Foreclosure in the works

XXX Tinkerbell Road $151/sqft. $389,000.

I'm going to predict that today's property will end up in foreclosure. The "owners" owe $368,037 on this property which they purchased a year and a half ago for $296,500. To avoid a shortsale/foreclosure situation, the owners have to get at least $143/sqft.

In their neighborhood, two houses just sold:

6/30/2009 -- 421 Tinkerbell Road. $119/sqft. $222,350 for 1862 sqft.
6/26/2009 -- 508 Colony Woods Drive. $100/sqft. $233,000 for 2367 sqft.

The next most recent sale in this neighborhood was back in May.

A third house is currently listed for $100/sqft. It's larger than today's property. It's also a few years younger (1968 vs 1962). This third house is priced to sell, and it will. Its owner even stands to make a profit.

When this third house sells, there will be three perfect comps -- comparison sales -- for today's property which an appraiser will use to measure the value of today's property. If the appraisal comes in at $119/sqft (generous), then the bank will only loan $243K. The buyer would have to put up a $143K down payment. If the appraisal comes in at $100/sqft (likely), then the bank would only loan $204K and the buyer would have to put up a $183K down payment. I don't think there are buyers with that much money saved who will consider this property.

The owners of today's property purchased the house in January of 2008. They payed the previous owner $296,500 in February 2008, but took out a 332K loan with BB&T. I don't understand why the bank wanted to loan 112% of the property value. Apparently, First Medallion Bank didn't think this was unreasonable and so they allowed the owners to refinance in December 2008, into a $346,800 loan. Then in January 2009, they took out a second mortgage from Kingsford Home Improvements for $21,237. Ahh. Serial refinancing. Did all that extra cash go to good use?

From the picture of the kitchen, it looks like they put in a granite counter top. The cabinets look new, but are ugly. I'm guessing the flat top range was installed as well. I personally dislike the idea of flat-topped ranges. They certainly didn't make the kitchen larger, it looks tiny. Maybe there are other improvements they made to the rest of the house, but then, why aren't they showing them in the pictures (there are only four), or at the very least, including a description of them? Geez, any description at all would be nice.

These owners intended to flip the house. Instead, they're going to get burned.