Quasi Laguna Beach short sale

Terraces Laguna Beach is technically Laguna Beach, but its location is realistically closer to much of Aliso Viejo than it is to the heart of Laguna.

Values here seem to have held fairly well, though there seems to be a lot of properties up for sale right now. Here's one of them that is also both a short sale and a preforeclosure...

404 San Nicholas Ct, 92651
Asking price: $440,000
Asking price/ sq ft: $325
Income requirement: $110,000
Purchase price: $535,000
Purchase date: 5/26/05
Size: 2 beds, 3 baths, 1,353 sq ft (built in 1988)
MLS: S536733 (28 days on Redfin)
Zillow Zestimate: $513,000
HOA dues: $377
Type: Condominium
Style: Cape Cod
Stories: 2 Levels
From listing: Laguna Beach at this price! Charming 2 masters. Open floor plan w/1/2 bath downstairs. Kitchen has been opened up to include 'new' breakfast area with counterspace and sink. Private back yard opens to greenbelt and great privacy. Very quiet location in complex. Main beach and all the charm of downtown Laguna minutes from your front door.

We counted 11 properties for sale on the MLS in the immediate area around this property. The cheapest two-bedroom is asking right around $400,000. The most expensive three-bedroom is trying to get $625,000. There is also nearby California Cove, a single family home neighborhood that's priced a bit higher.

The current owner purchased the property for $535,000 at the peak using (gasp) 100% financing in the form of two loans. Then, the genius lender allowed him to refinance into $595,000 worth of loans a year and a half later.

The mortgage has since gone delinquent and an $18,351 notice of default was filed on the first loan in May. Assuming the lender allows the sale to go through at the current asking price, it would mean a loss of about $155,000, not including sales costs, because of the increased debt on the property.

It would also mean a depreciation of "just" 18%.