Home Buying Class - DC - August 23, 2011


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  • Address in here how your agent fights for you in negotiations
  • Redfin refunds 50% of the buyer’s agent commissionApplied to closing costsRemainder paid as a check within 10 days of closingRefund is tax-freeMinimum Redfin fee: $6,000
  • Point out reviewsUpdating this page: This should be updated based on your Local Rec. Lender. Just go to the page click “Print Screen.” Come back to this page, click on the large image, click delete, and then right click and paste. Size the images so it fits the page. The right click again and click “Send to back.”
  • You should not be reading all of these. Pick you top three and chat about those.
  • You should not be reading all of these. Pick you top three and chat about those.
  • You should not be reading all of these. Pick you top three and chat about those.
  • 1. Important milestone tracker – click on these for more in depth infoDeal room provides you with step by step updates on where you are at in the process after you have made an offer 2. Get updates from your agent when they have made changes to your Deal Room
  • You should add your own key take aways for this and every class
  • You should add your own key take aways for this and every class
  • Home Buying Class - DC - August 23, 2011

    1. 1. Redfin’s Home Buying Class August 23, 2011 – Washington, DC
    2. 2. Agenda Considering… • To Buy or Not to Buy • Market Conditions Looking… • The Purchase Process • Finding an Agent Buying… • Working with Redfin • The Offer and the Deal Break! • Mortgages • Short Sales and Bank Owned Questions…Considering… Looking… Buying…
    3. 3. To Buy or Not to Buy
    4. 4. Why You Shouldn’t Buy a Home • You can rent for much less • You can’t afford a downpayment, repairs, etc • You don’t have emergency funds set aside • You plan on moving soon • You’re worried about job security or you might change jobsConsidering… Looking… Buying…
    5. 5. Why You Should Buy a Home • Pride of ownership • You can afford it • You’ve got a family, and need room to grow • You want deep roots • You want a type of property that is difficult to rent • You’re handy, and ready to invest your time in your homeConsidering… Looking… Buying…
    6. 6. Market Conditions
    7. 7. 12,000 MRIS: Number of Listings NWMLS: Median Price10,000 Area YoY Prior Mo. No. Montgomery -27.3% +1.6% 3,554 Fairfax -32.1% +3.7% 3,555 8,000 Washington, DC -35.4% +8.3% 2,244 6,000 4,000 2,000 - Montgomery Fairfax Washington, DC
    8. 8. 2,200 MRIS: Number of Homes Sold NWMLS: Median PricePrior Mo. No.2,000 Area YoY1,800 Montgomery -18% +17.9% 1,042 Fairfax -12.8% +15.4% 1,3991,600 Washington, DC -20% -5.2% 5861,4001,2001,000 800 600 400 200 Montgomery Fairfax Washington D.C.
    9. 9. 16 MRIS: Months of Supply14 NWMLS: Median Price Area YoY Prior Mo. Months Montgomery -11.4% -13.8% 3.4 Fairfax -22.2% -10.2% 2.512 Washington D.C. -19.3% -3.3% 3.810 8 6 4 2-
    10. 10. Median PriceMRIS: Median Price$550,000$500,000$450,000$400,000$350,000$300,000 Area YoY Prior Mo. $Amount$250,000 Montgomery +0.30% +6.7% $381,150 Fairfax +0.02% +7.3% $440,000$200,000 Washington, DC +3.19% +3.7% $445,000$150,000 Montgomery Fairfax Washington DC$100,000
    11. 11. Case-Shiller: DC area v. 20-City300.00 Case-Shiller: DC Area Month to Month: Up 2.4% Year to Year: Up 1.3%250.00 Prices at this level in: May 2004 Peak month: May 2006200.00150.00100.00 Case-Shiller: 20-City Composite Month to Month: Up 1% DC Metro Area Year to Year: Down 4.5% 20-City Composite 50.00 Prices at this level in: April 2003 Peak month: July 2006 0.00Considering… Looking… Buying…
    12. 12. The Price of YOUR House in DC • Fun facts but not very relevant for negotiating price • Median Prices • Case Schiller • Price per SF • Prices of other unsold listings • The price the seller paid • The tax assessed value • What Zillow or other online valuations sayConsidering… Looking… Buying…
    13. 13. The Price of YOUR House in DC • How to come up with an offer price: Look at it like an appraiser will… 1) What homes have sold in the last 3-4 months within a few block radius? 2) Make sure they have a similar number of bedrooms and bathrooms 3) Make sure they’re in similar condition 4) Make adjustments for differences in features • $20-$50k per parking space in most of DC • $20-$30k for an extra bedroom • $2-$10k for an extra half bath • $5-$15k for an extra full bath • $2-$25k+ for outdoor space • $25-$150 / PSF for additional square footageConsidering… Looking… Buying…
    14. 14. The Purchase Process
    15. 15. Tour homes Get pre-approved Find dream home Consult with agent, write offer Submit offer to listing agent Negotiations Success! Mutual Acceptance Earnest moneyOverview of a Inspection contingency [5-14 days]Purchase with Appraisal [14-21 days]Redfin Financing contingency [14-21 days] Waiting for loan approval Final Walkthrough Closing! (30-45 days) Receive Redfin refund Complete Redfin survey
    16. 16. What you’ll find on Redfin.com • All the homes for sale • You see what the agent sees: 4x the data • Real-time market data: photos, details of just-sold homesConsidering… Looking… Buying…
    17. 17. Searching on Redfin Find Redfin’s open Forums houses Exclude Search short recent sales sales Download to ExcelConsidering… Looking… Buying…
    18. 18. Add Homes to Your Favorites List Order by price, listing date, etc See your notesConsidering… Looking… Buying…
    19. 19. Finding an Agent
    20. 20. 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…
    21. 21. How to Find a Redfin AgentConsidering… Looking… Buying…
    22. 22. Pick Your Area to Find Local Redfin AgentsConsidering… Looking… Buying…
    23. 23. Select an AgentConsidering… Looking… Buying…
    24. 24. Make Sure They’re a Good Fit Click here when you decide See all deals & reviews Team members & rolesConsidering… Looking… Buying…
    25. 25. Working with RedfinWorking with Redfin
    26. 26. Working With Redfin is Different Service • Advocates: client-satisfaction bonuses, not commissions • Transparency: informed decisions • Best Agents: The right home for the right price No obligation • Switch Redfin agents • Pause and re-start your search any time Refund • You get up to 50% the commission The Best Results • Service: 97% would recommend us to a friendConsidering… Looking… Buying…
    27. 27. How Commissions Work
    28. 28. How Our Team Works Agent •Responsible for your Field Agents success •Writes your offer •Takes you on •Handles inspection home tours •Handles negotiations •Attends inspections You Coordinator •Schedules tours •Works on escrow •Prepares paperworkConsidering… Looking… Buying…
    29. 29. Local Recommended Lenders *In no way does Redfin benefit financially from recommending lenders – we just think they are great lenders!Considering… Looking… Buying…
    30. 30. Find a Home to TourConsidering… Looking… Buying…
    31. 31. Schedule a Tour or Add More HomesConsidering… Looking… Buying…
    32. 32. Fill Out Time & Coordinator Will Call to ScheduleConsidering… Looking… Buying…
    33. 33. Now You are Ready to Tour • Up to six homes per tour in two hour blocks • Go on as many tours as you would like • Led by field agent • No commitmentConsidering… Looking… Buying…
    34. 34. Your Agent Negotiates Deal • Researches seller • Reviews agent-only comments • Contacts listing agent • Studies listing agent negotiating patterns • Studies sellers situation and motivations • Discusses with you • Do you want a comparative market analysis? • Where do you want to start? • Where do you want to end up? • Crafts Offer to Purchase • Inspection contingency • Financing contingency • Submits offer • Negotiates termsConsidering… Looking… Buying…
    35. 35. Typical Deal Terms  2-5% earnest deposit (deposited with the title company immediately upon offer acceptance)  5-14 day inspection contingency (normally it’s 7 days)  14-21 day financing contingency (depending on lender)  14-21 day appraisal contingency (depending on lender)  30-45 day closing (buyer chooses the title / settlement company)Considering… Looking… Buying…
    36. 36. Available Home Inspections  Most common inspections  Termite (cost $40 - $150)  Physical Inspection with a licensed home inspector (cost $300 - $750)  Less common inspections  Radon Gas (cost $125-$200)  Mold ($125 - $1,000)  Lead Based Paint ($500 - $1,000)  Structural Engineer ($150 - $300 / hour)Considering… Looking… Buying…
    37. 37. Physical Home Inspection Hints Watch out for: Look for and Check: •Galvanized steel pipes •Chimney sweep fireplace •Double-paned windows •Knob and tube wiring inspection •Well ventilated attic •Cracks in foundation •Check all included •Stairs have handrails appliances •Mold, mildew or signs of •Check water pressure leaking near walls or floorsConsidering… Looking… Buying…
    38. 38. Deal Room Important milestone tracker Your to do list Your team of agents
    39. 39. Break!
    40. 40. Mortgages
    41. 41. Get Pre-Approved• A pre-approval letter is a letter from a bank or a lender estimating how much theyll lend a borrower• Help you establish how much you can afford and makes offer process go faster• Information needed: • W-2, two pay-stubs, tax returns (get them ready), bank statements• The process only takes a few days while banks get everything verified• The approval is good for 90 days, depending on lender• Ask for a few different amounts• Redfin asks that you get pre-approved before your third tour, but it’s advisable to do this before you look at homes
    42. 42. Organize Your Assets• Get ready for the down payment • Cash accounts (liquid funds) • 401(k), stocks, other investments • Gift funds? (Max. allowed varies) • Move funds around before you start shopping
    43. 43. Review Your Credit• During your preapproval, your loan officer will review your credit and provide a copy to you• Look for errors in your report• Don’t pay off or close any accounts unless your loan officer advises you• Don’t open any new lines of credit• Don’t buy any big ticket items• Co-borrower will need to do the same• Listen to your loan officer. Your credit may be perfect already or it may need some TLC
    44. 44. Choosing your Lender Contact up to 3 local loan officers from your area. Choose one that you like and trust. Ask your realtor about their past experiences with the loan officer. A good track record =  buyer. Good sources include: • Your real estate agent • Redfins partner lenders • Referrals from friends, family & co-workers • Banks or credit unions you have accounts with • Online review sites, such as Yelp
    45. 45. Current Average RatesType of Loan April 28, 2011 August 18, 201130-Year Fixed 4.78% 4.15%15-Year Fixed 3.97% 3.36%5/1 ARM 3.51% 3.08%1-Year ARM 3.15% 2.86%Source: http://www.freddiemac.com/pmms/
    46. 46. Comparing GFE Results• Gather Good Faith Estimates (loan quotes) • Up to 3 is plenty • 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)
    47. 47. Make Your Decision• When possible, get a loan commitment• Lock your interest rate (30 - 60 days)• Make alternative funds liquid (401k, stock)Good news! Loan payments are made in arrears,so your first loan payment won’t be for twomonths. You’ll have one month of no payments.
    48. 48. Short-Sales & Bank Owned
    49. 49. Typical Closing Delays Short Sales Tenant Occupied (6 month – 1 year Property (30-90 day delays common) delays common) Bank Owned Property (14-45 day delays common)Regular Sale(delays areuncommon)
    50. 50. 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)
    51. 51. We Can Help With A Short Sale• Tour short sales with Redfin• 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 refund
    52. 52. What is a Bank-Owned Property?A foreclosed home owned by a bank or lenderStandard 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 money
    53. 53. So…Where’s the Best Deal?• Bank-owned & short-sales myths – • Always the best deal? • Banks are stingy • Not a fire sale• Your best bet for a good deal: • Sellers who own their home outright • Sellers who are relocating • Homes on the market > 30 days (sometimes) • Estate Sales • Short Sales (maybe)
    54. 54. So What Now?• Make sure it’s the right time for you• Get pre-approved & look for a lender• Search for homes & start touring• Find the right agent• Make an offer & close the deal
    55. 55. Questions…
    56. 56. After Class… Please fill out the survey we’ll send this week along with this slide deck. We’d love to get your feedback on how the class could improve. To get even more info on the home buying process, check out our home buying guide: http://redfin.com/home-buying-guideConsidering… Looking… Buying…
    57. 57. Appendix:•Important forms/contracts•Favorite Real Estate Resources
    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 Real Estate Links: Listings • Redfin: MLS + FSBO + REO, updated every 15 minutes, with DOM, price history, Zestimate • craigslist: Major FSBO source that Redfin cant crawl • HotPads: Foreclosure heat maps • Brokerage site of listing agents: more photos of the listing • RealtyTrac: Foreclosure market detail, subscription required for full reports
    61. 61. Favorite Real Estate Links: Pricing Data • Case-Schiller Indices: Pricing trends by metropolitan area • HouseMath: Compares a housing investment to a stock market investment • 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 Real Estate Links: Mortgage • 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 • 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
    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 • What to Look for in an Inspection • American Society of Home Inspectors (ASHI): Good consumer FAQ & virtual home inspection
    65. 65. DC Real Estate Blogs • UrbanTurf.com • DC.Curbed.com • Dcmud.blogspot.com • Washingtoncitypaper.com/blogs/housing complex/