3.66%Interest rate on an average 30- year fixed mortgage
Agenda● To buy or not to buy● Overview of purchase process● Understanding the Market● Short sales & foreclosures● Touring● Mortgages● Break!● Choosing an agent● Redfin as a tool● What to know about closing
A Little Bit About Who We AreRedfin is a real estate brokerage that has helped over 20,000people 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 Video
Overview of Purchase Process● 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”● Closing
Case-Shiller: LA Area v. 20-City 300.00 Los Angeles 20-City Composite 250.00 200.00 150.00 100.00 50.00 0.00
Case-Shiller – By the NumbersLos Angeles Area● Down 3.6% year-over-year● Peak was September 2006● Down 41% from peak● Currently at July 2009 prices20-City Composite● Down 1.9 year-over-year● Peak was July 2006● Down 34% from peak● Currently at January 2003 prices
OC July Stats for Houses Tip: Local information can be found for any city, zip or county under “Stats and Trends” from the map page:
National Market Trends● Redfin’s data for 19 U.S. markets show June prices increasing 3.0% over last year● CoreLogic reported that May home prices increased 2.0% year-over-year, rising for the third consecutive month● One in four homes under contract in less than two weeks● Low rates and low inventory are creating the price pressure.● The interest rate on a 30-year mortgage hit an all-time low last week of 3.56%.● The number of homes for sale is down 19% from last year, and down nearly 50% in California and Seattle● Completed foreclosures are down 27% from their 2010 peak, and seriously delinquent mortgages hit a three-year low.
Where is the Market Headed?● Supply of homes is at a five-year low and won’t increase the rest of the year● Rents have been rising, making buying more attractive● Market stabilizing, though likely 2-3 years before significant appreciation● Rate & Rent increases – Two of the biggest issues for buyers
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 refund
What is a Bank-Owned Home?A foreclosed home owned by a bank or lender. Also referred to as an REO (Real Estate Owned).● Standard sale but: ► 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 ► Accelerated contingency periods
Making the Most of Your Tour1. Bring a camera, notebook & tape measure 9. Peek into the attic2. See how much sunlight the place gets 10. Bring a marble or two3. Check the bathrooms for rot & mold 11. When sharing a wall, make sure it’s thick4. Look for wavy or discolored wood siding 12. Ignore the appliances and carpets5. Make sure water spouts drain away from 13. Check the closets house 14. Get the disclosure packet6. Take stock of storage space 15. Compare the property’s tax records to the7. Turn off any music playing in house listing details8. Check for hardwood floors
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 obligation
Review Your Financial SituationTo 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 status
Start Shopping for LendersCompile a list of 3 lenders & brokersGood 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!
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 statements
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)
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 Program
Where Are Rates Headed?Type of Loan August 23, 2012 August 16 201230-Year Fixed 3.66% 3.62%15-Year Fixed 2.89% 2.88%5/1 ARM 2.80% 2.76%1-Year ARM 2.66% 2.69%
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 homes
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?
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 ► Attorneys
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?
Experience With Multiple OffersThis occurs when inventory is down and buyer interest is up5 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 limits
Redfin’s Partner ProgramPartner 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 demandWe survey all partner agent clients ► All surveys are published on their Redfin page ► 97% of customers would recommend Redfin partners
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 inspections
Other Contingencies● Appraisal – Performed in conjunction with financing● Financing● Disclosures● HOA Documents● Other
Closing: HUD–1 SettlementHUD-1 Settlement Statement – Lists all fees/charges/creditsBy 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 taxes
Escrow & Title Companies● What does the escrow company do? ► Prepares the HUD-1 and closing documents ► Arranges signing appointments ► Holds and disburses funds● What does the title company do? ► 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 buyer
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,
Closing Timelines● 1-5 days prior to close of escrow ● On the day of closing ► Final walk-through ► Title records the deed ► Sign documents at escrow ► County confirms recording ► Wire funds (or bring a cashier’s check ► Get keys and take possession! to signing)
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 deal
Thanks for Coming!Please fill out the survey that was handed out at the beginning ofclass. We appreciate the feedback!Check out our upcoming classes and events at http://www.redfin.com/buy-a-home/classes-and-events
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
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 ● ForeclosureRadar: Great foreclosure information including trustee sale dates, locations (subscription required) ● Brokerage site of listing agents: more photos of the listing
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
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
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
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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