Slide 1 of 49Redfin’s Home Buying ClassApril 20, 2013 El Dorado Hills, CAFollow: @RedfinSacramentoLike: http://www.facebook.com/RedfinSac
Slide 2 of 49Agenda● 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 closing
Slide 3 of 49A 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 priceNo obligationGet back a portion of our commission
Slide 8 of 49Overview of Purchase Process (more details tofollow)● Information – learn as much as possible about the market, theneighborhood, 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
Slide 10 of 55Case-Shiller: San Francisco Area v. 20-City0.0050.00100.00150.00200.00250.0020 City CompositeSan Francisco
Slide 11 of 49Case-Shiller – By the NumbersCase-Shiller: San Francisco AreaUp 17.5% year-over-yearPeak was May 2006Down 32.5% from peakCurrently at July 2003 pricesCase-Shiller: 20-City CompositeUp 8.1% year-over-yearPeak was July 2006Down 29.2% from peakCurrently at September 2003 prices
Slide 12 of 49El Dorado Hills March Stats for Homes
Slide 13 of 49El Dorado Hills March Stats for Homes
Slide 14 of 49National Market TrendsMultiple Offers - More than a Quarter of Listings Still Selling Fast● 2012 inventory fell 30%● Through the first 6 weeks of 2013 – inventory dropped another 18%● Multiple offers are not only against 3 or 5 buyers, but more like 10, 20 andsometimes even 30 or more
Slide 15 of 49National Market Trends● January YoY Prices up 10%● January YoY sales increased 9.1%● 70% of homes in January had competing offers● 30% of new listings were under contract in < 2 weeks● # new construction projects in Q4 2012 up 44% YoY● Why could slow the market?► Mortgage rates have increased to 3.75% (highest since last Sept.)► Eventually money will get more expensive and buyers will become morescarce
Slide 17 of 49What 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 partneragent● Redfin partner agents work for other brokerages but share Redfin’scommitment to customer service● Get a 15% commission refund
Slide 18 of 49What 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 money
Slide 20 of 49Review 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
Slide 21 of 49Start Shopping for LendersCompile a list of 3-4 lenders & brokersGood sources include:● Redfins partner lenders● Referrals from friends, family & co-workers● Online review sites, such as Yelp● Local chains and offices*Know your lender
Slide 22 of 49Getting Pre-ApprovedA pre-approval letter is a letter from a bank or a lender estimating howmuch 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
Slide 23 of 49Comparing 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 loansProgram (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 49Types 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, survivingspouses► No down payment● Ask your lender if they have special loan programs► Example: BB&T Chips Program
Slide 25 of 49Where Are Rates Headed?Type of Loan April 11, 2013 April 18, 201330-Year Fixed 3.43% 3.41%15-Year Fixed 2.65% 2.34%5/1 ARM 2.62% 2.60%1-Year ARM 2.62% 2.63%
Slide 26 of 49Make Your Decision● When possible, get a loan commitment● Make alternative funds liquid (401k, stock)Good news! Loan payments are made in arrears, so your firstloan payment won’t be for two months.
Slide 28 of 49Putting it all together to findYOUR home
Slide 29 of 49Redfin.com-Benefits of a MLS PoweredSite● 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
Slide 30 of 49Highlights of Redfin’s Site● Search by zip codeor 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 31 of 49Open Book● Redfin Certified Providers● Every professional is reviewed and all reviews are shown● Search for local:►Inspectors►Lenders►Title Companies
Slide 34 of 49What 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 35 of 49This occurs when inventory is down and buyer interest is up5 Tips for Winning in a Bidding War1. Make the competition eat your dust2. Get pre-approved with a local lender & get underwriterapproval3. Start the conversation early4. Write a letter & appeal to the seller5. Know your limitsExperience With Multiple Offers
Slide 36 of 49Redfin’s Partner ProgramPartner agents are employed by other brokerages, buthave teamed up with us to provide Redfin-Certifiedservice 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
Slide 38 of 49Making the Most of Your Tour1. Bring a camera, notebook & tape measure2. See how much sunlight the place gets3. Check the bathrooms for rot & mold4. Look for wavy or discolored wood siding5. Make sure water spouts drain away fromhouse6. Take stock of storage space7. Turn off any music playing in house8. Check for hardwood floors9. Peek into the attic10. Bring a marble or two11. When sharing a wall, make sure it’s thick12. Ignore the appliances and carpets13. Check the closets14. Get the disclosure packet15. Compare the property’s tax records to thelisting details
Slide 39 of 55How Touring with Redfin Works● Up to six homes per tour intwo hour blocks● Go on as many toursas you need● Led by agent or field agent● Need to be verified● No obligation
Slide 40 of 49Home Inspection andOther Contingencies
Slide 41 of 49Home Inspection● We recommend that you have a home inspection● Cost runs $350 to $1200 depending upon the size of thehouse● Your agent will accompany you● Your time to evaluate the property● What an inspection contingency covers and doesn’t cover● Types of inspections
Slide 42 of 49Other Contingencies● Appraisal – Performed in conjunction with financing● Financing● Termite● Other
Slide 44 of 49Closing: 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 titleinsurance● Government charges►Includes recording fees, recordation taxes and propertytaxes
Slide 45 of 49Title 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 recordableinstruments►Issues title insurance to the lender and the buyer
Slide 46 of 49Closing: Title Insurance● Title insurance guarantees that the property is clear andmarketable● 2 types of title insurance policies►Limited (Standard)Protection against pre-closing defects in title►Enhanced (Eagle)Costs 20% more than Standard policyCovers post closing fraud, forgery, identity theftIncreases with value of the property up to 150% oforiginal priceIncludes coverage for: mechanic’s liens, invalidpermits, forced removal of structure, unrecordedeasements, unrecorded leases,
Slide 47 of 49Closing Day● You’ll have a final walk-through on closingday or just before● What to bring:► Government issued photo ID► Certified check● Closing typically takes 1 hour● Get keys and take possession!
Slide 48 of 49So 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
Slide 49 of 49Thanks 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 athttp://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, subscriptionrequired for full reports● 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 marketby city, but some complain data is unreliable● MSN Home Affordability Calculator: Based on your income& credit score● SmartMoneys Home Buying Worksheet: Similar to theMSN calculator, but requires more info
Favorite Mortgage Links● Bankrate: Many ads, but is great for comparing locallenders● Zillows Mortgage Marketplace Help Center: Articlesmortgage rates, types of mortgages, credit reports, and aseries of mortgage calculators● The Mortgage Professor: Bare bones information onmortgages, definitions of common terms, myriad ofmortgage 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 ofinformation on remodeling►National Association of Home Builders (NAHB): Articles onremodeling your home, most are good
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