Home buying class falls church - december 20 2012

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Home buying class falls church - december 20 2012

  1. 1. Redfin’s Home Buying Class December 20, 2012 Falls Church Follow: @RedfinDC Like: http://www.facebook.com/RedfinDCSlide 1 of 46
  2. 2. Agenda ● To buy or not to buy ● Overview of purchase process ● Understanding the Market ● Touring ● Mortgages ● Choosing an agent ● Redfin as a tool ● Short sales & foreclosures ● What to know about closingSlide 2 of 46
  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 commissionSlide 3 of 46
  4. 4. To Buy or Not to BuySlide 4 of 46
  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 46
  6. 6. Understanding the Buying ProcessSlide 6 of 46
  7. 7. Overview of a 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 7 of 46
  8. 8. Understanding the MarketSlide 8 of 46
  9. 9. Case-Shiller: DC Area v. 20-City 300.00 250.00 200.00 150.00 100.00 50.00 0.00Slide 9 of 55
  10. 10. Case-Shiller – By the Numbers Case-Shiller: DC Area Up 3.9% year-over-year Peak was May 2006 Down 24.4% from peak Currently at June 2004 prices Case-Shiller: 20-City Composite Up 0.5% year-over-year Peak was July 2006 Down 31.1% from peak Currently at July 2003 pricesSlide 10 of 46
  11. 11. 22205 November Stats for HousesSlide 11 of 46
  12. 12. National Market Trends ● The key metrics across 19 major metropolitan markets are: ► October home sales were up 21.8% from a year ago, with an unusual 9.8% gain from September to October. ► Home prices in October increased 8.4% year over year, and were up just 0.4% month over month. ► The number of homes for sale declined 29.4% from October 2011 to October 2012 (even larger than the 28.1% drop in September), and declined by 5.3% since September. ► The percentage of listings that sold within 14 days of their debut inched up to 28.2% in October.Slide 12 of 46
  13. 13. Where is the Local Market Headed? ● Supply of homes is at a five-year low and won’t increase the rest of the year ● Market stabilizing, though likely 2-3 years before significant appreciation ● What do Redfin Agents think??? ► Pretty flat. Buyers are tired. ► Overall market climate, I would say has slowed down, seems to be less competition with other buyers. ► I noticed the market is a bit softer now than it was 30-45 days ago, inventory is low; maybe its adjusting to the mid-late summer market ► Theres still competition for well priced homes in good condition in our area. Inventory still low. Seems half the population is out of town. Looking forward to a brisk fall as rates remain at historic low.Slide 13 of 46
  14. 14. Short Sales and Bank OwnedSlide 14 of 46
  15. 15. 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 15 of 46
  16. 16. What is a Bank-Owned Property? ● A foreclosed home owned by a bank or lender ● Standard sale but can contain: ► Verbal negotiations ► Long response times ► Repairs unlikely ► Legal addenda may require an attorney ► Limited or no disclosures ► Banks demand use of their own contractsSlide 16 of 46
  17. 17. TouringSlide 17 of 46
  18. 18. 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. Compare the property’s tax records to the 6. Take stock of storage space listing details 7. Turn off any music playing in house 15. Check the main systems and windows 8. Check for hardwood floorsSlide 18 of 46
  19. 19. 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 19 of 55
  20. 20. MortgagesSlide 20 of 46
  21. 21. Review Your Financial Situation To 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 statusSlide 21 of 46
  22. 22. Start Shopping for Lenders Compile a list of 3-4 lenders & brokers Good sources include: ● Redfins partner lenders ● Referrals from friends, family & co-workers ● Online review sites, such as Yelp ● Local chains and offices *Know your lenderSlide 22 of 46
  23. 23. 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 ● 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 statementsSlide 23 of 46
  24. 24. Comparing Loan Estimates ● Gather loan estimates ► A minimum of three, more is better ► These aren’t final numbers, but within a few thousand dollars ► 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 24 of 46
  25. 25. 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 programsSlide 25 of 46
  26. 26. Current Average Rates Type of Loan December 6, 2012 December 13, 2012 30-Year Fixed 3.34% 3.32% 15-Year Fixed 2.67% 2.66% 5/1 ARM 2.69% 2.70% 1-Year ARM 2.55% 2.53%Slide 26 of 46
  27. 27. Make Your Decision Good news! Loan payments are made in arrears, so your first loan payment won’t be for two months.Slide 27 of 46
  28. 28. Putting it all together to findYOUR homeSlide 28 of 46
  29. 29. 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 29 of 46
  30. 30. 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 30 of 46
  31. 31. Open Book ● Redfin Certified Providers ● Every professional is reviewed and all reviews are shown ● Search for local: ► Inspectors ► Lenders ► Title CompaniesSlide 31 of 46
  32. 32. Choosing the Right AgentSlide 32 of 46
  33. 33. Traditional vs. RedfinSlide 33 of 46
  34. 34. 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 34 of 46
  35. 35. 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 35 of 46
  36. 36. 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 36 of 46
  37. 37. Home Inspection and Other ContingenciesSlide 37 of 46
  38. 38. 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 38 of 46
  39. 39. Other Contingencies ● Appraisal – Performed in conjunction with financing ● Financing ● Termite ● OtherSlide 39 of 46
  40. 40. Closing – what you need to knowSlide 40 of 46
  41. 41. 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 41 of 46
  42. 42. 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 42 of 46
  43. 43. 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 43 of 46
  44. 44. Closing Day ● You’ll have a final walk-through on closing ● Closing typically takes 2 hours day or just before ● Get keys and take possession! ● What to bring: ► Government issued photo ID ► Certified checkSlide 44 of 46
  45. 45. 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 on your home!Slide 45 of 46
  46. 46. 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 46 of 46

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