“I read recently that banks are telling people they need to go into default to do a loan modification, then they’re foreclosing on the home. The article said banks do this so they can get the home at auction for far less than its value. Is that true?”

Answer:
That’s absolutely 100% incorrect.

Despite all the bad press about greedy banks foreclosing on people on purpose, banks lose in so many ways when they foreclose:

1. They lose money, often 50% of the loan balance or more

2. They have less money to lend, so they lose out on interest

3. They’re more at risk for financial problems, including being taken over by the FDIC and shut down or sold

Banks prefer these scenarios, in order:

1. Borrower keeps paying
2. Loan modification for qualified borrower
3. Short sale
4. Foreclosure

Understand, I’m no apologist for banks. And I know they’ve messed up many a loan modification.

But I understand their incentives. They do NOT want to foreclose on people. This is not because they’re nice. It’s because they lose more money than in the other scenarios.

“My husband and I are planning to sell our large 2-story home in University City. We’re in our 70s and don’t want to do a lot of fixing to it. Our daughter’s friend who is an agent told us to just sell our home ‘As Is’ and then we won’t have to fix anything. Will that work?”

Answer:
Yes, BUT…

Right or wrong, marketing your San Diego home “As Is” broadcasts a message to agents and buyers that your home has real problems that you don’t want to deal with. And that results in lower offers and some people avoiding your home entirely.

Plus, it’s almost impossible to legally bind a buyer to buy “As Is.” So why bother? I suggest you do NOT take that agent’s advice as it’ll cost you tens of thousands of dollars and a lot of frustration.

Here’s what I advise my clients:

Making a few repairs is just a normal part of selling a home today. When we get the buyer’s repair request, we’ll look it over. Is it reasonable? Are you getting a price you’re happy with? Would the next buyer likely ask for the same repairs?

Then we work to negotiate it into a shorter list and offer a credit (preferably) for the repairs or have a contractor or handyman make them. We handle the whole process for our clients.

“Hello… My wife and I will be selling our La Jolla home this spring and don’t know any agents. There is one who seems to work the neighborhood. She calls herself the neighborhood specialist. Do you think we should list with her?”

Answer:
Excellent question. Let me share a story with you…

Years ago at another office I worked, there was a very nice agent. He “farmed” a certain large condo complex, meaning he focused his efforts there and several homeowners hired him to sell their homes. He was their “neighborhood specialist.”

Unfortunately, he had no clue what he was doing!

Despite his efforts and best intentions, he was just awful as an agent. And his clients consistently suffered: selling below-market, long delays, failed escrows…the list goes on.

My point is that being the “neighborhood specialist” is a plus, but by no means is it the main reason to hire the agent.

I suggest you interview 3 agents and choose the one with the best track record.

“Hi Gary. We and a couple of other people made offers on a home at the same time. Now the seller is asking for our highest/best, which I guess means for us to offer our highest price. I don’t want to get in a bidding war and am thinking of dropping out. What do you suggest?”

Answer:
I’ve been on the seller’s end of this many a time and I have a little secret for you…

Sometimes the highest offer drops out for the reason you stated, and the second highest gets the home.

I suggest you come back with your highest and best offer. Include not just price, but a bigger deposit, more flexible closing, and more down payment if possible. (We have additional proprietary ways we advise our clients to improve their offer. Call us for that.)

As far as getting in a bidding war, don’t offer more than you feel the home is worth and you should be fine.

If you don’t get the home, then you know you gave it your best shot without paying more than you think it’s worth. And if you do get it, all the better.

“We’re trying for a loan modification, but may consider a short sale if that doesn’t work. We were really misled about how our loan could change and reset. What is the responsibility of loan brokers and/or banks who lied to their clients about the type of loan they were getting?”

Answer:
Unfortunately the loan brokers who misled their clients typically say everything was disclosed in the mass of loan documents signed in a rush at the last minute, even if it’s not what they told you it would be.

But all those pages are too much for a mere mortal to read and understand. You and everyone naturally relied on what your loan broker told you.

Unfortunately, I don’t know of anything you can do about it unless your lender gave you something different in writing. You should check with an attorney, but you probably have no recourse.