South Los Angeles Home Buying Class - June 13, 2012
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South Los Angeles Home Buying Class - June 13, 2012 Presentation Transcript

  • 1. Redfin’s Home Buying Class June 13, 2012 Southern Los Angeles Follow: @RedfinLosAngeles Like: http://www.facebook.com/RedfinLosAngelesSlide 1 of 55
  • 2. Agenda ● To buy or not to buy ● Redfin as a tool ● Choosing an agent ● Touring ● Market conditions ● Break! ● Mortgages ● Short sales & foreclosures ● The offer processSlide 2 of 55
  • 3. To Buy or Not to BuySlide 3 of 55
  • 4. 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 paymentSlide 4 of 55
  • 5. 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 securitySlide 5 of 55
  • 6. Redfin as a Tool in Your SearchSlide 6 of 55
  • 7. Searching on Redfin Find open Redfin’s houses Forums Exclude short Search sales recent sales Download to ExcelSlide 7 of 55
  • 8. Home Details Page ` History of the property Add to Different Favorites map views Local school info Neighborhood Mortgage area pricing CalculatorSlide 8 of 55
  • 9. Benefits of a MLS Powered Site ● 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 9 of 55
  • 10. Highlights of Redfin’s Site ● Search by zip code or neighborhood ● Saved searches/instant alerts ● Agent notes ● Download results ● Price your home ● Agent scouting report ● Forums ● Home buying guide ● Home inspection guideSlide 10 of 55
  • 11. After your offer is accepted Important milestone tracker Your to do list Your team of agentsSlide 11 of 55
  • 12. What Happens After You Find a Home?Slide 12 of 55
  • 13. 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?Slide 13 of 55
  • 14. Make Sure She’s a Good Fit Click here when you decide See all deals & reviewsSlide 14 of 55
  • 15. Partners in the Process AGENT TOUR Responsible for your success COORDINATOR Writes your offer Schedules tours Handles negotiations Prepares paperwork TRANSACTION FIELD AGENT COORDINATOR Takes you to see homes Prepares paperwork Sees 50+ homes a week Works with escrowSlide 15 of 55
  • 16. 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 16 of 55
  • 17. Open Book ● Redfin Certified Providers ● Every professional is reviewed and all reviews are shown ● Search for local: ► Inspectors ► Lenders ► Title CompaniesSlide 17 of 55
  • 18. We Sell Homes, Too! ● More people see your home ► Premium placement on Redfin.com ► Mobile apps target on-the-go buyers ► Professional flyers ● You’ll know it all at every step ► Email all buyers who see your home ► See how many people have viewed your home ► Advise you at every step in the processSlide 18 of 55
  • 19. TouringSlide 19 of 55
  • 20. Now You are Ready to Tour ● 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 20 of 55
  • 21. Making the Most of Your Tour 1. Bring a camera, notebook & 8. Check for hardwood floors tape measure 9. Peek into the attic 2. See how much sunlight the 10. Bring a marble or two place gets 11. When sharing a wall, make 3. Check the bathrooms for rot & sure it’s thick mold 12. Ignore the appliances and 4. Look for wavy or discolored carpets wood siding on exterior 13. Check the closets 5. Make sure water spouts drain 14. Get the disclosure packet away from house 15. Compare the property’s tax 6. Take stock of storage space records to the listing details 7. Turn off any music playing in houseSlide 21 of 55
  • 22. Market ConditionsSlide 22 of 55
  • 23. 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 23 of 55
  • 24. Case-Shiller – By the Numbers Los Angeles Area Down 5.2% year-over-year Peak was September 2006 Down 40.8% from peak Currently at August 2003 prices 20-City Composite Down 4.5% year-over-year Peak was July 2006 Down 31.6% from peak Currently at February 2003 pricesSlide 24 of 55
  • 25. Cerritos May Stats for HousesSlide 25 of 55
  • 26. Long Beach May Stats for HousesSlide 26 of 55
  • 27. National Market Trends ● The Bottom? ► According to Redfin’s data of 17 urban cities, April 2011 to April 2012 home prices increased 4% ► First year over year gain we’ve seen in a long time ● Interest rates are driving demand ● The Redfin Real Time Price Tracker shows an annual price gain of 2.2% and a monthly gain of 2.7% from April 2012 ● Inventory levels were down 23.5% compared to last year, and down 1.7% compared to April 2012 ● Sales volume up 7.4% over this time last year, and pending sales were up even more, by 10.7%.Slide 27 of 55
  • 28. Where is the Local Market Headed? ● Supply of homes is at a five-year low and won’t increase the rest of the year ● Rents have been rising, making buying more attractive) ● Market stabilizing, though likely 2-3 years before significant appreciation ● Rate increases - biggest issue for buyersSlide 28 of 55
  • 29. 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 29 of 55
  • 30. Break!Slide 30 of 55
  • 31. MortgagesSlide 31 of 55
  • 32. 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 32 of 55
  • 33. 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 ● 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 33 of 55
  • 34. Start Shopping for Lenders Compile a list of 3-4 lenders & brokers Good sources include: ● Redfins partner lenders ● Referrals from friends, family & co-workers ● Your real estate agent ● Online review sites, such as Yelp ● Local chains and offices *Know your lenderSlide 34 of 55
  • 35. Local Recommended Lenders *In no way does Redfin benefit financially from recommending lenders – we just think they’re great lenders!Slide 35 of 55
  • 36. 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 36 of 55
  • 37. 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 37 of 55
  • 38. Current Average Rates Type of Loan June 7, 2012 May 31, 2012 30-Year Fixed 3.67% 3.75% 15-Year Fixed 2.94% 2.97% 5/1 ARM 2.84% 2.84% 1-Year ARM 2.79% 2.75%Slide 38 of 55
  • 39. Where Are Rates Headed?Slide 39 of 55
  • 40. 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 40 of 55
  • 41. Short-Sales & Bank OwnedSlide 41 of 55
  • 42. 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 42 of 55
  • 43. 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 43 of 55
  • 44. Understanding the Offer ProcessSlide 44 of 55
  • 45. Sequence of a Purchase ● Your agent: ► Researches seller & listing agent ► Prepares a comparative market analysis and discusses ► Writes up your offer ► Submits offer ► Negotiates on your behalf ● Mutual Acceptance ► Earnest money (within 3 days) ► Inspection contingency (10-17 days) ► Title review (17 Days) ► Financing contingency (17 days) ► Appraisal ► Waiting for loan approval ► ClosingSlide 45 of 55
  • 46. Closing: The Escrow/Title Company ● The Escrow Company: ► Prepares the final documents, including the HUD-1 ► Makes sure all the paperwork is in line ► Conducts the closing ► Makes sure everyone gets paid ● The Title Company ► Examines and clears the title to the property ► Records the deed, mortgage and any other recordable instruments ► Issues title insurance to the lender and the buyerSlide 46 of 55
  • 47. Closing: Title Insurance ● Title insurance guarantees that the property is clear and marketable ● 2 types of title insurance policies ► Limited (Standard) Protection against pre-closing defects in title ► Enhanced (Eagle) Costs 20% more than Standard policy Covers post closing fraud, forgery, identity theft Increases with value of the property up to 150% of original price Includes coverage for: mechanic’s liens, invalid permits, forced removal of structure, unrecorded easements, unrecorded leases,Slide 47 of 55
  • 48. Closing: What you need to know ● What to bring: ► Government issued photo ID (sometimes 2) ► Certified check (may need to pre-wire funds) ● Closing typically takes 1 hour ● Get keys and take possession after deed in recorded ● Receive Redfin refund ● Complete Redfin SurveySlide 48 of 55
  • 49. Closing: HUD–1 Settlement HUD-1 Settlement Statement – Lists all fees/charges/credits ● 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 49 of 55
  • 50. Sample HUD ● A form that your lender is required to provide to you one day before closing. It lists the final closing costs and fees for your loan. ● By law, the final costs listed on your HUD-1 must be within 10% of the estimates provided on your Good Faith Estimate (GFE).Slide 50 of 55
  • 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 ● Get pre-approved & look for a lender ● Start seeing homes ● Make an offer & close the dealSlide 51 of 55
  • 52. 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 52 of 55
  • 53. Check out our local pages!Slide 53 of 55
  • 54. Our next class! Short Sale and REO Class June 28, 2012 6:30 – 8:00pm Cerritos, CAhttp://www.redfin.com/buy-a-home/classes-and-eventsSlide 54 of 55
  • 55. 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 55 of 55
  • 56. AppendixSlide 56 of 55
  • 57. Appendix ● Important forms/contracts ● Favorite Real Estate ResourcesSlide 57 of 55
  • 58. HUD Settlement Statement
  • 59. 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
  • 60. 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
  • 61. 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
  • 62. 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
  • 63. 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
  • 64. 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