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Emeryville Home Buying Class - March 22, 2012


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Emeryville Home Buying Class - March 22, 2012

  1. 1. Redfin’s Home Buying ClassMarch 22, 2012 Emeryville, CA
  2. 2. AgendaConsidering…● To buy or not to buy● Market conditions● Searching for a homeLooking…● Finding a real estate agent● Working with RedfinBreak!Buying…● Mortgages● The offer and the deal● Short sales and bank owned
  3. 3. A Little Bit About Who We AreRedfin is a real estate brokerage that has helped over 20,000people 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 your commission
  4. 4. To Buy or Not to Buy
  5. 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 want a home that is difficult to rent● You’re handy & and ready to invest● You’ve saved up a down payment
  6. 6. 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 security
  7. 7. Market Conditions
  8. 8. Case-Shiller: San Francisco Area v. 20-City 250.00 San Francisco 20-City Composite 200.00 150.00 100.00 50.00 0.00
  9. 9. Oakland Feb. Stats for Houses
  10. 10. Stories from the Field 1027 Winsor Ave.Background: Oakland CA• 4BR/2BA listed at $709,000• Equity Sale, $13K pest• 8 offers after 2 weeksResult:• Our buyer offered $765,000• Negotiated $5K credit• Closed in 24 days
  11. 11. Where is the Market Headed?● Supply of homes is at a five-year low and won’t increase the rest of the year● Foreclosures have been driving price declines, likely years of inventory remain● Rents have been rising, making buying more attractive● Market stabilizing, though likely 2-3 years before significant appreciation● Rate increases - biggest issue for buyers
  12. 12. National Market Trends● New construction inventory low, sales rising and confidence rising too.● Pending home sales hit a 19-month high.● Actual closed home sales increased 4%.● The number of homes on the market declined 18% over the past year.● Foreclosure sales fell to a four-year low.● Prices will remain stable in 2012.
  13. 13. Searching for a Home
  14. 14. Overview •Search homes online & tour •Get pre-approved •Find a dream homeFinding •Consult with agent, write offerYour Home •Submit offer to listing agent •Negotiations •Success! •Earnest money •Inspection contingency Mutual •Title review Acceptance •Financing contingency •Waiting for loan approval •Escrow signing appointment •Get keys and take possession! Closing •Receive Redfin refund •Complete Redfin Survey
  15. 15. 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 homes
  16. 16. Live Demo of Redfin’s Site
  17. 17. Finding an Agent
  18. 18. 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?
  19. 19. Traditional vs. Redfin
  20. 20. Make Sure He’s a Good Fit Click here when you decide See all deals & reviews
  21. 21. Working with Redfin
  22. 22. How Our Team Works AGENT COORDINATOR Responsible for your success Schedules tours Writes your offer Prepares paperwork Handles negotiations Works with escrow COORDINATOR FIELD AGENT Schedules tours Takes you to see homes Prepares paperwork See 50+ homes a week Works with escrow
  23. 23. We Share Our Commission With You• We refund a part of our commission to you subject to the approval of your lender and the home seller • Applied to closing costs • Refund is tax-free
  24. 24. How-To TourWith Redfin Demo
  25. 25. 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 field agent ● No obligation
  26. 26. Break!
  27. 27. Mortgages
  28. 28. 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 ● Redfin asks that you get pre-approved before your third tour ● Similar, yet different from pre-qualification Information needed: ● W-2, two pay-stubs, tax returns, bank statements
  29. 29. Organize Your Assets● Get ready for the down payment● Cash accounts (liquid funds)● 401k, stocks, other investments● Gift funds? (max. allowed varies)● Move funds around early
  30. 30. Review Your Debt● Pull credit report, look for errors● 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● Co-borrower will need to do the same
  31. 31. Start Shopping for LendersCompile a list of 3-4 lenders & brokersGood sources include:● Redfins partner lenders● Referrals from friends, family & co-workers● Banks or credit unions you have accounts at● A large, national bank with an advertised rate● Your real estate agent● Online review sites, such as Yelp
  32. 32. Local Recommended Lenders *In no way does Redfin benefit financially from recommending lenders – we just think they’re great lenders!
  33. 33. Current Average RatesType of Loan March 8, 2012 March 1, 201230-Year Fixed 3.88% 3.90%15-Year Fixed 3.13% 3.17%5/1 ARM 2.81% 2.83%1-Year ARM 2.73% 2.72%
  34. 34. Where Are Rates Headed?
  35. 35. 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)
  36. 36. 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)
  37. 37. 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.
  38. 38. Making Your Offer
  39. 39. Getting The House You Want Your agent: ● Researches seller & listing agent ● Prepares a comparative market analysis and discusses ● Writes up your offer ● Submits offer ● Negotiates on your behalf
  40. 40. Tour homes Get pre-approved 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 [5-10 days] Title review [5 days]Purchase Financing contingency [20-25 days] Waiting for loan approval Escrow signing appointment Closing! Get keys and take possession! Receive Redfin refund Complete Redfin survey
  41. 41. Short-Sales & Bank Owned
  42. 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)
  43. 43. 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 refund
  44. 44. What is a Bank-Owned Property?A foreclosed home owned by a bank or lenderStandard 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 money
  45. 45. So… Where’s the Best Deal?● Sellers who own their home outright● Sellers who are relocating● Estate Sales
  46. 46. 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 deal
  47. 47. Appendix
  48. 48. Appendix● Important forms/contracts● Favorite Real Estate Resources
  49. 49. HUD Settlement Statement
  50. 50. 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
  51. 51. 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
  52. 52. 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
  53. 53. 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
  54. 54. 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
  55. 55. 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