but probably not enough to cover the debt plus sales expenses. Eventually, the asking price came down all the way to $329,900 in November. We also know WaMu approved a sale for $340,000 at one point.

It may be sad to say, but why would a buyer put extra effort into trying to make the short sale work, when the property will be re-listed by the bank for less money as an REO a month later?

It's also interesting to see what has happened with prices in this neighborhood. Consider:

• A 1,319 sq ft model sold for $325,000 in October 2008.
• An 1,820 sq ft model sold for $445,000 this August.
  
• A smaller 2-bedroom, 1,019 sq ft model went for $340,000 in early October 2008.
  
• A 1,358-sq ft model sold for $495,000 in mid 2004.
• A 1,763 sq ft fixer allegedly "priced $100,000 below market" sold for $535,000 in March 2007.
• The high price on nearby Pelican Way was $550,000 for a 1,200 sq ft model in March 2006.

The asking price of our subject property is around 40% below peak values.

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.

Whacked out listing: LN

This Laguna Niguel listing is a bit shocking for at least two reasons: 1) from the photos and description, we can tell the property is a total mess; 2) this property - a foreclosure - had more than $925,000 worth of loans made against it over the course of only a few months in 2005.

Do you want to roll the dice on 24002 Estacia Avenue after reading this description?

This 5 bedroom fixer home sits on a large lot. Needs alot of work. Property has geological history. Mold in laundry room. Buyer to check with the city regarding permits on the pool and add on family room. Buyer should not enter pool area. Covered to keep everyone out Please. Property is sold as is, including termite estimated at $15,000.

Points for honesty and up-frontedness. The asking price of $399,900 equates to $187 per square foot, but go ahead and tack on a significant amount of extra cash to deal with the geological history, mold, dangerous pool area, termites and possibly unpermitted additions. Is there anything not wrong with this property?

Don't think think a bank would feel comfortable loaning someone a lot of money to buy this property. Especially not in today's uncertain climate.

Collapse in Ladera Ranch

In recognition of the OC Register's San Clemente high-end foreclosure tour, we're going to post today on a luxury Ladera Ranch foreclosure property.

19 Dennis Lane, 92694
Asking price: $1,600,000
Asking price/ sq ft: $350
Bank purchase price: $2,002,160
Purchase date: 6/27/07
Size: 5 beds, 5.5 baths, 4,576 sq ft (built in 2005)
MRMLS: C08062676 (127 days on Redfin)
ZipRealty price tracker: Price Reduced: 5/15/08 -- $1,875,000 to $1,600,000
Zillow Zestimate: $1,631,500
HOA dues: $400
Type: Single Family Residence
Stories: 3+ Levels
From listing: SHERBORNW PLAN 3 TOTALLY UPGRADED!BEAUTIFUL GRAND ENTRY WITH HARDWOOD FLOORS, HANGING CHANELIER, OVERSIZED GREAT ROOM LEADS TO MORNING ROOM WITH A BAR, AND CUSTOM KITCHEN COMPLETE WITH WINE REFRIGERATOR ALL THERMODORE APLLIANCES, CUSTOM CROWN MOLDING AND GRANITE TOPPED ISLAND. FORMAL DINING TOOM WITH CUSTOM CANBINETRY LEADING TO FOUNTAIN AND ATRIUM. BACKYARD WITH VIEW, WITH WATER FOUNTAIN, SALT WATER POOL/SPA. FIREPLACE, BBQ ALSO 4 HOLE PUTTING GREEN. OVERSIZED BONUS ROOM !!!

Minimum Income Requirement (using 30Y Fixed): $318,000, assumes no other debt/obligations.
Downpayment needed: $320,000
Monthly Payment on 30Y Fixed at 7.25% with property taxes and mortgage insurance estimated: $10,481.86
Minimum Income Requirement (using 5Y fixed): $282,000, assumes no other debt/obligations.
Monthly Payment on 5Y fixed at 5.80% with property taxes and mortgage insurance estimated: $9,260.44
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.

Does this property look familiar to you? Perhaps you saw it before on BMIT when ocrenter profiled it in March 2007. At that point, a notice of default had been filed. This post is worth a look because you can see what kind of re-fi madness we're dealing with.

It looks like the property eventually went back to the bank despite the fact that it was up for sale in 2007 for $2.9 million at one point.

See how many typos and misspellings you can spot in the listing description. Unbelievable...

Two other properties are in trouble on this street: 23 Dennis Lane (an REO that is past the point of help) and 2 Dennis Lane, a preforeclosure.

Suffice to say, the lenders' losses on this property are staggering. It will be interesting to see what this one ends up selling for, but as you can see by the income and downpayment requirements, only an exclusive group can legitimately gain entry to this level of home.

REO sets the curve in Mission

We're going back to Mission Viejo - and to the Pacific Hills area - to show you an REO townhouse that is leading prices down in the Mirasol townhouse neighborhood.

29 Brindisi, 92692
Asking price: $410,000
Asking price/ sq ft: $212
Bank purchase price: $435,000
Purchase date: 6/30/08
Size: 3 beds, 3 baths, 1,936 sq ft (built in 1994)
MLS: S544115 (7 days on Redfin)
Zillow Zestimate: $463,000
HOA dues: $249
Type: Condominium
Stories: 2 Levels
Lot size: 1,200 sq ft
From listing: This is a 3 bedroom with a loft unit in the beautiful community of Mirasol. It needs a little TLC but in relatively good shape. It includes a formal living and dining room, separate family room with fireplace, breakfast nook area plus an inside laundry area. This is located in the gated community of Mirasol/Melrose in the Pacific Hills area of Mission Viejo. Included is the association pool and spa plus membership to Lake Mission Viejo.

Customized financial info:
Minimum Income Requirement (using 30Y Fixed): $102,000, assumes no other debt/obligations.
Downpayment needed: $12,300
Monthly Payment on 30Y Fixed at 6.875% with property taxes and mortgage insurance estimated: $3,371.61
Minimum Income Requirement (using 5Y fixed): $99,600, assumes no other debt/obligations.
Monthly Payment on 5Y fixed at 6.375% with property taxes and mortgage insurance estimated: $3,246.13
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.

Perhaps "relatively good shape" is the best one should expect when they're dealing with bank-owned properties.

There are two other properties for sale in the same neighborhood. Both are smaller. One is asking $499,999, and the other is hoping to get between $450,000 and $475,000. They've made it known that this one not a short sale, but they won't listen to your offer unless it's within their price range. It's now approaching four months on the market.

The previous owner of our subject property fell victim to the easy money bug. He purchased the home in 2002 for $376,000, using a $357,200 (95%) loan and an $18,800 downpayment. In December 2004 he pulled out his downpayment plus some extra cash by refinancing into a $440,000 loan from Cendant Mortgage Corp.

Wells Fargo enabled $166,000 more equity extraction over the course of the next three years. Doesn't look like too much money went back into the house.

The property's first loan slipped into default in February, and the condo eventually went back to the bank at auction in late July for about $20,000 below the notice of trustee sale amount.

Assuming the property sells for the full asking price, it would mean the home would only sell for $34,000 more than the former owner paid in 2002.

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.

"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.

Million-dollar REO in San Clemente

Today we go back to Forster Ranch in San Clemente to show you a bank-owned property that, if sold for its asking price, would demonstrate more than a half-million dollar decline in value from its previous sales price during the bubble.

2525 Costero Magestuoso, 92673
Asking price: $1,149,000
Asking price/ sq ft: $280
Income requirement: $287,250
Bank purchase price: $1,439,287
Purchase date: 4/1/08
Size: 4 beds, 5 baths, 4,100 sq ft (built in 2003)
MLS: S533569 (25 days on Redfin)
Zillow Zestimate: $1,986,500
2007 property tax: $11,458
HOA dues: $248
Type: Single Family Residence
Style: Tuscan
Stories: 2 Levels
Lot size: 7,500 sq ft
From listing: Stunning home in a gated community. MOVE-IN CONDITION. Upgraded Travertine throughout downstairs. Bedroom and full bathroom + powder room downstairs. Master bedroom with retreat and romantic fireplace. Family room with built-in entertainment niche, cozy fireplace. Breakfast nook, breakfast counter. Gourmet kitchen with granite stainless steel appliances. Plantation shutters throughout. Huge bonus room with built-in entertainment center w/ 62'HDTV and queen size Murphy bed. Upgraded back yard with salt water dipping pool/spa, waterfall, fire ring and sitting area. Covered patio with ceiling fans, BBQ with fridge. Hurry on this one, this will not last.

It's not too often you see an REO listing mentioning what good shape the house is in (move-in condition, no less), but then again this is a luxury property. Nice of the previous owners to leave the huge HDTV.

Speaking of the previous owners, they paid $1.7 million in 2006, using 100% financing from Bear Stearns. Can you imagine being handed the keys to a property like that without having to chip in a dime of your own money?

It was indeed too good to be true. The notice of default on the first loan came in August 2007, and the notice of trustee sale was filed in November for $1,353,839 - which is above the original loan amount of $1,275,000.

Assuming the bank can sell the property for the current asking price, it would mean a depreciation of $551,000, or 32% off the 2006 price, not including any sales costs.

We'll leave you with a snapshot of the foreclosure activity in the 92673 ZIP code, courtesy of ForeclosureRadar.com. The green markers signify notice of defaults, the blues are notice of trustee sales, and the red ones are bank owned. For an explanation of the California foreclosure process, click here.

Pair 'o REOs in Lake Forest

These two properties in Lake Forest have essentially the same story to tell, so we're going to feature them together. Both were purchased during the bubble years with...let's call it a "limited" amount of downpayment money needed.

Now, they've gone through foreclosure and are back up for sale as bank-owned properties.

22981 Ditz Lane, 92630
Asking price: $239,900
Asking price/ sq ft: $202
Bank purchase price: $256,500
Bank purchase date: 4/4/08
Size: 2 beds, 2 baths, 1,189 sq ft (built in 1972)
MLS: S517362 (114 days on Redfin)
ZipRealty price tracker: Price Reduced: 2/01/08 -- $324,900 to $299,900
Price Reduced: 2/14/08 -- $299,900 to $289,900
Price Reduced: 3/02/08 -- $289,900 to $279,900
Price Reduced: 3/06/08 -- $279,900 to $269,900
Price Reduced: 3/07/08 -- $269,900 to $259,900
Price Reduced: 3/15/08 -- $259,900 to $258,800
Price Reduced: 4/19/08 -- $258,800 to $239,900
From listing: Large 2 story townhome!!!! Great area, quiet and secluded street!!! Large bedrooms!!! Lots of storage!!! Large family kitchen!! Nice yard!!!! This property comes with 2 car garage!!! Great school system!! Wonderful area! Community assoc. Offers great entertaining and recreation!!! Must see!!!

Exclamation point abuse is alive and well here. The former owner "paid" $439,000 in July 2006 (essentially the peak of the market) with $0-down financing - a $351,200 first loan and a $87,800 second (80/20) from Peoples Choice Home Loan in Irvine. Surprise, surprise: This company was a lender for people "with credit problems." It also is no more as it filed for bankruptcy in 2007.

This condo went back to the bank (HSBC) for $256,500 - well below the notice of trustee sale amount of $371,548. Assuming a sale for the full asking price, it would be a decline of 45% off the peak price, not including any sales costs.

23004 Ditz Lane, 92630
Asking price: $269,900
Asking price/ sq ft: $296
Bank purchase price: $248,940
Bank purchase date: 3/6/08
Size: 2 beds, 1 bath, 912 sq ft (built in 1972)
MLS: U8001820 (15 days on Redfin)
From listing: Single-story ground level end unit in nice neighborhood. Enclosed patio, two-car garage and lots of windows --- shows light and bright.

Notice the "vintage" kitchen on the right. The image at the top of this post is the exterior shot of this property.

Not to sound like a broken record, but here we go: This property was purchased by the doomed borrower for $430,000 in December 2006 (again, either right at the peak of the market or just after) using 100% financing from JPMorgan Chase. There was a $344,000 first loan and an $86,000 second (80/20).

The NTS (notice of trustee sale) amount was $365,964, but it went back to the bank in March for $248,940. Assuming a sale for the full asking price, the depreciation then would be 37%, not including any sales costs.

This is what the street looks like:

View Larger Map
There is also a preforeclosure on the same street - 23011 Ditz Lane. This condo is the same size as 23004 Ditz Lane.

The loan in default was made in May 2007 and is for $345,000 from WaMu. Do you think it would be wise for the borrower to struggle to keep the property with this much debt, considering banks can't unload homes here when they are asking in the low to mid $200,000s?

And, just for kicks: 23008 Ditz Lane has a "make me move" price on Zillow of $425,000. LOL.

What not to do

Depending on one's point of view, this can be either a sad tale of things gone awry, or a biting case of poetic justice.

26432 San Ramon Way, which is a 4-bedroom, 3-bath house in Mission Viejo, is up for sale with an asking price of $699,000.
Here's the listing description: GREAT COMMUNITY, SINGLE LOADED, CUL-DE-SAC STREET. SPACIOUS FLOORPLAN. HIGH CATHEDRAL CEILING ENTRY OPENS TO LUXURY LIVING AND DINING ROOM. FROM ENTERTAINING FAMILY ROOM WALK INTO BREAKFAST AREA & GOURMET KITCHEN. CUSTOM SHUTTER WINDOWS THROUGHOUT. MAIN FLOOR BEDROOM CONVERTED TO OFFICE WITH BUILT-IN DESK & CABINETS. FULL BATHROOM DOWNSTAIR. COZY BACK YARD W/ MANY FRUIT TREES & ROSES. NEAR BY SIERRA & MONTENOSO RECREATION CENTERS.

Reader mja considers this property to be "a better-than-average home, and (it's) priced 15-20% below all the other homes in the area." The property has been on Redfin for 93 days now and the listing is still active.

You guessed it: There's more to the story.
Original list price: $989,000
WTH? On the surface, this seems insane. Did the owners really think their property had increased in value by $350,000 since they purchased it in 2003 for $639,000 - particularly since many other Mission Viejo properties are asking below 2004 prices at this point?

Well, no and yes. No, probably, because this was obviously a wishing price and had no basis in reality. Yes, because they were wishing for a bailout. Why?

Mja was wondering why this place wasn't already sold, and did a little digging. Here's what they found: "I called the agent, and she said that they have a number of offers and it's up to the bank to approve it. I asked why it is a short sale, being that they have received offers above the purchase price in '03 for $635k... well is turns out that the seller has over $1 million in loans on this property."

Another victim of the debt monster. Telltale signs in the photos include the flat-screen TV and all stainless steel appliances. Props to the owners, though, who managed to rack up debt to the tune of at least about $500k more than the purchase price of their home in a matter of four short years.

Easy money

Since it's the weekend, we're going to go out of town for a day and feature a property in Los Angeles County. There's no photo available of the property, so instead I'm using a generic picture of the city of Norwalk from the 1950s, right after this house was built.

The basic details:
11912 Cresson Street, Norwalk, 90650
Asking price: $459,000
Purchase price: $400,000
Purchase date: 6/27/2005
Size: 2 beds, 1 bath, 749 sq ft (built in 1949)
MLS: P604142 (26 days on Redfin)
Description: Charming home in quiet neighborhood walking distance to Park and Elementary school. The garage has been converted to an extra large bedroom, you get 3 bedrooms for the price of 2. Inside has been remodeled with new paint, carpet, crown molding, tile counters, and cieling fans. Large grass area in backyard along with a nice patio for relaxing.

On the surface, this property is unremarkable (especially since we don't have too much of an idea of what it actually looks like, other than the fact that it's a modest 2-bedroom*, post-WW II house in Norwalk). *-Nothing says class like a property with its garage converted into an additional bedroom.

If we assume the usual 6% sales costs, the gain would be $31,460. Since there is a relatively small potential gain, we would guess the owners don't have too much room to lower the price, despite the fact that larger neighboring 3-bedroom properties are asking $49,100 less and $43,100 less.

That doesn't tell the whole story. Here is the mortgage information for 11912 Cresson, courtesy of PropertyShark:
Purchase price in 2005: $400,000
1st mortgage: $320,000 (adjustable)
2nd mortgage: $80,000 (fixed)
Downpayment: $0
Refi (8/28/07): $417,000 (fixed)

So the owner put nothing down, and then re-fied into a bit larger loan to squeeze some more money out (notice they maxed out on the conforming loan limit of $417k). The current asking price is about 15% more than the current owner paid in '05, when the market peaked. By the way, this property sold for $136,000 in mid 2001, meaning that over the course of four years, this property shot up in value by 194%.

Can you imagine what could happen as prices in LA continue to turn around and head back down?