The six-bedroom property was sold last week for the bargain price because of its precarious position overlooking Oddicombe Beach in Torquay, Devon.
But just six days later more than 5,000 tonnes of rock at the bottom of the garden collapsed into the beach below.
Local residents said they heard a ”rumbling” noise before the unstable sandstone cliffs crumbled, narrowly missing a row of beach huts.
Police and coastguards feared joggers or dog walkers were trapped underneath the rock and used thermal imaging equipment to hunt for survivors.
No-one was hurt but Ridgemont House lost a ”substantial” chunk of its land and now sits just 50ft from the edge of the 300ft cliff.
One neighbour said: ”Apparently the cliff collapse was sparked when a large boulder the size of a Transit Van fell off and the whole lot went.
”It happened in the middle of the night so no-one saw how bad it was until daylight. It was a huge cliff fall.
”Ridgemont House lost a large chunk of its land – it was only sold last week. The timing was pretty terrible.”
The house was built in the late 1930s when Torquay and the English Riviera was popular with wealthy holidaymakers from London.
It, along with its gardens, were sold for £123,000 at auction last September and bought at another auction just days ago for £154,500 – just a fraction of the £1.5million for a similar sized beach front home in other British resorts.
It is understood to have been bought as a second home by a property developer from London named Sue Diamond, who paid a deposit with the sale to be finalised in March.
The new owner was said to be too upset to speak about the damage to her new property yesterday. …