San Fernando Valley Home Buying Class - January 30 2013

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  • 1. Redfin’s Home Buying Class January 30, 2013 Woodland Hills Follow: @RedfinLosAngeles Like: http://www.facebook.com/RedfinLosAngelesSlide 1 of 52
  • 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. 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. To Buy or Not to BuySlide 4 of 52
  • 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. Why You Shouldn’t Buy a Home ● You don’t have a good reason ● 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. Understanding the Buying ProcessSlide 7 of 52
  • 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. Understanding the MarketSlide 9 of 52
  • 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. Case-Shiller – By the Numbers Los Angeles Area Up 6.2% year-over-year Peak was September 2006 Down 36% from peak Currently at January 2004 prices 20-City Composite Up 4.3% year-over-year Peak was July 2006 Down 29% from peak Currently at September 2003 pricesSlide 11 of 52
  • 12. Woodland Hills Dec. Stats for Houses Tip: Local information can be found for any city, zip or county under “Stats and Trends” from the map page:Slide 12 of 52
  • 13. Woodland Hills Dec. Stats for HousesSlide 13 of 52
  • 14. Los Angeles Area Overview (last 90 days)Slide 14 of 52
  • 15. LA County Sept. Stats for HousesSlide 15 of 52
  • 16. National Market Trends Multiple Offers - More than a Quarter of Listings Still Selling Fast ● In Dec. 27.5% of new listings were under contract in two weeks or less. ● This measure of how competitive the market is for buyers has been holding steady for the last seven months. ● Multiple offers are not only against 3 or 5 buyers, but more like 10, 20 and sometimes even 30 or moreSlide 16 of 52
  • 17. National Market Trends ● The key metrics across 19 major metropolitan markets are: ► Prices 11.3% higher YoY (9th month in a row with increasing prices YoY) ► Inventory falls 33% YoY ► At the close of 2012 there were < 160,000 listings nationally ► Inventory been dropping YoY for 22 months in a rowSlide 17 of 52
  • 18. Short Sales and Bank Owned NameSlide 18 of 52
  • 19. 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 19 of 52
  • 20. 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 20 of 52
  • 21. TouringSlide 21 of 52
  • 22. 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 22 of 52
  • 23. 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 23 of 55
  • 24. MortgagesSlide 24 of 52
  • 25. 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 25 of 52
  • 26. Start Shopping for Lenders Compile a list of 3-4 lenders & brokers Good sources include: ● Redfins partner lenders ● Referrals from friends, family & co-workers ● Online review sites, such as Yelp ● Local chains and offices *Know your lenderSlide 26 of 52
  • 27. 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 27 of 52
  • 28. 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 28 of 52
  • 29. 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 29 of 52
  • 30. Where Are Rates Headed? Type of Loan January 10, 2013 January 3, 2013 30-Year Fixed 3.40% 3.34% 15-Year Fixed 2.66% 2.64% 5/1 ARM 2.67% 2.71% 1-Year ARM 2.60% 2.57%Slide 30 of 52
  • 31. Where Are Rates Headed?Slide 31 of 52
  • 32. Make Your Decision ● When possible, get a loan commitment ● 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.Slide 32 of 52
  • 33. 10-Minute Break 10 mins 5 mins End Let’s Get Started!Slide 33 of 52
  • 34. 15-Minute Break 15 mins 7.5 mins End Let’s Get Started!Slide 34 of 52
  • 35. Short Sales and Bank Owned MichelleSlide 35 of 52
  • 36. 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 36 of 52
  • 37. 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 37 of 52
  • 38. Putting it all together to findYOUR homeSlide 38 of 52
  • 39. Redfin.com - Benefits of MLS Powered (Multiple Listing Service) ● 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 39 of 52
  • 40. Agent NotesSlide 40 of 52
  • 41. CMA ToolSlide 41 of 52
  • 42. Home Buying GuideSlide 42 of 52
  • 43. Search by SchoolsSlide 43 of 52
  • 44. Home Inspection Guide http://www.redfin.com/home-buying-guide/interactive-home-inspectionSlide 44 of 52
  • 45. Redfin Open Book ● Redfin Certified Providers ► Proven track record, vetted by Redfin ● We survey every client & post the good, bad, & ugly ● Read real reviews & find a great local team ► Inspectors ► Lenders ► Title Companies ► AttorneysSlide 45 of 52
  • 46. Choosing the Right AgentSlide 46 of 52
  • 47. 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 47 of 52
  • 48. 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 48 of 52
  • 49. Overview of a PurchaseSlide 49 of 52
  • 50. Get pre-approved Tour homes Find dream home Consult with agent, write offer Submit offer to listing agent Negotiations Success! Mutual Acceptance Earnest money [Within 3 days]Overview of a Inspection contingency [10-17 days]Purchase Title review [5 days] Loan & Appraisal Contingency [17 days] Waiting for loan approval Escrow signing appointment Closing! Get keys and take possession! Receive Redfin refund Complete Redfin surveySlide 50 of 52
  • 51. 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 51 of 52
  • 52. Check out our local pages!Slide 52 of 52
  • 53. AppendixSlide 53 of 52
  • 54. Appendix ● Important forms/contracts ● Favorite Real Estate ResourcesSlide 54 of 52
  • 55. HUD Settlement StatementSlide 55 of 52
  • 56. 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 countySlide 56 of 52
  • 57. 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 listingSlide 57 of 52
  • 58. 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 infoSlide 58 of 52
  • 59. 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 buyersSlide 59 of 52
  • 60. 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 estateSlide 60 of 52
  • 61. 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 goodSlide 61 of 52