That’s all well and good, but when I ran some comps on this property, it appeared to me that values were in the $500-$550k range.  I obviously haven’t seen the property so there could be amenities making the higher part of the range accurate, but as often is the case with pre-foreclosure property, there’s probably quite a bit of money and time required to bring the property up to that range.

Currently, the property is scheduled for auction on 2-10-2009 with the lender being owed $638,000 or so on a $600,000 loan taken out several years ago.  Given current market conditions, I don’t see an outside bid greater than about $350k being placed so this one’s most likely going back to the lender.
With a market value of $500,000, there will be resale costs(commissions, title, escrow) of about $35,000 and we can safely guesstimate repairs/rehab for another $35,000.  That leaves $430,000 or a profit potential of $80,000 on a $350,000 bid.  The $350 is 70% of the current $500 value which is still kind of a high percentage in this type of market.  If the lender takes it back, they’ll still have to eat about $200,000, more if they perform repairs and/or market time is long.

What about the homeowner?
In this case, the owner bought the property for $180,000 in 1987 so they lived there a little over 20 years and managed to take out $400,000 in equity over those 20 years.  Who knows where the money went, but it’ll be the lender/ insurers and taxpayers footing the bill on this one.

Just a note, this isn’t a typical situation, I just found the numbers and history on this property interesting.