Redfin's Free Loan Class - Phoenix, AZ


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  • Chart: rates rise or remain relatively unchanged? This week (Nov. 7-13), half of the panelists believe mortgage rates will rise over the next week or so, one-third think rates will fall, and the rest believe rates will remain relatively unchanged (plus or minus 2 basis points).Read more: more: Rate Trend Index - Mortgage Rate Trends -
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  • Redfin's Free Loan Class - Phoenix, AZ

    1. 1. Loans, Appraisals & Negotiations Class Presented by Redfin Phoenix Team November 13, Tempe, AZ @Redfin
    2. 2. Redfin Team Liz Sourbeer Kevin Wachel Phoenix Phoenix, Scottsdale, Glendale, Litchfield Park Wayne Graham Phoenix
    3. 3. Working with Redfin
    4. 4. 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 ► Tour on your schedule and pace Refund ► We’ll refund a portion of the commission back to you The Best Results ► Service: 97% would recommend us to a friend
    5. 5. The Redfin Refund The Listing Agent gets 3% commission. You save with Redfin. You buy and pay for your dream home. The 6% sales commission is split. Your Buyers’ Agent gets 3% commission. Redfin keeps a portion as our fee.
    6. 6. How Our Team Works AGENT Responsible for your success Writes your offer Handles negotiations YOU ASSOCIATE AGENT Takes you to see homes See 50+ homes a week COORDINATOR Schedules tours Prepares paperwork Works with escrow
    7. 7. A Little Bit About What We Do Redfin is a brokerage that’s using technology and a customer-service focus to change the real estate game in the consumer’s favor. ● What: a brokerage ● How we are different: ► Technology ► Customer-service ● Why: we want to change the game
    8. 8. What We Have Accomplished Redfin is a real estate brokerage that has helped more than 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 up to 33% of our commission
    9. 9. Mortgages
    10. 10. Local Recommended Lenders *In no way does Redfin benefit financially from recommending lenders – we just think they’re great lenders!
    11. 11. Get Pre-Approved ● A pre-approval letter is a letter from a bank or a lender estimating ● ● ● ● ● ● how much they'll 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
    12. 12. Facts on Getting Pre-Approved ● Applications are usually free and credit checks should not cost more than $20 ● If you get multiple credit checks from multiple lenders within a 30 day period, this will only count as one credit check against your credit score ● The application does not bind you to a lender, loan or rate ● You will get a better idea of any other action items you need to complete before you can buy ● Gives you a chance to discuss different financing options ● Your pre-approval stays valid as long as your finances constant (check with your lender to see if they have limits on this) ● Being pre-approved is required by sellers to consider offers
    13. 13. 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
    14. 14. Review Your Debt ● Pull credit report, look for errors ● Figure out how much monthly income goes towards paying off debt: 28 – 33% healthy ● Pay down balances to 1/3rd of credit available ● Don’t open any new lines of credit ● Don’t buy any big ticket items ● Co-borrower will need to do the same
    15. 15. Start Shopping for Lenders Compile a list of 4-6 lenders & brokers Good sources include: ● Redfin's partner lenders ● Referrals from friends, family & co-workers ● Banks or credit unions you have accounts with ● A large, national bank with an advertised rate ● Your real estate agent ● Online review sites, such as Yelp ● BEWARE OF OUT OF STATE LENDERS!!!
    16. 16. Comparing GFE Results ● Gather Good Faith Estimates (loan quotes) ► A minimum of three, more is better ► 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)
    17. 17. 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 two months. You’ll have one month of no payments.
    18. 18. Where Are Rates Headed? Type of Loan November 7, 2013 October 31, 2013 30-Year Fixed 4.16% 4.10% 15-Year Fixed 3.27% 3.20% 5/1 ARM 2.96% 2.96% 1-Year ARM 2.61% 2.64%
    19. 19. Where Are Rates Headed?
    20. 20. Why All The Multiple Offers?
    21. 21. What trends are we noticing?  Homes are being listed at strategically low prices  So properties are selling way above list price  Base your offer price on comps & trends – NOT on list price  Deadlines are being set to accept & review offers  Sellers usually review offers after about 7 days on market  To give property exposure and create buzz amongst buyers  Multiple offers are not only against 3 or 5 buyers, but more like 10, 20 and sometimes even 30 others  Some buyers are waiving their inspection contingency
    22. 22. 5 Tips for Winning a Bidding War 1. Make the competition eat your dust – sign up a redfin 2. 3. 4. 5. listing alert! Get pre-approved with a local lender & get underwriter approval Start the conversation early Write a letter & appeal to the seller Know your limits
    23. 23. Never Miss a Home
    24. 24. Get Ready! Obtain a Pre-Approval Letter Your Lender is part of our Team!  Ask your loan officer how they can help you in a competitive situation (shorter contingency period, quick closing?)  Request that your LO be available to speak with the listing agent  Get a preapproval letter with your maximum approval amount, you can customize later if necessary  Use a lender with local expertise- in a competitive situation it can be the difference between winning and losing  Get full underwriter approval --No pre-qualification letters please
    25. 25. Get Ready! Let’s Do our Homework  Buyer’s agent should call the listing agent, to find out what the sellers situation is & why they are selling  What are the sellers’ motivations?  Will they need to remain at the property after closing?  Do they need a quick sale?  Request for copies of disclosures and reports  Find out how many disclosure packages have been sent out to other buyers, has there been heavy traffic?  Is there an offer due date? How should offers be submitted – via email, drop off at listing office or in person?  Build rapport with listing agent and check scouting report
    26. 26. Get Ready! Know the Numbers - Knowing what to offer and being confident in your offer price makes the process less stressful.  Run a Comparative Market Analysis (CMA)  Understand pricing for the area  Determine your maximum price  Calculate payment difference at incremental price points  $5,000 more equals $?/month  Know When To Walk Away  You can’t control what someone else is willing to pay
    27. 27. Get Ready! Documentation Having your finances and other required documents in order prior to making an offer can accelerate the process. Here’s what we’ll need at a minimum to include with your offer:  Pre-Approval Letter  Not a pre-qualification  Proof of Funds  Bank statement, 401k, brokerage statement  Earnest Money Deposit Check  Just a copy (picture, scan or fax)
    28. 28. Writing a Winning Offer Offer Price - Price & Terms are the King & Queen of Winning in Multiple Offer Situations  Study Comparables  Understand pricing trends in the area  Base your offer on the comparables – not the listing price especially if it is strategically low  List Price to Sales Price Ratio for the Area  How much negotiating room is there?  Days on Market  Fewer DOM – sellers are less flexible  More DOM – sellers are usually more motivated/open to negotiating  Know the Sellers Current Loan Situation
    29. 29. Writing a Winning Offer Highest & Best In a multiple offer situation you may have only one shot at offering and no opportunity to further negotiate  Blind betting – you don’t know what the other offers are  What is the maximum price you are willing to pay for this property?  How much do you really want this property?  Determine your walk away price  Go in with your Highest Price and Best Terms right from the start
    30. 30. Writing a Winning Offer TERMS - Understand & offer the terms that seller desires  Contingencies protect the buyer and gives the option to negotiate further, or cancel the transaction if no agreement is reached.  Inspection Contingency – Typically 7 to 12 days  Financing Contingency - Typically 14 to 17 days  Appraisal Contingency - Typically 14 to 17 days  Shorter contingency periods makes your offer stronger & shows how serious you are as buyers  Need a Home Warranty? Seller Rent Back?
    31. 31. Pre-Commitment Letter
    32. 32. Financing ● Cash ► Cash offers can close in just a few days as there is no loan approval process. ► Strongest of all financing options ● Conventional ► 5% or more down payment. Few restrictions on condition of home, buyer has good credit. ► Strong second best financing option ● FHA / VA ► Least down payment (as little as 0%-3.5%), lender may require repairs, longest closing period. Lower credit ok. ► Also viable financing options
    33. 33. Writing a Winning Offer Financing (continued)… Making the seller comfortable with your ability to purchase their property is key to getting your financed offer accepted.  Present a Solid Pre-Approval    Get a Loan Commitment – this will set you ahead of almost all other offers Show the maximum amount you qualify for List your FICO scores, DTI’s, etc. if possible  Use a Lender with Local Presence & Expertise   Easy to contact and part of our team Offer to have lender speak directly to Listing Agent (LA) and/or seller
    34. 34. Writing a Winning Offer Use a Redfin Preferred Lender *In no way does Redfin benefit financially from recommending lenders – we just think they’re great lenders!
    35. 35. Writing a Winning Offer Closing & Possession Closing - Chat with your lender and see how quick they can close. Flexibility with closing can make a huge difference Take Possession At closing or does the seller need a Rent Back?  The seller may needs to stay longer but want to close sooner to have access to the funds  Seller pays buyers PITI while occupying the home after settlement  Deposit & Rent is held at escrow upon closing  Usually a max of 30 days – anything more requires lender approval
    36. 36. Writing a Winning Offer Personal Touch Including a short letter to the seller and a picture may help the seller connect and consider your offer.  Include a bit about you, your family, your profession.  Comment on the things you liked about the seller’s home.  Send your agent a family photo to include.  Won’t help with a bank owned properties or investor sellers
    37. 37. Inspections: To Waive or Not To? ● Pre-Inspection(not that common in our market) ► Out $300 - $1000 and may not get the house ► Timing can be difficult ► Seller may not allow ● Post-Inspection ► May scare sellers – They usually want a truly As-Is sale ► Deal can quickly fall apart ► What’s reasonable to negotiate further? Health and Safety ● Waived Inspection ► High Risk ► Waiving contingencies is not advisable but buyers are doing it.
    38. 38. Earnest Money ● Deposited after offer acceptance at beginning of escrow ● A higher EMD shows you are serious buyers and could make the sellers consider your offer more ● To be submitted to escrow within 3 business days of acceptance – include copy with offer ● The check is cashed, held at escrow & applied to your down payment at closing ● Refunded if you cancel as a result of a contingency ● Could be in jeopardy if you cancel after you’ve removed all contingencies ● A higher deposit makes for a stronger offer ● Go BIG and put down 5% with the offer!
    39. 39. Closing & Possession ● Chat with your lender and see how quick they can close. Flexibility with closing can make a huge difference ● Take Possession ● At closing or does the seller need a Rent Back? ● The seller may needs to stay longer but want to close sooner to have access to the funds ● Seller pays buyers PITI while occupying the home after settlement ● Deposit & Rent is held at escrow upon closing ● Usually a max of 30 days – anything more requires lender approval, rental agreement contract
    40. 40. How Redfin Helps ● Redfin agents close more deals than an average agent, we know the market and how to get the job done. We are advocates for our clients ● Help determine market price - CMA, trends and stats ● Understand the listing agent’s negotiation style ► average discount ► market time and ► offer process ● Established relationships with listing agents - we know what questions to ask, what to say, when to say it ● Write crisp, clean offer quickly (Docusign) ● Team structure allows agent to focus on writing your offer
    41. 41. The Appraisal Process
    42. 42. Home Value and Appraisals ● Purpose of an Appraisal ► Buyer and lender protection ► Requirement for lenders ► Establish fair market value ► Appraisals are an opinion ● Appraisal costs ► Appraisals are paid for by the buyer ► Generally $350-$450, depends on size of home ● Appraisal timeline ► Ordered within the first few days of opening escrow ► Inspection is typically within first 4-7 days ► Appraisal report is received back to the bank within 10-14 days
    43. 43. How an Appraisal Professional is Selected ● Once mutual acceptance is met ► Escrow opens ► Your lender will order the appraisal from a licensed professional ► Appraiser will contact the Listing Agent for access ► Appraiser measures both the interior and exterior of the home for accuracy ► Appraiser is not a home inspector ► 17 day contingency for appraisal ► Once the appraisal is received back to the bank, it goes to underwriting with your lender
    44. 44. How Appraisals are Performed ● A critical part of a home purchase ► Appraisers choose comparable properties (comps) ► Comps are typically less than 6 months old (sometimes may be older if less data is available) ► Comps are chosen within close proximity to the subject property (typically within same neighborhood) ► Adjustments are made to the comps for items such as: • • • • • Date of Sale Location Site size View Quality of Construction • Age of Home • • • • Condition Heating/Cooling Garage/Carport Gross Living Area • # of Bedrooms • # of Bathrooms • Porch/Patio/Deck • Fireplaces • Total Room Count • Design/Style
    45. 45. Appraisal Comes in High or Low ● Appraisal comes in below the contract price ► Buyers are protected and will not overpay for the home ► There are several options:      Reduce the purchase price to the new appraised value Your loan is based on the appraised value, not the contract price Comps can be sent to the appraiser if there is doubt that the value is not correct Buyer can pay the difference Review appraisal may be ordered ● Appraisal comes in above the contract price ► The 17-day contingency is to protect you! If the value comes in higher, then that is instant equity to you, you do not need to do anything!
    46. 46. Thanks for Coming! Questions? Get in touch: Kevin Wachel Liz Sourbeer Wayne Graham Check out our upcoming classes: