Redfin Home Buying Class
Redfin’s North Coastal Orange County Team
July 29, 2014 – Fountain Valley, CA
Host: Rob Brandon
● Overview of the process
● Are you ready to buy?
● Understanding the market
● Never miss a home
● Choosing an agent
● Short sales & foreclosures
● Making an offer
● Acceptance to closing
A Little Bit About Who We Are
Redfin is a full service real estate brokerage that has helped
over 20,000 people buy or sell a home; 97% would refer us to
● Customers, not commissions
● Informed decisions
● Right home for the right price
What to Ask Any Agent
● Is this your full-time job?
● Where were your last five deals?
● Who else will be working with me?
● When am I committed to working with you?
● Has a client ever filed a compliant?
● How are you paid?
● Can I see some reviews of your work?
Making the Most of Your Tour
1. Bring a camera, notebook & tape measure
2. See how much sunlight the place gets
3. Check the bathrooms for rot & mold
4. Look for wavy or discolored wood siding
5. Make sure water spouts drain away from
6. Take stock of storage space
7. Turn off any music playing in house
8. Check for hardwood floors
9. Peek into the attic
10. Bring a marble or two
11. When sharing a wall, make sure it’s thick
12. Ignore the appliances and carpets
13. Check the closets
14. Get the disclosure packet
15. Compare the property’s tax records to the
Slide 20 of 55
How Touring with Redfin Works
● Up to six homes per tour in
two hour blocks
● Go on as many tours
as you need, we just ask
for your pre-approval or
proof of funds prior to the
● Led by agent or associate
● No obligation
Local Recommended Lenders
In no way does
lenders – we
just think they’re
Review Your Financial Situation
● Pull credit report, look for errors. Earlier the better
● Establish comfort level for monthly payment
● Figure out how much monthly income goes towards debt:
45% Max Conv, 56.9% Max FHA 43% Max Jumbo, 41% VA
● 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 status
Get Pre-Approved Early
A pre-approval letter is a letter from a bank or a lender estimating how
much they'll lend you (May vary from what you want to pay monthly)
● Establishes what you can afford & makes offer process go faster
● Redfin asks that you get pre-approved before your third tour
● Good for 90 days, depending on lender (Credit reports are good for
● W-2’s, 2 years tax returns (with all schedules, K-1’s etc) 1
month of pay-stubs, asset statements (Show all funds used
to close loan) Drivers License, If you own a home or homes,
need mortgage, tax, and insurance information
Pulling Credit: Is it harmful?
● Your credit report must be reviewed by a lender before you
can obtain a pre-approval
● If you know your score, a lender should be able to give you
ballpark pricing for their loan products
● Don’t allow lots of lenders to
pull your credit score
● Pull a free credit report. One
of the best is
Non Traditional Loan Programs!!!
If you are self employed or have a unique income situation, ask
your lender about special programs that can help you qualify.
At Banc of California – Banc Home Loans we offer
loans that turn bank deposits into income for qualifying
We also offer stated income loans to people with high
net worth. 30% down and assets of 1MM in reserves.
Loans up to 3.5MM
Lastly offer loans to people that Short Sold or
Foreclosed 1 day after the event, provided they have
20% down and a 660 credit score. For people that tried
to work with bank and didn’t have a hardship but
REX program for Equity Sharing
Start Shopping for Lenders
YOU will want to see that they have a competitive rate.
Although the rate and terms are important, finding a lender who will communicate with you
and answer all your questions and make you comfortable with things is invaluable.
They also need to have the ability to close your loan in 15-20 days. (Why?)
Lender should be willing to answer calls at night and on weekend, and even talk about your
qualifications directly with the listing agent to complement the cover letter to set you apart.
YOUR REALTOR will want to see that they are trustworthy, communicate well, and can close
your loan on time or early. It is these qualities that will allow your agent to sell your ability to
close to the listing agent.
Good sources include:
Redfin's partner lenders
Your real estate agent
Banks or credit unions you have accounts with
Online review sites, such as Redfin and Zillow
BEWARE OF OUT OF STATE LENDERS!!! (Based on accountability factors that make listing
North Orange County
North Orange County
North Orange County
● Feel free to come ask us questions!
10 mins 5 mins End
Let’s Get Started!
How those “priced out” of
the market can get “priced
Median Sold Price:
From $471,000 in 2013
Up 13% to $542,000 in 2014
2013-2014 Mortgage Rates
April 2013 – 3.375%
April 2014 – 4.270%
Comparing 2013-2014 Average Price and
Average mortgage rate with 20% down:
Price: $471,000 $542,000
Cash Down Payment: $94,200 $108,400 + $14,200
30 Yr. Fixed Rate 3.375% 4.250%
Principal and Interest: $1,665.82 $2,133.05
Taxes (1.25%) $490.62 $564.58
Insurance (.2%) $78.50 $90.33
Total: $2,234.94 $2,787.97 + $553.03
Three problems to solve:
● How do you overcome a $14,200 cash gap?
● How do you lower your payment by $553?
● How can you beat investors to lower priced homes?
● Get a small Second Loan (HELOC / HELOAN)
► A $25,000 second loan at 5.25% is $138 per month
● Borrow against a secured asset (401k, IRA)
► Most 401k loans will run $70 per pay check per $25,000 borrowed.
● Gifted Funds.
● Raise the rate by .25-.50% to reduce cash to close.
► .25 in rate is $63.94 per month.
► $14,200 cash / $63.94 per month breaks even in 222 payments.
● ARM loans
5/7/10 year ARM’s aren’t the same programs as before.
1-2 points paid on fixed or ARM loans can make a big difference.
● Government programs
State of California or County of Orange MCC.
● 1980-2005 ARM Caps – 0 to 10%
● 2014 ARM Caps – 2% to 5%
● Stable ARM indexes relative to 1980’s
1980 - 1990 Avg. Prime Rate - 14%
2004 – 2014 Avg. Prime Rate – 5%
● County of Orange MCC
• Must be a first time home buyer
An MCC is a tax credit of 20% of your annual interest paid.
$400,000 at 4.00% is $16,000 interest paid per year.
$16,000 x .20 is a tax credit of $3,200.
• Depending on your tax advisors suggestion, you could change your annual
withholding basis and receive a higher take home pay that will be offset by the
• As of 4/15/14, the County of Orange’s MCC has been fully funded. Additional
funds are expected to be allocated shortly.
Beating the investor: 203(k) financing
● Depending on the type of investor, they look for two things:
► Rental purchase investor: Cash flow.
At current prices, few properties cash flow, but those that
do aren’t in the best of shape.
► Flip purchase investor: Return on investment.
Most flippers need a 15-20% ROI. The properties that
produce that kind of return tend to be neglected.
The common key: Both buyer profiles look past the current
property condition. Try to view overlooked homes in the
same way in order to buy within the range you can afford.
Mission Viejo: $469, 000
•$80,000 budget for repairs.
•10% Down Payment – can be less!
•$494,100 at 4.50% PITI + MMI:
•Post repair value: $615,000
•Post repair refinance payment:
•$492,000 at 4.00% PITI: $3,092
What is a Short Sale?
The owner owes more on the mortgage than the home is
worth or will sell for
● Usually pre-foreclosure, but not always (divorce, hardship)
● Listed for less than what’s owed to the bank
● Requires 1 - 2 banks’ approval, sometimes more (usually 2)
● May have other liens (taxes, utilities, HOA, mechanics)
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
● Redfin partner agents work for other brokerages but share
Redfin’s commitment to customer service
● Get a 15% commission refund
What is a Bank-Owned
● A foreclosed home owned by a bank or lender
● Standard sale but:
►Long response times
►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
►Earnest money deposit usually held by listing agent
Crafting Your Offer
● Evaluate – your agent will provide you with information
about market conditions and recent sales in the area
● Consider the situation – the seller’s preferences, days on
the market, and other interest will influence the process.
● Decide on price & strategy with your agent
● Common contingencies & terms:
Tips for Winning a Bidding War
1. Just win, baby! Simply have the best offer.
► Cash is King
► Escalate your price?
► Tighten your timelines
► Remove some contingencies?
2. Get pre-approved with a local lender
3. What’s important to the seller?
4. Write a letter & appeal to the seller
►Try and make a personal connection
Your Offer has been Accepted!
● Earnest money deposit – usually 1-3%+
● Inspection – approximately $500
● Other Inspections – sewer scope, roof, electrical, geological
● Loan Application – 5 days or less
● Review Title
● Order Appraisal – approximately $500
● Loan Approval – remove contingencies!
● Escrow – appointment to sign loan documents
● Walk through/ Verification of Property
● Loan funds, title records, escrow closes
● Receive your keys!
We recommend that you have a home inspection
● Cost runs $350 to $1,200 depending upon the home’s size
● Your agent will accompany you
● Your time to evaluate the property, bring notepad, ask
questions. Get to know the property and know what your
Let’s talk about:
● What an inspection contingency covers and doesn’t cover
● Types of inspections
What are Contingencies?
Standard timeline for contingencies in local market: 17 days
● Appraisal – Performed in conjunction with financing
What is Escrow?
Escrow is a neutral third party intermediary that represents
neither the buyer nor the seller.
What do they do?
• Hold the earnest money
• Arrange for payoff of any liens (seller’s mortgage, utilities,
• Coordinate the signing appointments for all parties
• Receive and disburse funds for closing
• Arrange to notify county offices to change ownership
Walk Through to Closing
Walk through/Verification of Property: 2-5 days prior to close
date. Not a contingency in the contract.
Escrow: sign loan documents, transfer funds for your down
payment and closing costs.
Lender: Reviews your documents, sets up loan to fund
Title: Title records the day after funding in LA County. In
Orange County title can record on the same day as funding.
Give you Keys!!!
So What Now?
● Make sure it’s the right time for you
● Check out our Home Buying Guide
● Find the right agent
● Look for a local lender and get pre-approved
● Start seeing homes in person
● Make an offer & close the deal