Luxury Foreclosures

Nationwide, from 2006 to 2007, the number of foreclosed properties listed at $1 million or more rose 50 percent, to 7,642, up from 5,091, according to RealtyTrac. And the number of foreclosed homes priced from $500,000 to $999,999 jumped 88 percent, from 52,836 to 99,457.

"In the old days, you thought when someone was buying a $1 million house, they would stay in it," said Beth Doman, a Chantilly real estate agent.

Last month, Doman toured an empty six-bedroom mansion in the Villages at Waxpool, an upscale development in Ashburn, looking crestfallen as she pointed out the movie room, wet bar and library. Her client, local real estate investor Keith Thai, was struggling to close a short sale on this house he had bought for $1.2 million. It was in near-perfect condition with unscuffed white walls and shiny granite countertops. The tub in the downstairs bathroom had never been used -- and still had the original stickers -- even after renters had been living there for more than a year.

Doman ran her hands along the wrought-iron banisters and sighed. "This is nice," she said.

But the bank didn't approve the short sale, and Thai's house fell into foreclosure. So did Thai's 10 other high-end properties, including his own Ashburn home.

"I feel like a loser," Thai said, putting his head in his hands.

After WorldCom's downfall in 2001, Thai quit the company and systems engineering altogether to start a second career in real estate. He took classes and attended seminars. He was enthralled by Donald Trump's tale of building a real estate empire and vowed to make his own real estate fortune. And, on paper, he did.

"In two years," he said, "I made tenfold what I made in the last 15 years."

Thai flipped houses. He gathered investors to buy a high-end home from a builder before ground was even broken. When the house was completed, he sold it for a hefty profit.

Thai deferred the taxes on the sale of the investment property by channeling that profit into three new homes with adjustable-rate mortgages. He rented those homes to families for about $3,000 to $3,500 a month, while the interest was at 1 percent. The rent on each house was about $200 a month less than the mortgage, but at the time, Thai said, he could afford it.

After about a year, he would sell a house and repeat the process.

At the height of his investing, as home prices continued to skyrocket, Thai owned 15 homes in Northern Virginia. He later sold four, and of the remainder, nine were valued at about $1 million.