Leveraged to the hilt in Foothill Ranch

Foothill Ranch is OC's worst housing market, and South OC is home to four of the bottom 10 ZIP code-ranked markets in the county, according to Jon Lansner of the OC Register's "Zippy" ratings. Today's property is one reason why Foothill Ranch isn't doing so great right now...

11 Monserrat Pl, 92610
Asking price: $695,000
Asking price/ sq ft: $272
Purchase price: $536,000
Purchase date: 10/16/02
Size: 4 beds, 3 baths, 2,553 sq ft (built in 1991)
MLS: S562025 (106 days on Redfin)
ZipRealty price tracker: Price Reduced: 03/13/09 -- $775,000 to $695,000
Zillow Zestimate: $671,500
HOA dues: $70
Type: Single Family Residence
Style: Traditional
Stories: 2
Lot size: 5,029 Sq. Ft.
From listing: SPECTACULA VIEWS OF OCEAN, CITY LIGHTS & HILLS FROM PRIVATE REAR YARD & MASTER SUITE!!Custom upgrades throughout this private home at end of cul-de-sac. Main floor bdrm w/mirrored closet & separate entrance to full bath. Oversize family rm w/granite fireplace, lg wood mantle, inlay travertine flors & wet bar w/sink & granite top.Custom french slider. Lg light & bright gourmet kitchen w/custom granite counters, island,walk-in pantry,w/new Kitchen Aid appliances (brush silver double oven, stove top, diswasher, microwave & double sink w/new fixtures).Separate breakfast nook. IMPORTED CUSTOM GOLD PLATED CHANDELIERS FROM SPAIN!!Hardwood floor. Nuetral carpet. Travertine (family rm and bathrooms).Plantation shutters in Formal living rm w/vaulted ceiling & formal dining rm w/double french doors. Lg master suite, ceiling fan, new custom windows & PANORAMIC VIEWS! Oversize 2nd & 3rd bdrms w/ mirrored closets & ceiling fans.3 car garage w/storage & epoxy floor. Brick hardscape & lush landscape.

Sounds like some major overimrovements took place in this property. Why there is no photo featuring the "IMPORTED CUSTOM GOLD PLATED CHANDELIERS FROM SPAIN!!" is beyond us.

This is another of those properties that probably shouldn't be going through foreclosure, but the truth is the owner spent away the property a while ago.

He paid $536,000 in 2002 using 99% financing and a $5,400 downpayment. Even if he just stopped there, he probably would have come out OK. But, two years later, he refinanced into $607,500 worth of loans. Then, in April 2005, he refinanced into a $697,500 mortgage from Option One.

In February 2007, there was another new loan - a $706,000 first loan. A few months later, a second loan showed up for $149,000. Those two loans total $855,000. Total mortgage equity withdrawl was more than $300,000. The first loan for $706,000 went into default in April.

Assuming the property sells for the current asking price, it would be $159,000 or 30% above the 2002 price. But, as you now know, in reality this is another huge kick in the pants for the lender.

Flipper 1, bagholder 0

Now this isn't going to end well. Here is a preforeclosure in Foothill Ranch with an interesting recent history. It went REO in 2007 and Deutsche Bank sold it to a flipper, who in turn sold it for a profit to the current owner. Now, said current owner appears to be unable to afford the house.

How would you like to be in this situation right now?

64 Tessera Ave, 92610
Asking price: $699,900
Asking price/ sq ft: $241
Purchase price: $1,000,000
Purchase date: 10/18/07
Size: 5 beds, 3 baths, 2,900 sq ft (built in 1997)
MLS: S560990 (55 days on Redfin)
Zillow Zestimate: $756,500
HOA dues: $70
Type: Single Family Residence
Style: Traditional
Stories: 2
Lot size: 4,762 Sq. Ft.
From listing: Large Home at the end of cul de sac street in Beautiful Foothill Ranch.. Fabulous Neighborhood, Very Open Floor Plan, Dramatic Circular Staircase, Newer Custom Paint inside and out, Main Floor Bedroom & Bath, Spacious Gourmet Kitchen with Island and Granite, Large Family Room with Fireplace, Cathedral Ceilings and Lots of light. granite installed in all bathrooms and laundry room, 6' baseboards thru-out entire home, newer plush carpet and extensive use of Travertine in all bathrooms, kitchen, entry and laundry room. Newer range, dishwasher, water heater, recessed lighting. Landscaped front and rear.*** Panoramic Views of Hills, Canyon and City Lights, Association Pool and Spa. Minutes to Schools,library, Shopping, Restaurants, Parks, Whiting Ranch Trails and the 241/133 Tollroad.

Here are some more details on what happened: The property changed hands in 2004 for $675,000, and that buyer used 100% financing. The house went into foreclosure a couple years later, and we believe it went back to the bank for $723,000 in December 2006.

In May 2007, the lender sold the property for $820,000. About five months later, our flipper sold the property to the current owner for $1 million. That's a profit of $180,000 before expenses.

The current owner used 90% financing and put $100,100 down. The loan went into default in December.

In a situation like this, the thought that this could be fraud also crossed our mind. However, we don't think it's that likely for a few reasons. The last names of the previous two owners are different (though they could still be related or in collusion). It took about 14 months for the notice of default to be filed, so it's not like the current owner stopped paying on the mortgage right away. And, the current owner put more than $100,000 of his own money into the deal.

Assuming the property - a big short sale - can be sold for the current asking price, the loss would be $342,094, including 6% sales costs. The owner would lose his entire downpayment, and the lender would take the hit for the rest.

Model to example in Foothill Ranch

Today's property is a nice-looking, former model home in Foothill Ranch. It's now a preforeclosure and a short sale.

But, it's not a story of 100% financing, nor is it an over-the-top debt debacle. Those were so 2008. Is this the breed of foreclosure that will become more common this year?

34 Mallorca, 92610
Asking price: $649,900
Asking price/ sq ft: $270
Purchase price: $835,000
Purchase date: 9/15/05
Size: 4 beds, 2.5 baths, 2,409 sq ft (built in 1990)
MLS: S552854 (82 days on Redfin)
Zillow Zestimate: $609,500
HOA dues: $70
Type: Single Family Residence
Stories: 2
Lot size: 4,812 Sq. Ft.
From listing: THIS HOME WAS A FORMER MODEL FOR THE TRACT, GREAT LOCATION WITH VIEW OF THE PARK AND GREENBELT AREA. BEAUTIFUL LNDSCAPING WITH PALM TREES. ABOVE GROUND JACUZZI, DRAMATIC OPEN FLOOR PLAN WITH HIGH CEILINGS, SPIRAL STAIRCASE, CIRCULAR SKYLIGHT. TRAVETINE FLOORS, AND CUSTOMIZED KITCHEN COUNTERS, DINING AND FAMILY ROOM RIGHT OFF THE KITCHEN, LARGE MASTER SUITE WITH A VIEW OF THE CITY, ALSO FEATURING: A WALK-IN CLOSET, SEPERATE TUB AND SHOWER, AND DUAL SINKS. 4TH BEDROOM IS A BONUS ROOM WITH WOOD FLOORS AND BUILT-INS EASY TO CONVERT IF NEEDED AS A BEDROOM.


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The current owner paid $835,000 during the bubble. They used a 20% ($167,000) downpayment and financed the rest from WaMu. In late 2006, he added a $50,000 second from E-Loan. A notice of default was filed in December 2008 - a little more than a month after the property went on the market.

Assuming a sucessfull sale for the current price, it would mean a loss of $224,094, including 6% sales costs. The owner's downpayment would be gone, and the banks would take the hit for the rest.

Not including sales costs, the current asking price is 22% below the previous sales price.

Over the top in Foothill Ranch

It's amazing how quickly popular sentiment has changed in light of the deteriorating economy. If you follow baseball, you probably know the New York Yankees recently signed pitcher C.C. Sabathia to a completely outrageous, $160 million contract. Typically, the reaction would be: "Well, they're the Yankees. They can do whatever they want."

But, this free agent move has stirred up some questions and ill will - even from some Yankees fans. How could they carelessly throw that kind of dough to one guy while raising ticket prices when so many of us are barely getting by?

And, for that matter, how the heck could those car company CEOs step off their private planes and then convincingly argue how they desperately need money? We know, we know - safety issues.

Not too long ago, over-improved homes with all the amenities were put on a pedestal. And why not - with home prices rising and seemingly endless access to improvement funds, your imagination was the limit. Your home really could become your castle...decked to the hilt with stainless steel and granite.

Today, this sort of over-the-top opulence and shameless consumerism kind of seems...wrong and out of place. See what you think about this Foothill Ranch property.

30 Flores, 92610
Asking price: $1,240,000
Asking price/ sq ft: $344
Purchase price: $1,100,000
Purchase date: 3/17/06
Size: 4 beds, 4.5 baths, 3,601 sq ft (built in 1991)
MLS: P660018 (62 days on Redfin)
Zillow Zestimate: $713,000
HOA dues: $70
Type: Single Family Residence
Style: Santa Barbara
Stories: 2
Lot size: 6,391 Sq. Ft.
From listing: **STOP**The pictures in listing truly tell the story, nothing misleading here. **NO Detail missed**. Every Bedroom is a suite with it's own full bath, new cabinets/granite, 3 bedrooms include wall mounted Hi def LCD TV's. Located at end of cul-de-sac this home has well over **$200k+** in recent high end upgrades that include new windows throughout, custom wood flooring, new carpet, wood/wrought iron staircase, big open gourmet kitchen, new built in fridge, high end appliances and new cabinets. Tons of custom lighting, Big Bonus room with upstairs inside laundry room. All Plumbing internally epoxy coated. Noritz tankless water heater with commercial grade water softener system. Dual AC units and furnaces only a few years old. Hard wired alarm system with heat/smoke detectors and full outdoor security with 4 cameras. Custom outdoor patio with 4 built in heaters. Garage has custom cabinets and flooring. Home has 8 flat screen TV's that are negotiable as is the furniture. Move-in & Relax.

8 TVs. Really. 'Cause 9 would have been way over the top.

This property was listed in May for $1.28 million, and without a buyer fell off in July. That description may have been even worse: "Tired of looking at homes with no upgrades, old cabinets, flooring and windows that barely work and more. This home has over 200k in upgrades, new windows, High end wood flooring, new carpet, wood/wrought iron staircase, Kitchen just redone, new built in fridge. Tons of new lighting, canned lights, 200 amp panel.High end window coverings. Bedrooms have full baths and granite and new cabinets. Large Bonus room and upstairs laundry. Garage has custom cabinets, carpeted, overhead storage and new Garage doors and openers with the highest insulation value..."

We sincerely hope that someone shopping for a house that costs more than $1.2 million would be able to find others without "old cabinets, flooring and windows that barely work." Just a thought.

Do you think - including the $200,000 in upgrades - this property is now worth $140,000 more than its 2006 price? Doubtful.

Big rollback in Foothill Ranch

This is the first potential 2003 rollback in Foothill Ranch we've seen lately that's not a small condo - though it's only a rollback of that magnitude if you assume the price at the low end of the asking range.

Still, it's a pretty nice case study of the types of declines that are slowly starting to affect more neighborhoods in South OC.

4 E Jameson St, Lake Forest, 92610
Asking price: $519,999-$550,000
Asking price/ sq ft: $288-$304
Income requirement: About $135,000
Purchase price: $730,000
Purchase date: 3/14/06
Size: 4 beds, 2.5 baths, 1,808 sq ft (built in 1995)
MLS: U8002993 (5 days on Redfin)
Zillow Zestimate: $632,500
HOA dues: $49
Type: Single Family Residence
Style: Contemporary
Stories: 2 Levels
Lot size: 5,000 sq ft
From listing: Beautiful home, this 4 bed room 2.5 bath, a big attic, 2 car garage is completely upgraded, new carpet, new paint, new backyard with Jacuzzi, and gazebo. It s classy and modern but warm and cozy. Great area, safe, family oriented, great neighbors, located by the 241, shops, stores and restaurants walking distance from home. Great schools and parks. You can t go wrong with this house. This house was bought only 2 years ago for 730,000 and now going for this unbelievable price of 550,000. This is a short sale and the lender is willing to move fast with the right buyer. You can t go wrong with this home. Come see for yourself, you and your clients will fall in love when you walk in.

Here is one of those extreme short sales that appears to have been approved by the lender - meaning they will be accepting a huge six-figure loss to get this moved.

The current owner is not doing so well with her real estate purchase. She bought the property at the peak for $730,000 with $657,000 worth of financing and a $73,000 (10%) down payment. We are not sure if she later "liberated" any of her money from the property via a HELOC or standalone second.

If the owner did not take out any cash, and the short sale is approved at $550,000, the owner would lose their $73,000 downpayment and the bank would be out about $107,000. That does not take into account any sales costs. A sale at that amount would also mean a depreciation of $180,000 or 25% off the March 2006 price.

If we were to assume the best offer comes in closer to $520,000 and the sale still is allowed to go through, then the numbers are even more gnarly: That would equate to more like a $137,000 stinger for the bank. It also would mean a depreciation of $210,000, or 29% off the last sale. We also would have a 2003 rollback in the books.

This is what the foreclosure map looks like within a 1 mile radius of this property, courtesy of ForeclosureRadar.com. There are currently about 40 properties in some stage of foreclosure:

Big REO discount in Foothill Ranch

Foothill Ranch is holding up better than some other inland-ish areas of Orange County, but it isn't without its cracks. Here is a bank-owned property that is being offered at a healthy reduction from the previous bubble price.

31 Blazewood, 92610
Asking price: $609,900
Asking price/ sq ft: $265
Income requirement: $152,475
Peak purchase price: $808,000
Peak purchase date: 6/21/06
Size: 4 beds. 3 baths, 2,300 sq ft (built in 1994)
MLS: P603386 (247 days on Redfin)
ZipRealty price tracker: Price Reduced: 11/06/07 -- $729,750 to $714,900
Price Reduced: 11/28/07 -- $714,900 to $649,900
Price Reduced: 1/10/08 -- $649,900 to $609,900
Zillow Zestimate: $679,500
2007 property tax: $7,625
HOA dues: $70
Type: Single Family Residence
Stories: 2 Levels
Lot size: 3,610 sq ft
From listing: Upgraded home with tile flooring downstairs and carpet upstairs. Bonus room upstairs, crown mouldings, inside laundry, raised baseboards offered in this home. Private courtyard leads to double door entry. Large private balcony off front two bedrooms. Some minor cosmetic repairs needed. BACK ON MARKET as of 3/24/2008.


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Check out the house in the Google street view above and you'll see some telltale signs of foreclosure: Dead lawn and what looks like an accumulation of some trash out front (you may have to rotate around a bit to find the property, plus be careful of getting the property confused with an identical-looking one across the street).

Talk about great timing: The previous owners cashed in just as the market was beginning to turn in 2006 and walked away with a healthy $326,000 in profit (before sales costs) just for holding the house for three years. Perhaps they did some of the upgrades the listing hints at, but judging by the picture below the kitchen was barely touched, if at all.

The next owner wasn't so lucky.

She purchased the home for $808,000 in June 2006 - a startling amount considering the same home sold for less than $485,000 in 2003. What's not so startling is the financing: $200 down was all that was necessary to take possession of the property, thanks to 99.9% financing from Suntrust Mortgage.

A notice of default was filed in April 2007, and the property ended up going back to the bank in September for $691,338.

It appears the turnaround was quick, as the home was on the MLS in late September. The only thing lacking was a buyer. Now, eight months and $119,850 worth of discounts later, the REO is still on the market.

If the property can sell for the current full asking price, it would equal a depreciation of $190,100, or 24% off the peak price.

"Huh?" photo of the week

First person to figure out what the deal is with this photo attached to a Lake Forest (Foothill Ranch) condo gets a big gold star and pat on the back. Did they have to make it the No. 1 photo that shows up in the MLS?

OK, so it's a work in progress, we get it. Here is the listing description for this 1-bed, 1-bath, 800 sq ft place: New tile floor, berber carpet, new paint, private end unit, city lights view!! Beautiful unit!! Amazing BUY!!! Couldn't they have waited until after these upgrades went in to take the photos?

This property has been on the market for more than three months at an asking price of $269,000. I'm sure you're as shocked as we are that it hasn't sold yet.

Foothill Ranch rollback

It's high time we take a look at what is going on out in Foothill Ranch (ZIP 92610). In case you're not too familiar with the area, it was annexed to Lake Forest in 2000. Foothill Ranch occupies the northeastern part of that city and is close to the old El Toro Marine base.

I've only spent a little time out there, but it looks like a nice community. One possible downside is its distance to non-toll freeways. It also recently gained some attention during the Southern California wildfires, since it was briefly in danger. Fortunately, the area was spared.

Here's a nice-looking property with a killer backyard pool that's under the real estate gun...

5 Bienvenue Drive, 92610

Asking price: $549,000

Asking price/ sq ft: $390
Income requirement: $137,250
Purchase price: $660,000
Purchase date: 10/7/2005
Size: 3 beds, 2.5 baths, 1,407 sq ft (built in 1994)

MLS: S499329 (176 days on Redfin)

ZipRealty price tracker: Price Reduced: 8/21/07 -- $659,900 to $599,000
Price Reduced: 12/16/07 -- $599,000 to $549,000
2006 property tax: $8,121
HOA dues: $70
Type: Single Family Residence

Stories: Two Levels
Lot size: 3,601 sq ft
From listing: very motivated seller . place your offer. needs. Located on a quiet cul-de-sac in a friendly neighborhood. Large backyard that creates an extension of living space outdoors, perfect for backyard entertaining. (must see). .Dog run and storage area for ATV, motorcycle or jetski. All offers considered.

The suspense is killing me - what are the "needs?" One wonders just how eager these sellers are to unload their property these days considering there hasn't been a price reduction in more than a month. Then again, the last $50,000 price trim back in December is nothing to sneeze at.

We obviously don't know the details of the owners' situation and why they're motivated to sell, but sure as heck nobody wants to be forced to lower their asking price to $111,000 below what they paid a little more than two years ago.

Assuming a sale at the current asking price, the total loss would be $143,940, including 6% sales costs. Or, to look at it a different way, it also would represent a depreciation of 17% since 2005 (no sales costs included).