Redfin’s Home Buying ClassApril 4, 2012 San Francisco, CA
AgendaConsidering…● To buy or not to buy● Market conditions● Searching for a homeLooking…● Finding a real estate agent● Working with RedfinBreak!Buying…● Mortgages● The offer and the deal● Short sales and bank owned
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 your commission
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 want a home that is difficult to rent● You’re handy & and ready to invest● You’ve saved up a down payment
Why You Shouldn’t Buy a Home● You don’t have a good reason like family or schools● You can’t afford the down payment● You can rent for much less● You plan on moving soon● You’re worried about job security
Case-Shiller: San Francisco Area v. 20-City 250.00 San Francisco 20-City Composite 200.00 150.00 100.00 50.00 0.00
Case-Shiller – By the NumbersSan Francisco Area Down 5.4% year-over-year Peak was May 2006 Down 41.1% from peak Currently at February 2002 prices20-City Composite Down 3.8% year-over-year Peak was July 2006 Down 33.8% from peak Currently at February 2003 prices
San Francisco Feb. Stats for CondosConsidering… Looking… Buying…
Where is the Market Headed?● Supply of homes is at a five-year low and won’t increase the rest of the year● Foreclosures have been driving price declines, likely years of inventory remain● Rents have been rising, making buying more attractive)● Market stabilizing, though likely 2-3 years before significant appreciation● Rate increases - biggest issue for buyers
National Market Trends● New construction inventory low, sales rising and confidence rising too.● Pending home sales hit a 19-month high.● Actual closed home sales increased 4%.● The number of homes on the market declined 18% over the past year.● Foreclosure sales fell to a four-year low.● Prices will remain stable in 2012.
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?
How Our Team Works AGENT Responsible for your success Writes your offer Handles negotiations YOU COORDINATOR FIELD AGENT Schedules tours Takes you to see homes Prepares paperwork See 50+ homes a week Works with escrow
We Share Our Commission With You• We refund a part of our commission to you subject to the approval of your lender and the home seller • Applied to closing costs • Refund is tax-free
Getting Pre-Approved Income oSalary—Past 30 days oHourly—Consistency and history oSelf-employed—Two year average Credit Assets o 660 for FHA o Down Payment o 680 for Conventional o Closing Costs o 720 for Rate Improvement o Cash Reserves
Show Stable EmploymentSalaried Employee o W2’s are historic o Most recent paystubs o Raises count immediatelySelf-Employed o Two Year History o Same line of workHourly Wage Earner o Consistent hours over 1-2 year period
Organize Your Assets Lenders Will Require 2 Months of Statements oLiquid o Do not move money around—hard to paper trail oRetirement Accounts o Consider a 401k Loan oGift Funds o Family members only
Review Your Debt | Credit HistoryKnow Current Credit Score Know Your Debt ToleranceoMyfico.com—$19.95 to get your oCost of rentingscore oTax benefits of home ownershipoUse your mortgage lender’s report oBudget considerationsFix ErrorsoRemove duplicates Lender Tolerance May BeoResolve disputes DifferentoReduce credit card debt o45% debt to income ratio is allowedoDo not open, close, or changecredit linesoDo not make large purchases
Loan ScenarioHome Buyer $320,000 LoanoEarns $5,000/month o30/Yr Fixed 4% of LoanoHas car payment $350 = $1,528oWants to buy a home for oProperty Taxes$400,000 o1.41% on purchase priceoHas 20% down payment = $470 o $5,000 x 45% = $2,700 oHomeowners Insurance o $2,700 – 450 (other = $75 debt) oTotal: $1528 + $470 + $75 = Qualified $2,073/Month!= Allowed $2,250/Month!
Choosing a LenderPre-Approval letteroPart of the offeroSellers want accountabilityUsing ReferralsoFrom Redfin’s partner lendersoFrom friends who recently financed a homeoFrom realtoroFrom Yelp, Berkeley Parents Network Meet Your Lender!
Local Recommended Lenders *In no way does Redfin benefit financially from recommending lenders – we just think they’re great lenders!
Current Average Rates Type of Loan March 29, 2012 March 22, 2012 30-Year Fixed 3.99% 4.08% 15-Year Fixed 3.23% 3.30% 5/1 ARM 2.90% 2.96% 1-Year ARM 2.78% 2.84%
Make Your DecisionGet a Good Faith Estimate o Itemized List of Fees: o Origination o Credit report o Transfer Tax o Discount Fee o Title insurance o Recording o Processing o Escrow fees o Underwriting o Prepaid items Good news! Loan payments are made in arrears, so your first loan payment will not be for almost two months!
Getting The House You Want Your agent: ● Researches seller & listing agent ● Prepares a comparative market analysis and discusses ● Writes up your offer ● Submits offer ● Negotiates on your behalf
Overview of a Purchase •Search homes online & tour •Get pre-approved •Find a dream homeFinding •Consult with agent, write offerYour Home •Submit offer to listing agent •Negotiations •Success! •Earnest money (within 3 days) •Inspection contingency (5-10 days) Mutual •Title review (5 days) Acceptance •Financing contingency (20-25 days) •Waiting for loan approval •Escrow signing appointment •Get keys and take possession! Closing! •Receive Redfin refund •Complete Redfin Survey
Deal Room Important milestone tracker Your to do list Your team of agents
Home Inspection HintsWatch out for: Look for and Check:•Galvanized steel pipes •Chimney sweep fireplace •Double-paned windows•Knob and tube wiring inspection •Well ventilated attic •Check all included •Stairs have handrails•Mold, mildew or signs of appliances leaking near walls or floors •Check water pressure
SampleHUDA form that yourlender is required toprovide to you oneday before closing. Itlists the final closingcosts and fees foryour loan.By law, the final costslisted on your HUD-1must be within 10% ofthe estimatesprovided on yourGood Faith Estimate(GFE).
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 Property?A foreclosed home owned by a bank or lenderStandard 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
So… Where’s the Best Deal?● Sellers who own their home outright● Sellers who are relocating● Estate Sales
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● Get pre-approved & look for a lender● Start seeing homes● Make an offer & close the deal
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 ● 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 ► CalHFA: California State agency that helps certain buyers● 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