North Orange County Home Buying Class October 10, 2012

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North Orange County Home Buying Class October 10, 2012

  1. 1. Redfin’s Home Buying Class October 10, 2012 Huntington Beach, CA Follow: @RedfinOC Like: http://www.facebook.com/RedfinOCSlide 1 of 52
  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 52
  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 52
  4. 4. To Buy or Not to BuySlide 4 of 52
  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 52
  6. 6. Why You Shouldn’t Buy a Home ● 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 52
  7. 7. Understanding the Buying ProcessSlide 7 of 52
  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 52
  9. 9. Understanding the MarketSlide 9 of 52
  10. 10. Case-Shiller: Los Angeles Area v. 20-City 300.00 Los Angeles 20-City Composite 250.00 200.00 150.00 100.00 50.00 0.00Slide 10 of 55
  11. 11. Case-Shiller – By the Numbers Los Angeles Area Up .6% year-over-year Peak was September 2006 Down 38% from peak Currently at February 2011 prices 20-City Composite Up .5% year-over-year Peak was July 2006 Down 31% from peak Currently at July 2011 pricesSlide 11 of 52
  12. 12. Huntington Beach August Stats for HousesSlide 12 of 52
  13. 13. Huntington Beach August Stats for HousesSlide 13 of 52
  14. 14. OC August Stats for HousesSlide 14 of 52
  15. 15. OC August Stats for HousesSlide 15 of 52
  16. 16. National Market Trends● Prices Soften Slightly, Still Up 3.2% Year Over Year● Inventory Down 28.1% Year Over Year ► California still falling faster than everywhere else. ► Fewer bank-owned listings for sale, and fewer conventional sales on the market. ► Homeowners can’t afford to sell with prices at or near a five-year low in most markets. ► Stabilizing home prices and low interest rates have slowed foreclosures.Slide 16 of 52
  17. 17. National Market Trends ● One in Four Listings Is Under Contract in Less than 14 Days ► Over a quarter (27.8%) of all single-family houses that debuted in the first 3.5 weeks of July were off the market in under two weeks.Slide 17 of 52
  18. 18. 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 18 of 52
  19. 19. Short Sales and Bank OwnedSlide 19 of 52
  20. 20. 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 20 of 52
  21. 21. 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 21 of 52
  22. 22. TouringSlide 22 of 52
  23. 23. 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 23 of 52
  24. 24. 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 24 of 55
  25. 25. MortgagesSlide 25 of 52
  26. 26. 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 26 of 52
  27. 27. Start Shopping for Lenders Compile a list of 3 lenders & brokers Good sources include: ● Redfin Open Book ► Redfin Certified lenders ► Reviews you can trust ● Your real estate agent ● Friends, family & co-workers ● Banks or credit unions you have accounts with ● Beware of out-of-state lenders!Slide 27 of 52
  28. 28. 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 28 of 52
  29. 29. 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 29 of 52
  30. 30. 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: BB&T Chips ProgramSlide 30 of 52
  31. 31. Where Are Rates Headed? Type of Loan August 16, 2012 August 23, 2012 30-Year Fixed 3.62% 3.66% 15-Year Fixed 2.88% 2.89% 5/1 ARM 2.76% 2.80% 1-Year ARM 2.69% 2.66%Slide 31 of 52
  32. 32. Where Are Rates Headed?Slide 32 of 52
  33. 33. Break!Slide 33 of 52
  34. 34. 10-Minute Break 10 mins 5 mins End Let’s Get Started!Slide 34 of 52
  35. 35. 15-Minute Break 15 mins 7.5 mins End Let’s Get Started!Slide 35 of 52
  36. 36. Putting it all together to findYOUR homeSlide 36 of 52
  37. 37. Redfin.com - Benefits of a MLS (Multiple Listing Service) Powered ● 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 52
  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 52
  39. 39. Redfin Open Book ● Redfin Certified Providers ► Proven track record, vetted by Redfin ● We review every client & post the good, bad, & ugly ● Read real reviews & find a great local team ► Inspectors ► Lenders ► Title Companies ► AttorneysSlide 39 of 52
  40. 40. Redfin Open BookSlide 40 of 52
  41. 41. Choosing the Right AgentSlide 41 of 52
  42. 42. Traditional vs. RedfinSlide 42 of 52
  43. 43. 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 43 of 52
  44. 44. 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 44 of 52
  45. 45. 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 45 of 52
  46. 46. Home Inspection and Other Contingencies NameSlide 46 of 52
  47. 47. 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 47 of 52
  48. 48. Other Contingencies ● Appraisal – Performed in conjunction with financing ● Financing ● Termite ● OtherSlide 48 of 52
  49. 49. Closing – what you need to knowSlide 49 of 52
  50. 50. 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 50 of 52
  51. 51. 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 51 of 52
  52. 52. 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 52 of 52
  53. 53. 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 53 of 52
  54. 54. 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 54 of 52
  55. 55. 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 55 of 52
  56. 56. AppendixSlide 56 of 52
  57. 57. Appendix ● Important forms/contracts ● Favorite Real Estate ResourcesSlide 57 of 52
  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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