San jose multiple offer market trends class 2.21.13
Market Trends &How To Win In MultipleOffer SituationsSan Jose, CAFebruary 21, 2012Follow: @RedfinSanFranciscoLike: http://www.facebook.com/RedfinFrancisco
Agenda● A little bit about Redfin● Case Shiller● Listing inventory● Monthly supply● All cash deals● Multiple offers● Preparing to buy● Starting an offer● Writing a winning offer● How Redfin helps
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
National Market TrendsMultiple 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 more
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 row
Yesterday’s priceswere a historic joke....and not a very funny one.
Case-Shiller: San Francisco Area v. 20-City 250.00 20 City Composite San Francisco 200.00 150.00 100.00 50.00 0.00Slide 7 of 53
Case-Shiller – By the NumbersCase-Shiller: San Francisco Area Up 12.7% year-over-year Peak was May 2006 Down 33.1% from peak Currently at June 2003 pricesCase-Shiller: 20-City Composite Up 5.5% year-over-year Peak was July 2006 Down 29.4% from peak Currently at September 2003 prices
Today’s Market:Great for Sellers...if you can afford to sell.
Total Listing Inventory in December: 2007-2012Home Sales San Mateo County San Francisco County Santa Clara County14,00012,00010,000 8,000 6,000 4,000 3,224 2,754 2,000 2,143 0 2007 2008 2009 2010 2011 2012
Homes Sold in December: 2008-2012New Listings San Mateo County San Francisco County Santa Clara County1,8001,6001,4001,200 1,1091,000 1,012 800 700 600 400 200 0 2007 2008 2009 2010 2011 2012
New Listings in December: 2007-2012Inventory San Mateo County San Francisco County Santa Clara County1,2001,000 843 800 676 670 600 400 200 0 2007 2008 2009 2010 2011 2012
Supply of InventoryMonths of Supply 18 16 14 12 10 Months 8 6 4 2 0 2011 2012
Multiple Offers of homes sold in 2012 in San Mateo County were ALL-CASH deals
Multiple Offers of Redfin offers faced competition (November & December, San Francisco)
Why all the Multiple Offers?What’s driving the sudden demand for homes? Interest rates still at historical lows Recent IPOs “Paper millionaires” have cashed out to buy homes Foreign investors, all-cash buyers Buyers are not shying away from bidding wars LOW INVENTORYMonths of Supply – The time it would take to sell through all the homes on the market, given the current pace of sales In a balanced market, Months of Supply is between 5-6 months --- Anything less is a seller’s market In August, SFV Months of Supply was 2.0! The lowest we’ve seen since 2004 and a 56.8% drop from August of 2011
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
Get Ready!Obtain a Pre-Approval LetterYour 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
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 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
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
Get Ready!DocumentationHaving your finances and other required documents in orderprior to making an offer can accelerate the process. Here’s whatwe’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)
Writing a Winning OfferOffer 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
Writing a Winning OfferHighest & BestIn 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
Writing a Winning OfferTERMS - 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?
Inspections: To Waive or Not To? • Pre-Inspection • 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? • Waived Inspection • High Risk • Waiving contingencies is not advisable
Financing Cash Cash offers can close in just a few days as there is no 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
Writing a Winning OfferFinancing (continued)…Making the seller comfortable with your ability to purchase theirproperty 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
Writing a Winning OfferUse a Redfin Preferred Lender *In no way does Redfin benefit financially from recommending lenders – we just think they’re great lenders!
Earnest Money1-3% of purchase price is typical for this area 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 (seller can’t keep more than 5%)
Writing a Winning OfferClosing & PossessionClosing - Chat with your lender and see how quick they can close. Flexibility with closing can make a huge differenceTake PossessionAt 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
Writing a Winning OfferPersonal TouchIncluding a short letter to the seller and a picture may help theseller 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
How Redfin HelpsRedfin agents close more deals than an average agent, we knowthe market and how to get the job done. 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, electronic offer process Team structure allows agent to focus on writing your offer