This is the story of a house in old town Warrenton. It's in the historic district and is a beautiful house set on a quarter acre lot.

The house has beautiful hardwood floors and an updated kitchen. It has three bedrooms and 1.5 baths. It was built in 1939 and is within walking distance of old town.

This house was sold in 2003 for $165,000. It was sold again in August of 2006 for $353,999. The owner who bought it at that time eventually lost the home to foreclosure.

In April of 2008 the bank listed it for $369,900. It's hard to know what they were thinking, but clearly they didn't have a clue what had happened in the local real estate market. No improvements had been made to the home since the last sale.

Not surprisingly, the house didn't sell at that price. They eventually lowered the price to $319,900 before withdrawing it and listing it with another real estate agent. In September it was listed with the new agent, still at $319,900. Eventually the price was lowered to $249,900.

It finally sold last month for $137,800, roughly 16% below what it sold for six years ago.

This is a house that was not trashed by the last owners. It was in as good a condition when they left as when they bought it.

That sales price is 61% below what it sold for in 2006.

The lessons here:

There are some incredible deals out there.

• Banks lose big time when they over price foreclosures.
• 61% price drop in 2.5 years is astonishing.
• Don't be afraid to make a lowball offer to a bank. Sure, most of the time you won't get it. But, it does happen.

No one can tell you for sure what will happen with prices this year. But to compete with this kind of deal, most sellers will have to cut prices much more than they have thus far.