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Redfin Home Buying Class - Fountain Valley, CA


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Redfin Home Buying Class - Fountain Valley, CA

  1. 1. Redfin Home Buying Class Redfin’s North Coastal Orange County Team July 29, 2014 – Fountain Valley, CA Host: Rob Brandon @Redfin
  2. 2. Agenda ● Overview of the process ● Are you ready to buy? ● Understanding the market ● Never miss a home ● Choosing an agent ● Touring ● Mortgages ● Break! ● Short sales & foreclosures ● Making an offer ● Acceptance to closing
  3. 3. A Little Bit About Who We Are Redfin is a full service 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
  4. 4. Understanding the Buying Process
  5. 5. Are You Ready to Buy? ● Do you have a family and need room to grow? ● Do you expect to own the home for 5 or more years? ● Have you saved up a down payment? ● Can you rent for less?
  6. 6. Overview of a Purchase Research Neighborhoods Real Estate Agents Mortgage Options Preapproval Consider your needs Search Define Preferences Saved Search Home Tours Open Houses Offer Comparables Draft Offer Docs Negotiate Mutual Acceptance Closing Earnest Money Inspection Loan application Title Review Appraisal Financing Approval Closing
  7. 7. Understanding the Market
  8. 8. Current Market: Low Inventory
  9. 9. Current Market: Rising Prices
  10. 10. Fountain Valley Overview
  11. 11. Never Miss A Home
  12. 12. Real Estate Sites: What to Look For ● Has all the homes for sale ● Updated every 15 minutes ● Real-time sales data ● Insights from agents ● Lots of data ● Mobile apps
  13. 13. Never Miss a Home
  14. 14. Redfin On the Go. Mobile Apps ● See every new home, just minutes after it's listed while away from your computer with your smart phone or tablet.
  15. 15. Choosing the Right Agent
  16. 16. What to Ask Any Agent ● Is this your full-time job? ● Where were your last five deals? ● Who else will be working with me? ● When am I committed to working with you? ● Has a client ever filed a compliant? ● How are you paid? ● Can I see some reviews of your work?
  17. 17. Redfin Agent Reviews
  18. 18. Seeing Homes in Person
  19. 19. Making the Most of Your Tour 1. Bring a camera, notebook & tape measure 2. See how much sunlight the place gets 3. Check the bathrooms for rot & mold 4. Look for wavy or discolored wood siding 5. Make sure water spouts drain away from house 6. Take stock of storage space 7. Turn off any music playing in house 8. Check for hardwood floors 9. Peek into the attic 10. Bring a marble or two 11. When sharing a wall, make sure it’s thick 12. Ignore the appliances and carpets 13. Check the closets 14. Get the disclosure packet 15. Compare the property’s tax records to the listing details
  20. 20. Slide 20 of 55 How Touring with Redfin Works ● Up to six homes per tour in two hour blocks ● Go on as many tours as you need, we just ask for your pre-approval or proof of funds prior to the 3rd tour. ● Led by agent or associate agent ● No obligation
  21. 21. Mortgages
  22. 22. Local Recommended Lenders In no way does Redfin benefit financially from recommending lenders – we just think they’re great lenders!
  23. 23. Review Your Financial Situation ● Pull credit report, look for errors. Earlier the better ● Establish comfort level for monthly payment ● Figure out how much monthly income goes towards debt: 45% Max Conv, 56.9% Max FHA 43% Max Jumbo, 41% VA ● 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 status
  24. 24. Get Pre-Approved Early A pre-approval letter is a letter from a bank or a lender estimating how much they'll lend you (May vary from what you want to pay monthly) ● Establishes what you can afford & makes offer process go faster ● Redfin asks that you get pre-approved before your third tour ● Good for 90 days, depending on lender (Credit reports are good for 90 days) Info needed: ● W-2’s, 2 years tax returns (with all schedules, K-1’s etc) 1 month of pay-stubs, asset statements (Show all funds used to close loan) Drivers License, If you own a home or homes, need mortgage, tax, and insurance information
  25. 25. Pulling Credit: Is it harmful? ● Your credit report must be reviewed by a lender before you can obtain a pre-approval ● If you know your score, a lender should be able to give you ballpark pricing for their loan products ● Don’t allow lots of lenders to pull your credit score repeatedly ● Pull a free credit report. One of the best is
  26. 26. Non Traditional Loan Programs!!! If you are self employed or have a unique income situation, ask your lender about special programs that can help you qualify. At Banc of California – Banc Home Loans we offer loans that turn bank deposits into income for qualifying purposes. We also offer stated income loans to people with high net worth. 30% down and assets of 1MM in reserves. Loans up to 3.5MM Lastly offer loans to people that Short Sold or Foreclosed 1 day after the event, provided they have 20% down and a 660 credit score. For people that tried to work with bank and didn’t have a hardship but needed out. REX program for Equity Sharing
  27. 27. Start Shopping for Lenders YOU will want to see that they have a competitive rate. Although the rate and terms are important, finding a lender who will communicate with you and answer all your questions and make you comfortable with things is invaluable. They also need to have the ability to close your loan in 15-20 days. (Why?) Lender should be willing to answer calls at night and on weekend, and even talk about your qualifications directly with the listing agent to complement the cover letter to set you apart. YOUR REALTOR will want to see that they are trustworthy, communicate well, and can close your loan on time or early. It is these qualities that will allow your agent to sell your ability to close to the listing agent. Good sources include: Redfin's partner lenders Your real estate agent Banks or credit unions you have accounts with Online review sites, such as Redfin and Zillow BEWARE OF OUT OF STATE LENDERS!!! (Based on accountability factors that make listing agents nervous)
  28. 28. Break! Rob Brandon North Orange County Denise Merhoff North Orange County Courtney Rice North Orange County
  29. 29. 10-Minute Break ● Feel free to come ask us questions! 10 mins 5 mins End Let’s Get Started!
  30. 30. How those “priced out” of the market can get “priced back” in.
  31. 31. Median Sold Price: From $471,000 in 2013 Up 13% to $542,000 in 2014
  32. 32. Median Rent for 3br – now $2,650
  33. 33. 2013-2014 Mortgage Rates April 2013 – 3.375% April 2014 – 4.270%
  34. 34. Comparing 2013-2014 Average Price and Average mortgage rate with 20% down: 2013 2014 Price: $471,000 $542,000 Cash Down Payment: $94,200 $108,400 + $14,200 30 Yr. Fixed Rate 3.375% 4.250% Principal and Interest: $1,665.82 $2,133.05 Taxes (1.25%) $490.62 $564.58 Insurance (.2%) $78.50 $90.33 Total: $2,234.94 $2,787.97 + $553.03
  35. 35. Three problems to solve: ● How do you overcome a $14,200 cash gap? ● How do you lower your payment by $553? ● How can you beat investors to lower priced homes?
  36. 36. Cash solutions: ● Get a small Second Loan (HELOC / HELOAN) ► A $25,000 second loan at 5.25% is $138 per month ● Borrow against a secured asset (401k, IRA) ► Most 401k loans will run $70 per pay check per $25,000 borrowed. ● Gifted Funds. ● Raise the rate by .25-.50% to reduce cash to close. ► .25 in rate is $63.94 per month. ► $14,200 cash / $63.94 per month breaks even in 222 payments.
  37. 37. Payment solutions: ● ARM loans 5/7/10 year ARM’s aren’t the same programs as before. ● Points 1-2 points paid on fixed or ARM loans can make a big difference. ● Government programs State of California or County of Orange MCC.
  38. 38. ARM loans ● 1980-2005 ARM Caps – 0 to 10% ● 2014 ARM Caps – 2% to 5% ● Stable ARM indexes relative to 1980’s 1980 - 1990 Avg. Prime Rate - 14% 2004 – 2014 Avg. Prime Rate – 5%
  39. 39. Government Programs ● County of Orange MCC • Must be a first time home buyer An MCC is a tax credit of 20% of your annual interest paid. $400,000 at 4.00% is $16,000 interest paid per year. $16,000 x .20 is a tax credit of $3,200. • Depending on your tax advisors suggestion, you could change your annual withholding basis and receive a higher take home pay that will be offset by the tax credit. • As of 4/15/14, the County of Orange’s MCC has been fully funded. Additional funds are expected to be allocated shortly.
  40. 40. Beating the investor: 203(k) financing ● Depending on the type of investor, they look for two things: ► Rental purchase investor: Cash flow. At current prices, few properties cash flow, but those that do aren’t in the best of shape. ► Flip purchase investor: Return on investment. Most flippers need a 15-20% ROI. The properties that produce that kind of return tend to be neglected. The common key: Both buyer profiles look past the current property condition. Try to view overlooked homes in the same way in order to buy within the range you can afford.
  41. 41. Example Properties: Mission Viejo: $469, 000 •$80,000 budget for repairs. •10% Down Payment – can be less! •$494,100 at 4.50% PITI + MMI: $3,698 •Post repair value: $615,000 •Post repair refinance payment: •$492,000 at 4.00% PITI: $3,092 Investment: $47,000-$55,000
  42. 42. Short Sales and Bank Owned
  43. 43. What is a Short Sale? The owner owes more on the mortgage than the home is worth or will sell for ● Usually pre-foreclosure, but not always (divorce, hardship) ● Listed for less than what’s owed to the bank ● Requires 1 - 2 banks’ approval, sometimes more (usually 2) ● May have other liens (taxes, utilities, HOA, mechanics) 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(REO)? ● 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 ►Earnest money deposit usually held by listing agent
  45. 45. Making an Offer
  46. 46. Crafting Your Offer ● Evaluate – your agent will provide you with information about market conditions and recent sales in the area ● Consider the situation – the seller’s preferences, days on the market, and other interest will influence the process. ● Decide on price & strategy with your agent ● Common contingencies & terms: ►Earnest Money ►Inspection ►Financing ►Appraisal ►Title Review
  47. 47. Tips for Winning a Bidding War 1. Just win, baby! Simply have the best offer. ► Cash is King ► Escalate your price? ► Tighten your timelines ► Remove some contingencies? 2. Get pre-approved with a local lender 3. What’s important to the seller? 4. Write a letter & appeal to the seller ►Try and make a personal connection
  48. 48. ESCROW
  49. 49. Your Offer has been Accepted! ● Earnest money deposit – usually 1-3%+ ● Inspection – approximately $500 ● Other Inspections – sewer scope, roof, electrical, geological etc. ● Loan Application – 5 days or less ● Review Title ● Order Appraisal – approximately $500 ● Loan Approval – remove contingencies! ● Escrow – appointment to sign loan documents ● Walk through/ Verification of Property ● Loan funds, title records, escrow closes ● Receive your keys!
  50. 50. Home Inspection We recommend that you have a home inspection ● Cost runs $350 to $1,200 depending upon the home’s size ● Your agent will accompany you ● Your time to evaluate the property, bring notepad, ask questions. Get to know the property and know what your buying Let’s talk about: ● What an inspection contingency covers and doesn’t cover ● Types of inspections
  51. 51. What are Contingencies? Standard timeline for contingencies in local market: 17 days ● Inspection ● Appraisal – Performed in conjunction with financing ● Financing ● Disclosures
  52. 52. What is Escrow? Escrow is a neutral third party intermediary that represents neither the buyer nor the seller. What do they do? • Hold the earnest money • Arrange for payoff of any liens (seller’s mortgage, utilities, etc.) • Coordinate the signing appointments for all parties • Receive and disburse funds for closing • Arrange to notify county offices to change ownership
  53. 53. Walk Through to Closing Walk through/Verification of Property: 2-5 days prior to close date. Not a contingency in the contract. Escrow: sign loan documents, transfer funds for your down payment and closing costs. Lender: Reviews your documents, sets up loan to fund Title: Title records the day after funding in LA County. In Orange County title can record on the same day as funding. Give you Keys!!!
  54. 54. So What Now? ● Make sure it’s the right time for you ● Check out our Home Buying Guide ● Find the right agent ● Look for a local lender and get pre-approved ● Start seeing homes in person ● Make an offer & close the deal
  55. 55. Future Events!
  56. 56. All Done!
  57. 57. Thanks for Coming! Questions? Get in touch: Rob Brandon Check out our upcoming classes: