San Francisco Home Buying Class October 10, 2012

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  • 1. Redfin’s Home Buying Class October 10, 2012 San Francisco Follow: @RedfinSanFrancisco Like: http://www.facebook.com/RedfinFranciscoSlide 1 of 61
  • 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 61
  • 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 61
  • 4. To Buy or Not to BuySlide 4 of 61
  • 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 61
  • 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 61
  • 7. Understanding the Buying ProcessSlide 7 of 61
  • 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 61
  • 9. Understanding the MarketSlide 9 of 61
  • 10. Case-Shiller: San Francisco Area v. 20-City 250.00 San Francisco 20-City Composite 200.00 150.00 100.00 50.00 0.00Slide 10 of 55
  • 11. Case-Shiller – By the Numbers San Francisco Area Up 3% year-over-year Peak was May 2006 Down 36% from peak Currently at April 2010 prices 20-City Composite Up .5% year-over-year Peak was July 2006 Down 31% from peak Currently at July 2011 pricesSlide 11 of 61
  • 12. SF August Stats for HousesSlide 12 of 61
  • 13. SF August Stats for HousesSlide 13 of 61
  • 14. SF August Stats for CondosSlide 14 of 61
  • 15. SF August Stats for CondosSlide 15 of 61
  • 16. National Market Trends● Prices Soften Slightly, Still Up 3.2% Year Over Year● Inventory Down 28.1% Year Over Year ► California still falling faster than everywhere else. ► Fewer bank-owned listings for sale, and fewer conventional sales on the market. ► Homeowners can’t afford to sell with prices at or near a five-year low in most markets. ► Stabilizing home prices and low interest rates have slowed foreclosures.Slide 16 of 61
  • 17. National Market Trends ● One in Four Listings Is Under Contract in Less than 14 Days ► Over a quarter (27.8%) of all single-family houses that debuted in the first 3.5 weeks of July were off the market in under two weeks.Slide 17 of 61
  • 18. Multiple Offer Situations This occurs when inventory is down and buyer interest is up 5 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 limitsSlide 18 of 61
  • 19. Short Sales and Bank OwnedSlide 19 of 61
  • 20. 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 20 of 61
  • 21. 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 21 of 61
  • 22. TouringSlide 22 of 61
  • 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 61
  • 25. 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 ReservesSlide 25 of 61
  • 26. Show Stable EmploymentSalaried Employee o W2’s are historic o Most recent paystubs o Salaryincreases count immediatelySelf-Employed o Two Year History (Tax Years) o Same line of work (strategic)Hourly Wage Earner o Consistent hours over 1-2 year periodSlide 26 of 61
  • 27. Organize Your Assets Lenders Will Require 2 Months of Statements ●Liquid ► Do not move money around—hard to paper trail ●Retirement Accounts ► Consider a 401k Loan ●Gift Funds ► Family members onlySlide 27 of 61
  • 28. Review Your Debt | Credit HistoryKnow Current Credit Score Know Your Debt Tolerance●Mycreditreport.com: pay to get ●Cost of rentingyour score; no affect on scores ●Tax benefits of home ownership●Use your mortgage lender’s report;limit multiple checks ●Budget considerationsFix Errors Lender Tolerance May Be●Remove duplicates Different●Resolve disputes ●45% DTI, Fannie Mae●Reduce credit card debt (33%) ●43% DTI, Jumbo●Do not open, close, or change ●50% DTI, FHAcredit lines●Do not make large purchasesSlide 28 of 61
  • 29. Pre-approval ScenariooEarns $6,500/month $400,000 LoanoHas car payment $300 o30/Yr Fixed, 3.75%oWants to buy a home for = $1,852$500,000 oProperty TaxesoHas 20% down payment o1.41% on purchase price o $6,500 x 45% = $2,925 = $588 ($7,050/yr) o $2,925 – 300 (other oHomeowners Insurance debt) = $100 ($1,200/yr) oTotal: $1852+588+100= Allowed $2,625/Month! = Qualified $2,540/Month!Slide 29 of 61
  • 30. Choose a Lender Pre-Approval Letter is Critical ●Part of the offer ●Sellers want accountability, Local lenders preferred Using Referrals to find your lender ●From Redfin’s partner lenders ●From friends who recently financed a home ●From Realtor Research Your Lender ●Check Yelp, Berkeley Parents Network, Google ●Schedule a meeting by phone or in personSlide 30 of 61
  • 31. Understand Your CostsGet a Good Faith Estimate o Itemized List of Fees: o Lender: Appraisal, Credit, Processing, Underwriting, Points o Escrow: Title Insurance, Documents, Notary Public o Government: Recording fee, Transfer Tax o Prepaid Items: Mortgage Interest, Homeowner’s insurance, impounds Good news! Loan payments are made in arrears, so your first loan payment will not be for almost two months!Slide 31 of 61
  • 32. Local Recommended Lenders *In no way does Redfin benefit financially from recommending lenders – we just think they’re great lenders!Slide 32 of 61
  • 33. Where Are Rates Headed? Type of Loan October 4, 2012 September 27, 2012 30-Year Fixed 3.36% 3.40% 15-Year Fixed 2.69% 2.73% 5/1 ARM 2.72% 2.71% 1-Year ARM 2.57% 2.60%Slide 33 of 61
  • 34. Where Are Rates Headed?Slide 34 of 61
  • 35. Break!Slide 35 of 61
  • 36. Putting it all together to findYOUR homeSlide 36 of 61
  • 37. 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 homesSlide 37 of 61
  • 38. Agent NotesSlide 38 of 61
  • 39. Choosing the Right AgentSlide 39 of 61
  • 40. Traditional vs. RedfinSlide 40 of 61
  • 41. 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? ● How are you paid? ● Can I see some reviews of your work?Slide 41 of 61
  • 42. Home Inspection and Other Contingencies NameSlide 42 of 61
  • 43. 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 inspectionsSlide 43 of 61
  • 44. Other Contingencies ● Appraisal – Performed in conjunction with financing ● Financing ● Termite ● OtherSlide 44 of 61
  • 45. Closing – what you need to knowSlide 45 of 61
  • 46. Closing: HUD–1 Settlement HUD-1 Settlement Statement – Lists all fees/charges/credits By 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 taxesSlide 46 of 61
  • 47. Closing Day ● You’ll have a final walk-through on closing ● Closing typically takes 1 hour day or just before ● Get keys and take possession! ● What to bring: ► Government issued photo ID ► Certified checkSlide 47 of 61
  • 48. 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 48 of 61
  • 49. Thanks for Coming! Please fill out the survey that was handed out at the beginning of class. We appreciate the feedback! Check out our upcoming classes and events at http://www.redfin.com/buy-a-home/classes-and-eventsSlide 49 of 61
  • 50. AppendixSlide 50 of 61
  • 51. Appendix ● Important forms/contracts ● Favorite Real Estate ResourcesSlide 51 of 61
  • 52. Some Of Our Favorite Sites ● Curbed Seattle: cool houses ● WalkScore: see what’s nearbySlide 52 of 61
  • 53. HUD Settlement Statement
  • 54. 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
  • 55. 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
  • 56. 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
  • 57. 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
  • 58. 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
  • 59. 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