Emeryville Home Buying Class, June 21, 2012

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Emeryville Home Buying Class, June 21, 2012

  1. 1. Redfin’s Home Buying Class June 21, 2012 EmeryvilleSlide 1 of 55
  2. 2. Agenda ● To buy or not to buy ● Overview of purchase process ● Understanding the Market ● Touring ● Mortgages ● Break! ● Choosing an agent ● Redfin as a tool ● Short sales & foreclosures ● What to know about closingSlide 2 of 55
  3. 3. 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 ● The right home for the right price No obligation Get back a portion of our commission Redfin VideoSlide 3 of 55
  4. 4. To Buy or Not to BuySlide 4 of 55
  5. 5. Why You Should Buy a Home ● You have a family and need room to grow ● You expect to stay put for 5 or more years ● You’re handy & and ready to invest ● You’ve saved up a down paymentSlide 5 of 55
  6. 6. Why You Shouldn’t Buy a Home ● You don’t have a good reason ● You can’t afford the down payment ● You can rent for much less ● You plan on moving soon ● You’re worried about job securitySlide 6 of 55
  7. 7. Understanding the Buying ProcessSlide 7 of 55
  8. 8. Overview of Purchase Process ( more details to follow) ● Information – learn as much as possible about the market, 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” ● ClosingSlide 8 of 55
  9. 9. Understanding the MarketSlide 9 of 55
  10. 10. Case-Shiller: San Francisco Area v. 20-City San Francisco 20-City CompositeSlide 10 of 55
  11. 11. Case-Shiller – By the Numbers San Francisco Area Down 5.9% year-over-year Peak was May 2006 Down 42.5% from peak Currently at December 2001 prices 20-City Composite Down 3.8% year-over-year Peak was July 2006 Down 34.4% from peak Currently at January 2003 pricesSlide 11 of 55
  12. 12. Oakland April Stats for HomesSlide 12 of 55
  13. 13. Oakland April Stats for HomesSlide 13 of 55
  14. 14. National Market Trends ● The Bottom? ► According to Redfin’s data of 17 urban cities, April 2011 to April 2012 home prices increased 4% ► First year over year gain we’ve seen in a long time ● Interest rates are driving demand ● The Redfin Real Time Price Tracker shows an annual price gain of 2.2% and a monthly gain of 2.7% from April 2012 ● Inventory levels were down 23.5% compared to last year, and down 1.7% compared to April 2012 ● Sales volume up 7.4% over this time last year, and pending sales were up even more, by 10.7%.Slide 14 of 55
  15. 15. Multiple Offer Situations This occurs when inventory is down and buyer interest is up 5 Tips for Winning in a Bidding War 1. Make the competition eat your dust 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 limitsSlide 15 of 55
  16. 16. Multiple Offer Situations This occurs when inventory is down and buyer interest is up 5 Tips for Winning in a Bidding War 1. Make the competition eat your dust 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 limitsSlide 16 of 55
  17. 17. Short Sales and Bank Owned NameSlide 17 of 55
  18. 18. What is a Short Sale? The owner owes more on the mortgage than the home is worth ● 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) We Can Help With a Short Sale! ● See short sales with a Redfin agent ● If you want to buy, work with a Redfin agent or a short sale partner agent ● Redfin partner agents work for other brokerages but share Redfin’s commitment to customer service ● Get a 15% commission refundSlide 18 of 55
  19. 19. What is a Bank-Owned Property? ● A foreclosed home owned by a bank or lender ● Standard sale but: ► Verbal negotiations ► Long response times ► Repairs unlikely ► Legal addenda may require an attorney ► Limited or no disclosures ► Banks demand use of their own contracts ► Bank can back out any time until they’ve signed ► Contract often requires early release of earnest moneySlide 19 of 55
  20. 20. TouringSlide 20 of 55
  21. 21. Making the Most of Your Tour 1. Bring a camera, notebook & tape measure 9. Peek into the attic 2. See how much sunlight the place gets 10. Bring a marble or two 3. Check the bathrooms for rot & mold 11. When sharing a wall, make sure it’s thick 4. Look for wavy or discolored wood siding 12. Ignore the appliances and carpets 5. Make sure water spouts drain away from 13. Check the closets house 14. Get the disclosure packet 6. Take stock of storage space 15. Compare the property’s tax records to the 7. Turn off any music playing in house listing details 8. Check for hardwood floorsSlide 21 of 55
  22. 22. How Touring with Redfin Works ● Up to six homes per tour in two hour blocks ● Go on as many tours as you need ● Led by agent or field agent ● Need to be verified ● No obligationSlide 22 of 55
  23. 23. MortgagesSlide 23 of 55
  24. 24. Getting Pre-Approved Income oSalary—Past 30 days oHourly—Consistency and history oSelf-employed—Two year average Credit Assets o 660 for FHA o Down Payment o 680 for Conventional o Closing Costs o 720 for Rate Improvement o Cash ReservesSlide 24 of 55
  25. 25. Show Stable EmploymentSalaried Employee o W2’s are historic o Most recent paystubs o Raises count immediatelySelf-Employed o Two Year History o Same line of workHourly Wage Earner o Consistent hours over 1-2 year periodSlide 25 of 55
  26. 26. Organize Your Assets Lenders Will Require 2 Months of Statements ●Liquid ► Do not move money around—hard to paper trail ●Retirement Accounts ► Consider a 401k Loan ●Gift Funds ► Family members onlySlide 26 of 55
  27. 27. Review Your Debt | Credit HistoryKnow Current Credit Score Know Your Debt Tolerance●Myfico.com—$19.95 to get your ●Cost of rentingscore ●Tax benefits of home ownership●Use your mortgage lender’s report ●Budget considerationsFix Errors●Remove duplicates Lender Tolerance May Be●Resolve disputes Different●Reduce credit card debt ●45% debt to income ratio is allowed●Do not open, close, or changecredit lines●Do not make large purchasesSlide 27 of 55
  28. 28. Loan ScenarioHome Buyer $320,000 LoanoEarns $6,000/month o30/Yr Fixed 4% of LoanoHas car payment $350 = $1,528oWants to buy a home for oProperty Taxes$400,000 o1.41% on purchase priceoHas 20% down payment = $470 o $6,000 x 45% = $2,700 oHomeowners Insurance o $2,700 – 450 (other = $75 debt) oTotal: $1528 + $470 + $75 = Qualified $2,073/Month!= Allowed $2,250/Month!Slide 28 of 55
  29. 29. Choosing a Lender Pre-Approval letter ●Part of the offer ●Sellers want accountability Using Referrals ●From Redfin’s partner lenders ●From friends who recently financed a home ●From Realtor ●From Yelp, Berkeley Parents Network Meet Your Lender!Slide 29 of 55
  30. 30. Local Recommended Lenders *In no way does Redfin benefit financially from recommending lenders – we just think they’re great lenders!Slide 30 of 55
  31. 31. Types 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, surviving spouses ► No down payment ● Ask your lender if they have special loan programs ► Example: EOM programSlide 31 of 55
  32. 32. Current Average Rates Type of Loan June 14, 2012 June 7, 2012 30-Year Fixed 3.71% 3.67% 15-Year Fixed 3.98% 2.94 % 5/1 ARM 2.80% 2.84% 1-Year ARM 2.78% 2.79%Slide 32 of 55
  33. 33. Where Are Rates Headed?Slide 33 of 55
  34. 34. Make Your DecisionGet a Good Faith Estimate o Itemized List of Fees: o Origination o Credit report o Transfer Tax o Discount Fee o Title insurance o Recording o Processing o Escrow fees o Underwriting o Prepaid items Good news! Loan payments are made in arrears, so your first loan payment after closing will not be for almost two months!Slide 34 of 55
  35. 35. Break!Slide 35 of 55
  36. 36. Putting it all together to findYOUR homeSlide 36 of 55
  37. 37. Redfin.com-Benefits of a MLS Powered Site ● 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 homesSlide 37 of 55
  38. 38. Highlights of Redfin’s Site ● Search by zip code or 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 55
  39. 39. Open Book ● Redfin Certified Providers ● Every professional is reviewed and all reviews are shown ● Search for local: ► Inspectors ► Lenders ► Title CompaniesSlide 39 of 55
  40. 40. Choosing the Right AgentSlide 40 of 55
  41. 41. Traditional vs. RedfinSlide 41 of 55
  42. 42. What 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 42 of 55
  43. 43. Experience With Multiple Offers This occurs when inventory is down and buyer interest is up 5 Tips for Winning in a Bidding War 1. Make the competition eat your dust 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 limitsSlide 43 of 55
  44. 44. Redfin’s Partner Program Partner 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 demand We survey all partner agent clients ► All surveys are published on their Redfin page ► 97% of customers would recommend Redfin partnersSlide 44 of 55
  45. 45. Home Inspection and Other Contingencies NameSlide 45 of 55
  46. 46. Home Inspection ● We recommend that you have a home inspection ● Cost runs $350 to $1200 depending upon the size of the house ● Your agent will accompany you ● Your time to evaluate the property ● What an inspection contingency covers and doesn’t cover ● Types of inspectionsSlide 46 of 55
  47. 47. Other Contingencies ● Appraisal – Performed in conjunction with financing ● Financing ● Termite ● OtherSlide 47 of 55
  48. 48. Closing – what you need to know NameSlide 48 of 55
  49. 49. Closing: HUD–1 Settlement HUD-1 Settlement Statement – Lists all fees/charges/credits By law, the final costs listed on your HUD-1 must be within 10% of the estimates provided on your Good Faith Estimate (GFE). ● Lender charges ► Includes origination fee, appraisal fee, credit report, insurance and tax escrows ● Title charges ► Includes settlement fee, and owner’s and lender’s title insurance ● Government charges ► Includes recording fees, recordation taxes and property taxesSlide 49 of 55
  50. 50. Title Companies ● What does the title company do? ► Prepares the final documents, including the HUD-1 ► Conducts the closing ► Examines and clears the title to the property ► Records the deed, mortgage and any other recordable instruments ► Issues title insurance to the lender and the buyerSlide 50 of 55
  51. 51. Closing: Title Insurance ● Title insurance guarantees that the property is clear and marketable ● 2 types of 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% of original price Includes coverage for: mechanic’s liens, invalid permits, forced removal of structure, unrecorded easements, unrecorded leases,Slide 51 of 55
  52. 52. Closing Day ● You’ll have a final walk-through on closing ● Closing typically takes 1 hour day or just before ● Get keys and take possession! ● What to bring: ► Government issued photo ID ► Certified checkSlide 52 of 55
  53. 53. So 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 dealSlide 53 of 55
  54. 54. Thanks for Coming! Please fill out the survey that was handed out at the beginning of class. We appreciate the feedback! Check out our upcoming classes and events at http://www.redfin.com/buy-a-home/classes-and-eventsSlide 54 of 55
  55. 55. AppendixSlide 55 of 55
  56. 56. Appendix ● Important forms/contracts ● Favorite Real Estate ResourcesSlide 56 of 55
  57. 57. Some Of Our Favorite Sites ● Seattle Bubble: market analysis ● Curbed Seattle: cool houses ● Urbnlivn: for condo shoppers ● WalkScore: see what’s nearbySlide 57 of 55
  58. 58. HUD Settlement Statement
  59. 59. Favorite Real Estate Links● Property information ► PropertyShark: Zoning data, title history, permits, neighborhood data; navigation is clunky● Neighborhood information ► WalkScore: Proximity to points of interest ► Trulia Heat Maps: Median prices across a county
  60. 60. Favorite Homes For Sale Links ● Redfin: MLS + FSBO + REO, updated every 15 minutes, with DOM, price history, Zestimate ● craigslist: Major FSBO source that Redfin doesn’t have ● HotPads: Foreclosure heat maps ● RealtyTrac: Foreclosure market detail, subscription required for full reports ● Brokerage site of listing agents: more photos of the listing
  61. 61. Favorite Data Links ● Case-Schiller Indices: Pricing trends by metropolitan area ● Altos Research: Median price trends and days on market by city, but some complain data is unreliable ● MSN Home Affordability Calculator: Based on your income & credit score ● SmartMoneys Home Buying Worksheet: Similar to the MSN calculator, but requires more info
  62. 62. Favorite Mortgage Links ● Bankrate: Many ads, but is great for comparing local lenders ● Zillows Mortgage Marketplace Help Center: Articles mortgage rates, types of mortgages, credit reports, and a series of mortgage calculators ● The Mortgage Professor: Bare bones information on mortgages, definitions of common terms, myriad of mortgage calculators ● HUD FHA page: Most reliable explanation of FHA loans, good site for first-time buyers
  63. 63. 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
  64. 64. Favorite Links Cont.● Remodeling & renovations ► DoItYourself.com: A few ads, but a useful clearinghouse of information on remodeling ► National Association of Home Builders (NAHB): Articles on remodeling your home, most are good

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