Redfin Free Multiple Offer Class - Seattle, WA

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  • http://www.ocregister.com/articles/housing-347343-boom-market.html
    3.98% with 0.7 points as of 4/5 Freddie Mac survey
    3. http://www.cnbc.com/id/46892030
    4. http://www.foreclosureradar.com/california/orange-county-foreclosures
  • http://www.usatoday.com/money/economy/housing/story/2012-04-03/us-homes-lure-chinese-buyers
    http://articles.businessinsider.com/2012-03-07/tech/31130843_1_facebook-employees-palo-alto-redfin
    http://www.foreclosureradar.com/california/san-mateo-county-foreclosures
  • [REQUIRED]
  • We’ll stick around…

Transcript

  • 1. How To Win In Multiple Offer Situations Presented by: Redfin Cap Hill Date: June 4, 2014 Host: Allie Howard Follow: Twitter.com/@Redfin Like: facebook.com/Redfin
  • 2. Agenda  A little about Redfin  Why All the Multiple Offers?  Preparing to Buy  Starting an Offer  Writing a Winning Offer  Price  Financing  Contingencies  Earnest Money  Personal Touch  How Redfin Helps
  • 3. Working with Redfin
  • 4. 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 ● Right home for the right price  No obligation  Commission credit
  • 5. The Redfin Refund You buy and pay for your dream home. The 6% sales commission is split. The Listing Agent gets 3% commission. Your Buyers’ Agent gets 3% commission. You save with Redfin. Redfin keeps a portion as our fee.
  • 6. Partners in the Process AGENT Responsible for your success Writes your offer Handles negotiations ASSOCIATE AGENT Takes you to see homes Sees 50+ homes a week TOUR COORDINATOR Schedules tours Prepares paperwork TRANSACTION COORDINATOR Prepares paperwork Works with escrow
  • 7. Why All The Multiple Offers?
  • 8. Why all the Multiple Offers? What’s driving the sudden demand for homes? ► In Seattle # homes for sale = 11,026  Up only 0.4% year over year ► In Seattle median sale price rose 8.2% year over year to $357,000 ► 44.1% of listing are under contract within 14 days in March 2014 ► Average of 23 days on the market before pending ► Seattle – 62.1% offers in March faced competition, down from 71.9% in March 2013. ► 41.9% of offers are over asking in March 2014 ► Seattle Winning Offers  14% were all cash  37.2% had a cover letter  11.6% waived financing
  • 9. 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
  • 10. 5 Tips for Winning a Bidding War 1. Make the competition eat your dust – sign up a redfin listing alert! 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 limits
  • 11. Never Miss a Home
  • 12. Get Ready! Obtain a Pre-Approval Letter Your 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
  • 13. 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  What are the sellers’ motivations?  Will they need to remain at the property after closing?  Do they need a quick sale?  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
  • 14. 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
  • 15. Get Ready! Documentation Having your finances and other required documents in order prior to making an offer can accelerate the process. Here’s what we’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)
  • 16. Writing a Winning Offer Offer 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
  • 17. Writing a Winning Offer Highest & Best In 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
  • 18. Writing a Winning Offer TERMS - 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 5 to 10 days  Financing Contingency - Typically 14 to 21 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?
  • 19. Escalation Clauses ● Allows you to bid up price in incremental amounts ● Shows your top bidding price ● Seller must show proof of competing offer that dove the price up ● Why larger incremental amounts can be a powerful term ● Shows appraisers that multiple buyers were bidding for house and inspires confidence during the appraisal process
  • 20. Pre-Commitment Letter
  • 21. Financing ● Cash ► Cash offers can close in just a few days as there is no loan approval process. ► Strongest of all financing options ● Conventional ► 20% or more = very strong down payment ► 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
  • 22. Writing a Winning Offer Financing (continued)… Making the seller comfortable with your ability to purchase their property 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
  • 23. Writing a Winning Offer Use a Redfin Preferred Lender *In no way does Redfin benefit financially from recommending lenders – we just think they’re great lenders!
  • 24. Writing a Winning Offer Closing & Possession Closing - Chat with your lender and see how quick they can close. Flexibility with closing can make a huge difference Take Possession At 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
  • 25. Writing a Winning Offer Personal Touch Including a short letter to the seller and a picture may help the seller 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
  • 26. Inspections: To Waive or Not To? ● Pre-Inspection ►Out $300 - $600 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? Health and Safety ● Waived Inspection ►Poses higher risk if offering on vintage ome ►Waiving contingencies is not advisable but buyers are doing it.
  • 27. Earnest Money ● Deposited after offer acceptance at beginning of escrow ● A higher EMD shows you are serious buyers and could make the sellers consider your offer more ● To be submitted to escrow within 2 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 ● A higher deposit makes for a stronger offer ● Go BIG and put down 5% with the offer!
  • 28. Closing & Possession ● Chat with your lender and see how quick they can close. Flexibility with closing can make a huge difference ● Take Possession ● At 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, rental agreement contract
  • 29. How Redfin Helps ● Redfin agents close more deals than an average agent, we know the market and how to get the job done. We are advocates for our clients ● 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) ● Team structure allows agent to focus on writing your offer
  • 30. Thanks for Coming! Questions? Get in touch: Allie Howard – allie.howard@redfin.com Check out our upcoming classes: http://www.redfin.com/events