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Distressed Properties - Atlanta - February 7, 2012


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Distressed Properties - Atlanta - February 7, 2012

  1. 1. Redfin’s Distressed Properties ClassWhat you need to know before looking at Foreclosures, Short Sales and Auction Properties February 7, 2012 Suwanee, GA
  2. 2. Agenda• Market and pricing statistics• What is a distressed home?• Foreclosures• Short sales• Auctions• Financing• Finding distressed homes• Negotiation strategies• Home inspections• Attorneys, title and closing
  3. 3. To Buy or Not to Buy
  4. 4. Reasons to buy or not buy?• Why would you buy a • Foreclosure? • Short sale?• Why wouldn’t you buy a • Foreclosure? • Short sale?
  5. 5. Market Conditions
  6. 6. Case-Shiller: Atlanta v. 20-City250.00 Case-Shiller: Atlanta Area Down 11.8% year-over-year Peak was July 2007200.00 Down 34.8% from peak Currently at April 1998 prices150.00100.00 Atlanta Area Case-Shiller: 20-City Composite 20-City Composite 50.00 Down 3.7% year-over-year Peak was July 2006 Down 32.9% from peak Currently at April 2003 prices 0.00 Considering… Looking… Buying…
  7. 7. Atlanta Active Inventory Foreclosure 18% Short Traditional Sale 53% 15% Other 14%Source FMLS as of 7/20/2011 for SFR in Fulton,Dekalb, Cherokee, Cobb, Forsyth, & Gwinnett
  8. 8. Atlanta Sales 2011 Traditional Other 62% 14% Foreclosure 17%Short Sale 7% Source FMLS as of 1/26/2012 for SFR in Fulton, Dekalb, Cherokee, Cobb, Forsyth, & Gwinnett, $100k+
  9. 9. Atlanta Supply by Sale Type Absorption10.0 8.0 6.0 4.0 2.0 0.0 Absorption
  10. 10. Distressed Properties
  11. 11. Atlanta-Area ForeclosuresArea Foreclosures Average Price % of HomesAtlanta 7,908 $137,252 0.26%Fulton County 9,413 $149,313 0.29%Georgia 81,215 $110,064 0.27%Nationally 1,354,459 $175,968 0.16%Considering… Looking… Buying…
  12. 12. Types of Distressed Homes• Short Sales • AKA: Pre-foreclosure • Potential vs. Approved Short Sale• Foreclosures (Post-County Foreclosure) • AKA: Bank-owned, REO, lender owned • Fannie, Freddie, Ginnie & HUD• Auctions• Estate Sales
  13. 13. Short Sales• How does a short sale work?• Parties involved (see chart)• Qualifying the short sale• Short sale approval process (see chart)• Timelines (Contingencies and Closing)• False contracts• Approval notice
  14. 14. Short Sale Parties Short Sale Bank #1 Attorney Customer Short Sale Care Departmen Litigation Center t Closer BPO Mortgage Appraiser Insurer Escrow Assistant Mortgage Negotiator Investor #1Sellers Bank #2 Mortgage Investor #2 Short Sale Listing Customer Departmen Litigation Closing Agent Care Center Buyers t Departmen t BPO Mortgage Redfin Home Buyer’s Appraiser Insurer Agent Appraiser Inspectors Lender Mortgage Negotiator Underwrite Investor #1 r Mortgage Investor Investor #2 Guidelines Closing Departmen t
  15. 15. Short Sale Approval Process
  16. 16. Short Sale Tid Bits• The rumor mill (old market)• Types of loans and liens • Get the Prelim! (and read the fine print)• 90 day non-refundable earnest• 15% Redfin Rebate on Short Sales• Questions to ask before writing an offer
  17. 17. 15 Questions to Ask the Listing Agent1.Is the property owned by and owner or investor?2.Has there been a trustee’s sale notice issued?3.How many short sales have you closed?4.Do you have the seller’s completed short sale package in your possession?5.Have you ordered the preliminary title report?6.Are there any non-mortgage liens attached to the property?7.How many loans are on the home?8.Who are the lenders/banks?9.Are any of the loans a line of credit?10.Do you have any offers?11.Have you had any previous offers?12.Have you received an acceptance letter?13.Has the broker’s price opinion (BPO) been conducted? (if yes, when)14.Have you been assigned a negotiator?15.What has motivated the sellers to do a short sale?
  18. 18. Seller’s Short Sale Shoes• Why do a short sale?• Credit hit• Emotions• House maintenance• Inspections• Moving Aid
  19. 19. Why Buy a Short Sale?• It’s the perfect home• You can wait 90-120 days minimum• If you don’t get it, you’ll be alrightOr…• You like emotional roller-coasters
  20. 20. Bank Owned Homes• Contracts• Addendums• Timelines• Home condition• Listing agents• Tenants
  21. 21. Why Buy a Bank Owned?• Best price• Not afraid of a remodel• Comfortable with contracts• Financially strong with liquid capital
  22. 22. Buying at Auction• County Auctions (steps)• Organized Auctions• Who buys homes at auction?• What types of homes are at auction?• What are the prices like?• What is involved with buying at auction?• What is an absolute auction?• Due Diligence prior to auction• Tip - Write down your Max-bid
  23. 23. Financing Tara Ryan, Envoy Mortgage
  24. 24. Financing• Pre-qualification vs pre-approval• Credit inquiries and FICO• Lender you trust • Redfin Partner Lenders
  25. 25. Financing Options• Conventional loans • 30 year, 15 year, 5/1 ARM, etc• FHA • FHA health and safety requirements • Flipping guidelines• Rehab loans (203k)• Homepath loans
  26. 26. Financing Steps• Preapproval• Select property • What is condition of property? • Flipping guidelines• When to lock in the rate • Short sale • Bank owned• Mortgage process
  27. 27. Interest Rates• Rates near all-time lows• Loans are still available, just harder to get than before• Long-term, rates must go up – but no one can say when
  28. 28. Where Are Rates Headed?
  29. 29. Searching for Distressed Homes
  30. 30. Finding Distressed Homes• Redfin • Shadow Inventory • Foreclosures (bank owned) • Short Sales• Government Sites • and •• Look down the street
  31. 31. Searching on Redfin Only Show Bank Find Owned open houses Exclude Search short foreclos sales ures Download to ExcelConsidering… Looking… Buying…
  32. 32. Add Homes to Your Favorites List Order by price, listing date, etc See your notesConsidering… Looking… Buying…
  33. 33. 30306 Foreclosures
  34. 34. Working with RedfinWorking with Redfin
  35. 35. Working With Redfin is Different Service • Advocates: client-satisfaction bonuses, not commissions • Transparency: informed decisions • Best Agents: The right home for the right price No obligation • Unlimited tours, no commitment • Pause and re-start your search any time Refund • You get up to 50% the commission The Best Results • Service: 97% would recommend us to a friendConsidering… Looking… Buying…
  36. 36. Get pre-approved Tour homes Find dream home Consult with agent, write offer Submit offer to listing agent Negotiations Success! Mutual Acceptance Earnest money [Within 3 days]Overview of a Inspection contingency [5-14 days]Purchase Title review [5 days] Financing contingency [20-28 days] Appraisal Contingency [14-21 days] Pre-closing Walk Closing! Get keys and take possession! Receive Redfin credit Complete Redfin survey
  37. 37. Find a Home to TourConsidering… Looking… Buying…
  38. 38. Schedule a Tour or Add More HomesConsidering… Looking… Buying…
  39. 39. The Offer & The Deal
  40. 40. Negotiation Considerations• How long has the property been listed?• Price reduction Strategy• Low SS list prices• Long response times• Multiple Offers• Round 2 Negotiations• Bank retains control
  41. 41. Deal Room Important milestone tracker Your to do list Your team of agents
  42. 42. How Commissions Work Example: You buy a home for $500,000 Traditional Agents Commission Seller’s Agent (3%) $15,000 Buyer’s Agent (3%) $15,000 Redfin Agents Commission Seller’s Agent (3%) $15,000 Redfin (1.5%) $7,500 Redfin Buyer (1.5%) $7,500 • Redfin refunds 50% of the buyer’s agent commission • Applied to closing costs • Remainder paid as a check within 10 days of closing • Refund is tax-free • Minimum Redfin fee: $6,000Considering… Looking… Buying…
  43. 43. Attorneys, Title and Closing• Attorney represents buyer’s lender*• Deeds – Warranty Deed vs. Special Warranty Deed• Title Search • Chain of title • Last minute liens • Title insurance • Lender’s Policy • Owner’s Policy• Closing Paperwork• Possession and keys
  44. 44. Home Inspections
  45. 45. Home Inspections• What to look for yourself• Missing components • Big ticket items (AC, cabinets, appliances) • Deliberate damage & safety (electrical)• Severe neglect• What an inspector won’t find and won’t test • Hidden defects • Untested system defects
  46. 46. Home Inspections• Most common concerns • Roof • Structural • Plumbing • Electrical • HVAC • Deferred Maintenance • Termites • Mold • Cosmetic
  47. 47. Next Steps
  48. 48. So What Now? • Make sure it’s the right time for you • Get pre-approved & look for a lender • Ask to meet with an agent • Search for homes & start touring • Make an offer & close the deal THANK YOU FOR YOUR TIME!!!Considering… Looking… Buying…
  49. 49. Thanks For Coming! Please fill out the survey we’ll send tomorrow along with the slide deck. We’d love to get your feedback on how the class could improve.To get even more info on the home buying process, check out our home buying guide:
  50. 50. Thanks for Coming!
  51. 51. 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
  52. 52. Favorite Real Estate Links: Listings • Redfin: MLS + FSBO + REO, updated every 15 minutes, with DOM, price history, Zestimate • craigslist: Major FSBO source that Redfin cant crawl • HotPads: Foreclosure heat maps • Brokerage site of listing agents: more photos of the listing • RealtyTrac: Foreclosure market detail, subscription required for full reports
  53. 53. Favorite Real Estate Links: Pricing Data • Case-Schiller Indices: Pricing trends by metropolitan area • HouseMath: Compares a housing investment to a stock market investment • 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
  54. 54. Favorite Real Estate Links: Mortgage • 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
  55. 55. 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
  56. 56. Favorite Links Cont. • Remodeling & Renovations • 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 • What to Look for in an Inspection • American Society of Home Inspectors (ASHI): Good consumer FAQ & virtual home inspection
  57. 57. Tara Ryan, Mortgage Consultant Tara Ryan Branch Manager Envoy Mortgage, LTD 678-707-8144