Home Buying Class - 12.6 2011 - Seattle

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  • 1. Redfin’s Home Buying Class December 6, 2011 Seattle, WA
  • 2. Agenda Considering… • To buy or not to buy • Market conditions • Searching for a home Looking… • Finding a real estate agent • Working with Redfin Break! Buying… • Mortgages • The offer and the deal • Short sales and bank ownedConsidering… Looking… Buying…
  • 3. A Little Bit About Who We AreRedfin is a real estate brokerage that hashelped over 20,000 people buy or sell ahome; 97% would refer us to a friend.• Customers, not commissions• Informed decisions• The right home for the right price No obligation Get back up to 50% of our commission
  • 4. To Buy or Not to Buy
  • 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 want a home that is difficult to rent • You’re handy & and ready to invest • You’ve saved up a down paymentConsidering… Looking… Buying…
  • 6. Why You Shouldn’t Buy a Home • You don’t have a good reason like family or schools • You can’t afford the down payment • You can rent for much less • You plan on moving soon • You’re worried about job securityConsidering… Looking… Buying…
  • 7. Market Conditions
  • 8. Case-Shiller: Seattle Area v. 20-City 250.00 Case-Shiller: Seattle Area Down 6.1% year-over-year 200.00 Peak was July 2007 Down 28.7% from peak July/Aug July/Aug July/Aug Currently at November 2004 prices 2009 2010 2011 150.00 100.00 Seattle Area Case-Shiller: 20-City Composite 20-City Composite 50.00 Down 3.8% year-over-year Peak was July 2006 Down 31% from peak Currently at July 2003 prices 0.00 Looking… Buying…Considering…
  • 9. # Homes for Sale – October 2011City Compared to Compared to September 2011 October 2010Seattle -11.9% -32.2%Bellevue -12.6% -30.6%Federal Way -7.7% -25.7%Issaquah -12% -23.8%Kent -8.0% -23.2%Kirkland -10.6% -35.1%Renton -11.3% -35.8%Shoreline -4.6% -29.6%Redmond -11.6% -20.8%
  • 10. # of Sales – October 2011 City Compared to Compared to September 2011 October 2010Seattle -9.9% +8.1%Bellevue -20.3% +9.6%Federal Way -12.69% +43.4%Issaquah -31.1% -17.7%Kent 0.0% +35.2%Kirkland -13.3% +27.3%Renton +19.4% +33%Shoreline +18.5% +28.0%Redmond -21.4% +5.8%
  • 11. Price Changes – October 2011 Median Sold Median Sold Median Sold Median ListedCity $/SqFt Change $/SqFt Change Price Oct. 2011 Price Oct. 2011 since Sept. 2011 since Oct. 2010Seattle $338,000 $360,000 -0.8% -3.0%Bellevue $432,000 $485,000 0.0% +0.4%Federal Way $149,000 $207,000 +4.0% -17.3%Issaquah $317,000 $375,000 -5.2% -9.0%Kent $192,000 $215,000 +1.9% -16.7%Kirkland $359,000 $400,000 -4.8% -9.6%Renton $220,000 $244,000 +2.3% -11.9%Shoreline $246,000 $264,000 +1.9% -10.8%Redmond $376,000 $375,000 +6.9% -10.6%
  • 12. Where is the Market Headed?• Supply of homes is at a five-year low and won’t increase the rest of the year• Foreclosures have been driving price declines, likely years of inventory remain• Rents have been rising, making buying more attractive (Seattle Times article)• Market stabilizing, though likely 2-3 years before significant appreciation• Rate increases - biggest issue for buyers
  • 13. Searching for a Home
  • 14. 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 homesConsidering… Looking… Buying…
  • 15. Demo of Redfin’s Site
  • 16. Working with RedfinWorking with Redfin
  • 17. How Our Team Works AGENT Responsible for your success Writes your offer Handles negotiations YOU FIELD AGENT COORDINATOR Takes you to see homes Schedules tours See 50+ homes a week Prepares paperwork Works with escrowConsidering… Looking… Buying…
  • 18. Now You are Ready to Tour • Up to six homes per tour in two hour blocks • Go on as many tours as you need • Led by field agent or agent • No obligationConsidering… Looking… Buying…
  • 19. How Commissions Work Example: You buy a home for $500,000 Traditional Agents Commission Seller’s Agent (3%) $15,000 Buyer’s Agent (3%) $15,000 Redfin Agents Commission Seller’s Agent (3%) $15,000 Redfin (50% of commission) $7,500 Redfin Buyer (50% of commission) $7,500 • Commissions are determined by the seller • Redfin refunds 50% of the buyer’s agent commission • Applied to closing costs • Refund is tax-free • Minimum Redfin fee: $6,000Considering… Looking… Buying…
  • 20. Finding an Agent
  • 21. 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?Considering… Looking… Buying…
  • 22. Make Sure He’s a Good Fit Click here when you decide Map view of James’ transactions See all deals & reviews
  • 23. Break!
  • 24. Mortgages
  • 25. Getting Pre-Approved A pre-approval letter is a letter from a bank or a lender estimating how much theyll lend you • Establishes what you can afford & makes offer process go faster • Good for 90 days, depending on lender • Ask for a few different amounts • Redfin asks that you get pre-approved before your third tour • Similar, yet different from pre-qualification Information needed: • W-2, two pay-stubs, tax returns, bank statementsConsidering… Looking… Buying…
  • 26. Organize Your Assets • Get ready for the down payment • Cash accounts (liquid funds) • 401k, stocks, other investments • Gift funds? (max. allowed varies) • Move funds around earlyConsidering… Looking… Buying…
  • 27. Review Your Debt • Pull credit report, look for errors • 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 • Co-borrower will need to do the sameConsidering… Looking… Buying…
  • 28. Start Shopping for Lenders Compile a list of 3-4 lenders & brokers Good sources include: • Redfins partner lenders • Referrals from friends, family & co-workers • Banks or credit unions you have accounts at • A large, national bank with an advertised rate • Your real estate agent • Online review sites, such as YelpConsidering… Looking… Buying…
  • 29. Local Recommended Lenders *In no way does Redfin benefit financially from recommending lenders – we just think they’re great lenders!
  • 30. Current Average Rates Type of Loan November 17, 2011 November 23, 2011 30-Year Fixed 4.00% 3.98% 15-Year Fixed 3.31% 3.30% 5/1 ARM 2.97% 2.91% 1-Year ARM 2.98% 2.79%Considering… Looking… Buying…
  • 31. Where Are Rates Headed?
  • 32. Comparing GFE Results • Gather loan quotes • A minimum of three, more is better • 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)Considering… Looking… Buying…
  • 33. Make Your Decision • When possible, get a loan commitment • Make alternative funds liquid (401k, stock) Good news! Loan payments are made in arrears, so your first loan payment won’t be for two months.Considering… Looking… Buying…
  • 34. Making Your Offer
  • 35. Overview •Search homes online & tour •Get pre-approved •Find a dream homeFinding •Consult with agent, write offerYour Home •Submit offer to listing agent •Negotiations •Success! •Earnest money •Inspection contingency Mutual •Title review Acceptance •Financing contingency •Waiting for loan approval •Escrow signing appointment •Get keys and take possession! Closing •Receive Redfin refund •Complete Redfin Survey
  • 36. Overview of a Purchase •Search homes online & tour •Get pre-approved •Find a dream homeFinding •Consult with agent, write offerYour Home •Submit offer to listing agent •Negotiations •Success! •Earnest money (within 3 days) •Inspection contingency (5-10 days) Mutual •Title review (5 days) Acceptance •Financing contingency (20-25 days) •Waiting for loan approval •Escrow signing appointment •Get keys and take possession! Closing! •Receive Redfin refund •Complete Redfin Survey
  • 37. Short-Sales & Bank Owned
  • 38. 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)Considering… Looking… Buying…
  • 39. We Can Help With A Short Sale • See short sales with a Redfin agent • If you want to buy, Redfin refers you to a short sale partner agent • Redfin partner agents work for other brokerages but share Redfin’s commitment to customer service • Get a 15% commission refundConsidering… Looking… Buying…
  • 40. 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 moneyConsidering… Looking… Buying…
  • 41. So… Where’s the Best Deal? • Bank-owned & short-sales myths: • Banks are stingy • Not a fire sale • Your best bet for a good deal: • Sellers who own their home outright • Sellers who are relocating • Estate SalesConsidering… Looking… Buying…
  • 42. After Class… Please fill out the survey. We will also you this slide deck. We’d love to get your feedback so we can improve. To get even more info on the home buying process, check out our home buying guide: Redfin.com/home-buying-guideConsidering… Looking… Buying…
  • 43. Some Of Our Favorite Sites• Seattle Bubble: market analysis• Curbed Seattle: cool houses• Urbnlivn: for condo shoppers• WalkScore: see what’s nearby
  • 44. Appendix• Important forms/contracts• Favorite Real Estate Resources
  • 45. NWMLS Purchase & Sale Agreement
  • 46. HUD Settlement Statement
  • 47. 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
  • 48. 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
  • 49. 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
  • 50. 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
  • 51. Favorite Links• Loans for first-time home buyers • Federal Housing Administration (FHA) • Fannie Mae and Freddy Mac • CalHFA: California State agency that helps certain buyers• Government sites • Federal Trade Commission: Articles & alerts for home-buyers. • Dept. of Justice: Role of competition in real estate
  • 52. 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