After Google's Kevin Rose rejected a last-minute $1.3 million cash offer for his new Willamette Heights' home, the demolition crews arrived in the Northwest Portland neighborhood Tuesday morning and began setting up fences to keep protestors at bay.

Since Rose -- the founder of Digg.com and a partner at Google Ventures -- and his wife, Darya, bought the house, built in 1892, for $1.3 million in March, neighbors have fought a pitched battle to preserve one of the oldest homes on the hillside. That effort included an online petition campaign that had gathered more than 2,500 signatures by Monday night.

Late Monday night, Will Aitchison -- a labor attorney serving as the spokesman for the neighborhood coalition -- emailed Rose with the $1.3 million cash offer from Tom and Jennifer Saunders. That email included an earnest-money agreement, and a photocopy of a $50,000 check.

Saunders said Tuesday morning that the offer was made to save the 122-year-old house: "This house is important to the fabric of the neighborhood. To tear it down would be a big loss."

Saunders is a Portland developer and a 25-year resident of Willamette Heights.

Aitchison clearly expected the offer would allow Rose -- who has also dealt with protests outside his home in San Francisco -- a graceful exit from Willamette Heights. Clearly stung by the petition drive, the Roses earlier offered to sell the house back to the former owners, Jim Draudt and Ann Witsil, if they were given an additional $75,000, presumably to cover the cost of the designs for the new 5,900-square-foot palazzo, the "

."

As late as 12:15 p.m. Monday, Rose noted on Twitter, "We offered the house back to the buyers."

On Tuesday morning, Aitchison said the Roses had not responded to the offer.

"Or I guess they did," he added. "The demolition trucks are out there."

Aitchison said his wife, Val, immediately asked the general contractor -- Paul Steiner of Otis Construction -- if he knew neighbors had offered to buy Rose out.

The protests have just begun ...

"The contractor gets on the phone with Kevin Rose," Aitchison said. "The description from the contractor was, 'He told me to proceed with the demolition.'

"The first step is they're building a huge fence to keep the neighbors out because they believe there are going to be protests."

Aitchison said he was "beyond discouraged. This is a profound statement that the Roses simply do not care about the neighborhood. They want to build their mansion in Portland without regard to the public ethic or how inappropriate what they're going to build is for the neighborhood. It's a profound statement about how they regard Portland's history."

By 9:30 a.m. Tuesday, Saunders said he had upped his cash offer to $1.375 million, and offered to channel that money through the former owners, per Rose's request.

Saunders said he understands why the Roses may have been annoyed by the stridency of the comments attached to the online petition: "I'm thinking he has his ego up a little bit and doesn't want to back off. But we may be able to work it out.

"He has a right to tear the house down," Saunders said. "He just doesn't get how tight and historic and politically active this neighborhood is. People are talking about blocking the street. If he gets what he asks for and doesn't take it, he's being crazy."

As this story is a moving target, it will be frequently updated Tuesday.

-- Steve Duin