Redfin Multiple Offer Class - Denver, CO

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  • http://www.ocregister.com/articles/housing-347343-boom-market.html
    3.98% with 0.7 points as of 4/5 Freddie Mac survey
    3. http://www.cnbc.com/id/46892030
    4. http://www.foreclosureradar.com/california/orange-county-foreclosures

  • http://www.denverpost.com/ci_19741406
    http://www.metrodenver.org/research-reports/economic-forecasts/
    DMAR: Single family only, no condo in the following counties: Adams, Arapahoe, Boulder, Broomfield, Clear Creek, Denver,
    Douglas, Elbert, Gilpin, Jefferson, and Park
  • [REQUIRED]
  • We’ll stick around…
  • Redfin Multiple Offer Class - Denver, CO

    1. 1. How To Win In Multiple Offer Situations Presented by: Redfin Denver Team Date: August 26, 2014 Host: Michelle Ackerman and Sharon White Follow: Twitter.com/@Redfin Like: facebook.com/Redfin
    2. 2. Agenda  A little about Redfin  Why All the Multiple Offers?  Preparing to Buy  Starting an Offer  Writing a Winning Offer  Price  Financing  Contingencies  Earnest Money  Personal Touch  How Redfin Helps
    3. 3. Working with Redfin
    4. 4. A Little Bit About Who We Are Redfin is a real estate brokerage that has helped over 20,000 people buy or sell a home; 97% would refer us to a friend. ● Customers, not commissions ● Informed decisions ● Right home for the right price  No obligation  Commission credit
    5. 5. The Redfin Refund You buy and pay for your dream home. The 5.6% sales commission is split. The Listing Agent gets 2.8% commission. Your Buyers’ Agent gets 2.8% commission. You save with Redfin. Redfin keeps a portion as our fee.
    6. 6. Partners in the Process AGENT Responsible for your success Writes your offer Handles negotiations TOUR COORDINATOR Schedules tours Prepares paperwork ASSOCIATE AGENT Takes you to see homes Sees 50+ homes a week TRANSACTION COORDINATOR Prepares paperwork Works with escrow
    7. 7. Why All The Multiple Offers?
    8. 8. Why all the Multiple Offers? What’s driving the sudden demand for homes? ►Denver is 5th in the nation for in-migration ►Colorado is in the top 10 states for employment growth ►Interest rates are still low at less than 5%, 30 year fixed ►Lack of available homes  6,287 Active listings June 2014  16.82% less than June 2013, 28.69% less than 2012  This represents less than 3 months of inventory  Some neighborhoods, like Congress Park and Baker have just weeks of inventory  DOM has shrunk to 29, versus 41 in 2013
    9. 9. What trends are we noticing? ● Sometimes, sellers use “strategic” pricing ►Price it low, to encourage multiple offers ►Also brings about better inspection negotiations ► Base your offer price on under contracts & trends – NOT on list price  Deadlines are being set to accept & review offers ► Sellers usually review offers after about 3 days on market ►To give property exposure and increase number of offers  Multiple offers are sometimes as many as 5-8 buyers, especially in the Central Denver neighborhoods
    10. 10. 5 Tips for Winning a Bidding War 1. Make the competition eat your dust – sign up a redfin listing alert! 2. Get pre-approved with a local lender & get underwriter approval 3. Start the conversation early 4. Write a letter & appeal to the seller 5. Know your limits
    11. 11. Never Miss a Home
    12. 12. Get Ready! Obtain a Pre-Approval Letter Your Lender is part of our Team!  Ask your loan officer how they can help you in a competitive situation (shorter contingency period, quick closing?)  Request that your LO be available to speak with the listing agent  Get a preapproval letter with your maximum approval amount, you can customize later if necessary  Use a lender with local expertise & local appraiser- in a competitive situation it can be the difference between winning and losing  Get full underwriter approval --No pre-qualification letters please
    13. 13. Get Ready! Let’s Do our Homework  Buyer’s agent should call the listing agent, to find out what the sellers situation is & why they are selling  What are the sellers’ motivations?  Will they need to remain at the property after closing?  Do they need a quick sale?  Request for copies of disclosures and reports  Find out how many disclosure packages have been sent out to other buyers, has there been heavy traffic?  Is there an offer due date? How should offers be submitted – via email, drop off at listing office or in person?  Build rapport with listing agent and check scouting report
    14. 14. Get Ready! Know the Numbers - Knowing what to offer and being confident in your offer price makes the process less stressful.  Run a Comparative Market Analysis (CMA)  Understand pricing for the area  Determine your maximum price  Calculate payment difference at incremental price points  $5,000 more equals $?/month  Know When To Walk Away  You can’t control what someone else is willing to pay
    15. 15. Get Ready! Documentation Having your finances and other required documents in order prior to making an offer can accelerate the process. Here’s what we’ll need at a minimum to include with your offer:  Pre-Approval Letter  Not a pre-qualification  Proof of Funds  Bank statement, 401k, brokerage statement  Earnest Money Deposit Check  Just a copy (picture, scan or fax)
    16. 16. Writing a Winning Offer Offer Price - Price & Terms are the King & Queen of Winning in Multiple Offer Situations  Study Comparables  Understand pricing trends in the area  Base your offer on the comparables – not the listing price especially if it is strategically low  List Price to Sales Price Ratio for the Area  How much negotiating room is there?  Days on Market  Fewer DOM – sellers are less flexible  More DOM – sellers are usually more motivated/open to negotiating  Know the Sellers Current Loan Situation
    17. 17. Writing a Winning Offer Highest & Best In a multiple offer situation you may have only one shot at offering and no opportunity to further negotiate  Blind betting – you don’t know what the other offers are  What is the maximum price you are willing to pay for this property?  How much do you really want this property?  Determine your walk away price  Go in with your Highest Price and Best Terms right from the start
    18. 18. Writing a Winning Offer TERMS - Understand & offer the terms that seller desires  Contingencies protect the buyer and gives the option to negotiate further, or cancel the transaction if no agreement is reached.  Inspection Contingency – Typically 5 to 10 days  Financing Contingency - Typically 14 to 21 days  Appraisal Contingency - Typically 14 to 17 days  Shorter contingency periods makes your offer stronger & shows how serious you are as buyers  Need a Home Warranty? Seller Rent Back?
    19. 19. Escalation Clauses ● Allows you to bid up price in incremental amounts ● Shows your top bidding price ● Ask the seller to show you proof of competing offer that dove the price up ● Why larger incremental amounts can be a powerful term ● Shows appraisers that multiple buyers were bidding for house and inspires confidence during the appraisal process
    20. 20. Pre-Commitment Letter
    21. 21. Financing ● Cash ► Cash offers can close in just a few days as there is no loan approval process. ► Strongest of all financing options ● Conventional ► 20% or more = very strong down payment ► 5% or more down payment. Few restrictions on condition of home, buyer has good credit. ► Strong second best financing option ● FHA / VA ► Least down payment (as little as 0%-3.5%), lender may require repairs/property be in a particular condition, longest closing period. Lower credit ok. Appraisal stays with the property ► Also a viable financing options
    22. 22. Writing a Winning Offer Financing (continued)… Making the seller comfortable with your ability to purchase their property is key to getting your financed offer accepted.  Present a Solid Pre-Approval  Get a Loan Commitment – this will set you ahead of almost all other offers  Show the maximum amount you qualify for  List your FICO scores, DTI’s, etc. if possible  Use a Lender with Local Presence & Expertise  Easy to contact and part of our team  Offer to have lender speak directly to Listing Agent (LA) and/or seller
    23. 23. Writing a Winning Offer Use a Redfin Preferred Lender *In no way does Redfin benefit financially from recommending lenders – we just think they’re great lenders!
    24. 24. Writing a Winning Offer Closing & Possession Closing - Chat with your lender and see how quick they can close. Flexibility with closing can make a huge difference Take Possession At closing or does the seller need a Rent Back?  The seller may needs to stay longer but want to close sooner to have access to the funds  Seller pays buyers PITI while occupying the home after settlement  Deposit & Rent is held by earnest holder upon closing  Usually a max of 30 days – anything more requires lender approval
    25. 25. Writing a Winning Offer Personal Touch Including a short letter to the seller and a picture may help the seller connect and consider your offer.  Include a bit about you, your family, your profession.  Comment on the things you liked about the seller’s home.  Send your agent a family photo to include.  Won’t help with a bank owned properties or investor sellers
    26. 26. Inspections: To Waive or Not To? ● Pre-Inspection ►Out $300 - $600 and may not get the house ►Timing can be difficult ►Seller may not allow ● Post-Inspection ►May scare sellers – They usually want a truly As-Is sale ►Deal can quickly fall apart ►What’s reasonable to negotiate further? Health and Safety ● Waived Inspection ►Poses higher risk if offering on vintage ome ►Waiving contingencies is not advisable but buyers are doing it.
    27. 27. Earnest Money ● Deposited after offer acceptance at beginning of transaction ● A higher EMD shows you are serious buyers and could make the sellers consider your offer more ● To be submitted to earnest holder within 5 business days of acceptance – include copy with offer ● The check is cashed & applied to your down payment at closing ● Refunded if you cancel as a result of a contractual contingency ● Could be in jeopardy if you cancel after you’ve removed all contingencies ● A higher deposit makes for a stronger offer ● Consider a cashiers check, to further strengthen your offer!
    28. 28. Closing & Possession ● Chat with your lender and see how quick they can close. Flexibility with closing can make a huge difference ● Take Possession ● At closing or does the seller need a Rent Back? ● The seller may needs to stay longer but want to close sooner to have access to the funds ● Seller might pay buyers PITI while residing at the ● Deposit might be held at the title company to cover damages ● Usually a max of 30 days – anything more requires lender approval
    29. 29. How Redfin Helps ● Redfin agents close more deals than an average agent, we know the market and how to get the job done. We are advocates for our clients ● Help determine market price - CMA, trends and stats ● Understand the listing agent’s negotiation style ►average discount ►market time and ►offer process ● Established relationships with listing agents - we know what questions to ask, what to say, when to say it ● Write crisp, clean offer quickly (Electronically) ● Team structure allows agent to focus on writing your offer
    30. 30. Thanks for Coming! Questions? Get in touch: Michelle Ackerman – michelle.ackerman@redfin.com Sharon White – sharon.white@redfin.com Check out our upcoming classes: http://www.redfin.com/events

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