Doug: Courtney and I update this slide to reflect the agent who is presenting and their team.
Slide 1 of 56Redfin’s Home Buying ClassApril 30, 2013 Woodstock, GAPresented by: Pam OConnor-SmithRedfin’s North Atlanta TeamFollow: @RedfinAtlantaLike: http://www.facebook.com/RedfinAtlanta
Slide 2 of 56Agenda● To buy or not to buy● Overview of purchase process● Understanding the Market● Condos/Townhomes● Touring● Mortgages● Choosing an agent● Redfin as a tool● Short sales & foreclosures● What to know about closing
Slide 3 of 56A Little Bit About Who We AreRedfin is a real estate brokerage that has helped over 20,000people buy or sell a home; 97% would refer us to a friend.● Customers, not commissions● Informed decisions● The right home for the right price No obligation Get back a portion of our commission
Slide 8 of 56Overview of Purchase Process (more details tofollow)● Information – learn as much as possible about themarket, the neighborhood, price trends● Tour some houses to get a general idea● Interview Lenders- get pre-approved● Choose an Agent● Tour more seriously and find YOUR home● Mutual Acceptance on your offer● Home Inspection “Contingency”● Financing and Appraisal “Contingencies”● Closing
Slide 10 of 55Case-Shiller: Atlanta Area v. 20-City0.0050.00100.00150.00200.00250.0020 City CompositeAtlanta
Slide 11 of 56Case-Shiller – By the NumbersCase-Shiller: Atlanta AreaUp 13.4% year-over-yearPeak was July 2007Down 29.0% from peakCurrently at June 1999 prices20-City CompositeUp 8.1% year-over-yearPeak was July 2006Down 29.2% from peakCurrently at September 2003 prices
Slide 12 of 56National Market TrendsMultiple Offers - More than a Quarter of Listings Still Selling Fast● 2012 inventory fell 30%● Through the first 6 weeks of 2013 – inventory dropped another 18%● Multiple offers are not only against 3 or 5 buyers, but more like 10, 20 andsometimes even 30 or more
Slide 13 of 56National Market Trends● January YoY Prices up 10%● January YoY sales increased 9.1%● 70% of homes in January had competing offers● 30% of new listings were under contract in < 2 weeks● # new construction projects in Q4 2012 up 44% YoY● Why could slow the market?► Mortgage rates have increased to 3.75% (highest since last Sept.)► Eventually money will get more expensive and buyers will becomemore scarce
Slide 14 of 56Where is the Local Market Headed?● Supply of homes is at a five-year low and won’t increase therest of the year● Rents have been rising, making buying more attractive● Market stabilizing, though likely 2-3 years before significantappreciation● Rate increases - biggest issue for buyers● Rise in New Construction activity
Slide 17 of 56Absorption RateNumber of Active listings or comps ina specific marketNumber of homes that sold in that last12 months“The rate at which available homes are sold in a specificreal estate market during a given time period”
Slide 19 of 56What is a Short Sale?The owner owes more on the mortgage than the home isworth● Usually pre-foreclosure, but not always● Listed for less than what’s owed to the bank● Requires 1 - 2 banks’ approval (usually 2)● May have other liens (taxes, utilities, HOA)How are short sales different?● Flexible closing date● Contract Price has to be approved by the seller’s lender(s)● Property is sold “as-is”● Get a 15% commission refund
Slide 20 of 56What is a Foreclosure?● A foreclosed home owned by a bank, lender or GSE● Standard sale but:► Verbal negotiations► Long response times► Repairs unlikely► Legal addenda may require an attorney► Limited or no disclosures► Potential for multiple offers► Bank can back out any time until they’ve signed► Fannie Mae and Freddie Mac(GSE’s) – First Look Period► HUD Homes also have a First Look Period
Slide 22 of 56Condos● HOA► Monthly Fees Ext Building Maintenance Ext Liability Insurance Ext lighting, security Landscaping Pest Control Water Utilities Cable, Internet
Slide 23 of 56Condominiums● HOA► Meeting Minutes► Special Assessments► Rental Cap (10-25%)► Wait list for Rentals► Litigations?► Typically, the older the building, the higher the HOA fee
Slide 24 of 56Condominiums● Financing► Conventional► FHA► FNMA► Factor in HOA fee for approval amount
Slide 25 of 56Condominium● What to look for….► Noise levels► Staff friendly and helpful► Pet friendly► Pet restrictions► Common Area cleanliness, maintenance► Parking, location and number of spaces, visitor► Storage► Security, Concierge 24/7?► Amenities, pool, fitness, tennis, clubhouse, etc
Slide 26 of 56Townhomes● Fee Simple► Lower HOA fees than condos► Owner responsible for interior and exterior of building► Maintain full home insurance► If problem occurs, then work with insurance vs HOA
Slide 27 of 56MortgagesBrandi LaneMovement Mortgage
Slide 28 of 56Review Your Financial SituationTo Buy or Not to Buy● Pull credit report, look for errors● Establish comfort level for monthly payment● Figure out how much monthly income goes towards debt:28 – 33% healthy● Pay down credit balances to 1/3rd● Don’t open any new lines of credit● Don’t buy any big ticket items● Source of money● Current employment status
Slide 29 of 56Start Shopping for LendersCompile a list of 2-3 lenders & brokersGood sources include:● Redfins partner lenders● Referrals from friends, family & co-workers● Online review sites, such as Yelp● Local chains and offices*Know your lender
Slide 30 of 56Getting Pre-ApprovedA pre-approval letter is a letter from a bank or a lender estimatinghow much theyll lend you● Establishes what you can afford & makes offer process go faster● What’s the difference between Pre-Approval and Pre-Qualification● Good for 90 days, depending on lender● Ask for a few different amounts● Similar, yet different from pre-qualification● Redfin asks that you get pre-approved before your third tour● Are gift funds involved?● How much do you have for a down payment?Information needed:● W-2, two pay-stubs, tax returns, bank statements
Slide 31 of 56Comparing Loan Estimates● Gather loan estimates► A minimum of three, more is better► These aren’t final numbers, but within a few thousanddollars► Compare similar loans Program (FHA, conventional) Timeframe (same day)● Compare costs side-by-side► Discount & origination points► Interest rates► Insurance premiums (FHA, PMI)► APR (interest rates + fees + points + PMI)
Slide 32 of 56Types of Loans● Conventional:► As low as 5% down► Fixed or adjustable rates, conforming or non-conforming● Federal Housing Administration Loan (FHA):► Always have mortgage insurance► Buyers need only a 3.5% down payment● VA Guaranteed Loan:► Veterans, active duty personnel, reservists/national guard, survivingspouses► No down payment● Ask your lender if they have special loan programs► Example: BB&T Chips Program
Slide 33 of 56Where Are Rates Headed?Type of Loan April 25, 2013 April 18, 201330-Year Fixed 3.40% 3.41%15-Year Fixed 2.61% 2.64%5/1 ARM 2.58% 2.60%1-Year ARM 2.62% 2.63%
Slide 34 of 56Make Your Decision● When possible, get a loan commitment● Make alternative funds liquid (401k, stock)● Lock your rate once you have a contract on a property anda set closing dateGood news! Loan payments are made in arrears, so your firstloan payment won’t be for two months.
Slide 35 of 56Putting it all together to findYOUR home
Slide 36 of 56Redfin.com-Benefits of a MLS PoweredSite● All the homes for sale: 30% more listings● You see what the agent sees: 4x the data● Real-time market data: photos, details of just-sold homes
Slide 37 of 56Highlights of Redfin’s Site● Search by zip codeor neighborhood● Saved searches/instant alerts● Agent notes● Download results● Price your home● Forums● Home buying guide● Home inspection guide● Any questions about the site?
Slide 38 of 56Open Book● Redfin Certified Providers● Every professional is reviewed and all reviews are shown● Search for local:► Inspectors► Lenders► Attorneys
Slide 40 of 56What to Ask Any Agent● Is this your full-time job?● Familiar with foreclosures or short-sales?● Where were your last five deals?● Who else will be working with me?● Will you show me all properties for sale?● When am I committed to working with you?● Has a client ever filed a complaint?● How are you paid?● Can I see some reviews of your work?
Slide 41 of 56This occurs when inventory is down and buyer interest is up5 Tips for Winning in a Bidding War1. Make the competition eat your dust2. Get pre-approved with a local lender & get underwriterapproval3. Start the conversation early4. Write a letter & appeal to the seller5. Know your limitsExperience With Multiple Offers
Slide 42 of 56Redfin’s Partner ProgramPartner agents are employed by other brokerages,but have teamed up with us to provide Redfin-Certified service to a wider range of customers.We’ll refer you to a partner agent when:► A home is outside of our direct service area► A home is below our price minimum► We’re experiencing an unusually high customer demandWe survey all partner agent clients► All surveys are published on their Redfin page► 97% of customers would recommend Redfin partners
Slide 45 of 56Making the Most of Your Tour1. Bring a camera, notebook & tape measure2. See how much sunlight the place gets3. Check the bathrooms for rot & mold4. Look for wavy or discolored wood siding5. Make sure water spouts drain away fromhouse6. Take stock of storage space7. Turn off any music playing in house8. Check for hardwood floors9. Peek into the attic10. Bring a marble or two11. When sharing a wall, make sure it’s thick12. Ignore the appliances and carpets13. Check the closets14. Get the disclosure packet15. Compare the property’s tax records to thelisting details
Slide 46 of 55How Touring with Redfin Works● Up to six homes per tour intwo hour blocks● Go on as many toursas you need● Led by agent or field agent● Need to be verified● No obligation
Slide 47 of 56Home Inspection andOther Contingencies
Slide 48 of 56Home Inspection● We recommend that you have a home inspection● Home Inspections are performed early in the due diligenceperiod● $350 to $800+ depending upon the size of the house● Your agent will accompany you● Your time to evaluate the property● Types of Due Diligence► Specialized Inspections –Structural, Stucco, Septic, SewerScopes, Well, Specialized Roof, Tree, Pool, RadonTest, Air Quality/Mold Test, Termite & Pest► Survey► Other – Schools, Crime, Traffic, Sex Offender, etc.
Slide 49 of 56Other Contingencies● Appraisal Contingency► Performed in conjunction with financing► Appraisal report must be completed prior to theexpiration of the Appraisal Contingency Period● Financing Contingency► Buyer must make full application for the mortgage withtheir selected lender within 3 days of binding agreement► Lender must provide a loan commitment letter or denialletter prior to the expiration of the Financing ContingencyPeriod● Title – Owner must provide clear title to the property● Other – Contingencies on sale or lease of otherproperty, etc.
Slide 51 of 56Closing: HUD–1 SettlementHUD-1 Settlement Statement – Lists all fees/charges/creditsBy law, the final costs listed on your HUD-1 must be within10% of the estimates provided on your Good Faith Estimate(GFE).● Lender charges► Includes origination fee, appraisal fee, creditreport, insurance and tax escrows● Title charges► Includes settlement fee, and owner’s and lender’s titleinsurance● Government charges► Includes recording fees, recordation taxes and propertytaxes
Slide 52 of 56Attorney Closings● What does the Attorney do?► Prepares the final documents, including the HUD-1► Represent the buyer’s lender► Conducts the closing► Examines and clears the title to the property► Records the deed, mortgage and any other recordableinstruments► Issues title insurance to the lender and the buyer
Slide 53 of 56Closing: Title Insurance● Lender and Owner Title Policies● Title insurance guarantees that the property is clear andmarketable● 2 types of Owner title insurance policies► Limited (Standard) Protection against pre-closing defects in title► Enhanced (Eagle) Costs 20% more than Standard policy Covers post closing fraud, forgery, identity theft Increases with value of the property up to 150% oforiginal price Includes coverage for: mechanic’s liens, invalidpermits, forced removal of structure, unrecordedeasements, unrecorded leases,
Slide 54 of 56Closing Day● You’ll have a final walk-through on closingday or just before● What to bring:► Government issued photo ID► Certified check or wired funds● Closing typically takes 1 hour● Get keys and take possession!
Slide 55 of 56So What Now?● Make sure it’s the right time for you● Start browsing online● Check out our Home Buying Guide and Events page● Find the right agent● Look for a lender and get pre-approved● Start seeing homes● Make an offer & close the deal
Slide 56 of 56Thanks for Coming!Please fill out the survey that was handed out at the beginningofclass. We appreciate the feedback!Check out our upcoming classes and events athttp://www.redfin.com/buy-a-home/classes-and-events
Favorite Real Estate Links● Property information► PropertyShark: Zoning data, titlehistory, permits, neighborhood data; navigation is clunky● Neighborhood information► WalkScore: Proximity to points of interest► Trulia Heat Maps: Median prices across a county
Favorite Homes For Sale Links● Redfin: MLS + FSBO + REO, updated every 15minutes, with DOM, price history, Zestimate● craigslist: Major FSBO source that Redfin doesn’t have● HotPads: Foreclosure heat maps● RealtyTrac: Foreclosure market detail, subscriptionrequired for full reports● Brokerage site of listing agents: more photos of thelisting
Favorite Data Links● Case-Schiller Indices: Pricing trends by metropolitanarea● Altos Research: Median price trends and days on marketby city, but some complain data is unreliable● MSN Home Affordability Calculator: Based on yourincome & credit score● SmartMoneys Home Buying Worksheet: Similar to theMSN calculator, but requires more info
Favorite Mortgage Links● Bankrate: Many ads, but is great for comparing locallenders● Zillows Mortgage Marketplace Help Center: Articlesmortgage rates, types of mortgages, credit reports, and aseries of mortgage calculators● The Mortgage Professor: Bare bones information onmortgages, definitions of common terms, myriad ofmortgage calculators● HUD FHA page: Most reliable explanation of FHAloans, good site for first-time buyers
Favorite Links● Loans for first-time home buyers► Federal Housing Administration (FHA)► Fannie Mae and Freddy Mac● Government sites► Federal Trade Commission: Articles & alerts for home-buyers.► Dept. of Justice: Role of competition in real estate
Favorite Links Cont.● Remodeling & renovations► DoItYourself.com: A few ads, but a useful clearinghouseof information on remodeling► National Association of Home Builders (NAHB): Articleson remodeling your home, most are good