Oakland Berkeley HBC November 15 2012

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Oakland Berkeley HBC November 15 2012

  1. 1. Redfin’s Home Buying Class November 14th, 2012 Emeryville Follow: @Redfinbayarea Like: http://www.facebook.com/RedfinbayareaSlide 1 of 61
  2. 2. Agenda ● To buy or not to buy ● Overview of purchase process ● Understanding the Market ● Touring ● Mortgages ● Break! ● Choosing an agent ● Redfin as a tool ● Short sales & foreclosures ● What to know about closingSlide 2 of 61
  3. 3. 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 3 of 61
  4. 4. To Buy or Not to BuySlide 4 of 61
  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’re handy & and ready to invest ● You’ve saved up a down paymentSlide 5 of 61
  6. 6. Why You Shouldn’t Buy a Home ● You can’t afford the down payment ● You can rent for much less ● You plan on moving soon ● You’re worried about job securitySlide 6 of 61
  7. 7. Understanding the Buying ProcessSlide 7 of 61
  8. 8. Overview of Purchase Process ( more details to follow) ● Information – learn as much as possible about the market, the neighborhood, price trends ● Tour some houses to get a general idea ● Interview Lenders- get pre-approved ● Choose an Agent ● Tour more seriously and find your home ● Mutual Acceptance on your offer ● Home Inspection “Contingency” ● Financing and Appraisal “Contingencies” ● ClosingSlide 8 of 61
  9. 9. Understanding the MarketSlide 9 of 61
  10. 10. Case-Shiller: San Francisco Area v. 20-City 250.00 San Francisco 20-City Composite 200.00 150.00 100.00 50.00 0.00Slide 10 of 55
  11. 11. Case-Shiller – By the Numbers San Francisco Area Up 5.3% year-over-year Peak was May 2006 Down 35% from peak Currently at August 2010 prices 20-City Composite Up 2.0% year-over-year Peak was July 2006 Down 29% from peak Currently at October 2010 pricesSlide 11 of 61
  12. 12. Oakland Oct. Stats for CondosSlide 12 of 61
  13. 13. Oakland Oct. Stats for CondosSlide 13 of 61
  14. 14. National Market Trends Multiple Offers ● More than a Quarter of Listings Still Selling Fast ► For the month of September through October, 27.1% of new listings were under contract in two weeks or less. ► This measure of how competitive the market is for buyers has been holding steady for the last seven months. ► And from here on out, the inventory crunch will only get worse. With less than eight weeks before Thanksgiving, few sellers will jump into the market now, so supply will keep falling. ► Multiple offers are not only against 3 or 5 buyers, but more like 10, 20 and sometimes even 30 or more ► More on how to tackle multiple offers in a minute…Slide 14 of 61
  15. 15. National Market Trends ● The key metrics across 19 major metropolitan markets are: ► Home prices in September increased 5.4% year over year, and were down 0.8% month over month. ► The number of homes for sale declined 29.3% from September 2011 to September 2012, and by 4.3% since August. ► Home sales increased 4% from last year, and fell 17% since August—a typical seasonal decline. ► The percentage of listings that sold within 14 days of their debut held steady in September at 27%. ► Home prices in September were 5 percent higher than a year earlier.Slide 15 of 61
  16. 16. Multiple Offer SituationsSlide 16 of 61
  17. 17. 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 17 of 61
  18. 18. Pre-Approval LetterSlide 18 of 61
  19. 19. Earnest Money ● Typically 3% of offer price ● Deposited 3 business days after offer acceptance ● Applied towards your down payment & closing costs ● Could be in jeopardy if you cancel after removing contingencies ● A higher deposit makes for a stronger offer ● Go BIG and put down 5% with the offer!Slide 19 of 61
  20. 20. Personal Touch Write a heart-felt letter to seller Include a bit about you, your family, your profession Mention actual attributes of the property Send your agent a family photo to include. Won’t help with a bank owned propertySlide 20 of 61
  21. 21. Slide 21 of 61
  22. 22. Slide 22 of 61
  23. 23. What to do? ● Go see the home as soon as you can! ► First couple days on market ● Homes that are priced well, and move-in ready, may sell in days. ● Expect to be up against multiple offers (5-10+), some cash offers ● Get pre approval early onSlide 23 of 61
  24. 24. TouringSlide 24 of 61
  25. 25. Highlights of Redfin’s Site ● Search by zip code or neighborhood ● Saved searches/instant alerts ● Agent notes ● Download results ● Price your home ● Forums ● Home buying guide ● Home inspection guide ● Any questions about the site?Slide 25 of 61
  26. 26. Making the Most of Your Tour 1. Bring a camera, notebook & tape measure 8. Check for hardwood floors 2. See how much sunlight the place gets 9. Peek into the attic 3. Check the bathrooms for rot & mold 10. Bring a marble or two 4. Look for wavy or discolored wood siding 11. When sharing a wall, make sure it’s thick 5. Make sure water spouts drain away from 12. Check the closets house 13. Compare the property’s tax records to the 6. Take stock of storage space listing details 7. Turn off any music playing in houseSlide 26 of 61
  27. 27. How Touring with Redfin Works ● 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 27 of 55
  28. 28. MortgagesSlide 28 of 61
  29. 29. Getting Pre-Approved Income oSalary—Past 30 days oHourly—Consistency and history oSelf-employed—Two year average Credit Assets o 660 for FHA o Down Payment o 680 for Conventional o Closing Costs o 720 for Rate Improvement o Cash ReservesSlide 29 of 61
  30. 30. Show Stable EmploymentSalaried Employee o W2’s are historic o Most recent paystubs o Salaryincreases count immediatelySelf-Employed o Two Year History (Tax Years) o Same line of work (strategic)Hourly Wage Earner o Consistent hours over 1-2 year periodSlide 30 of 61
  31. 31. Organize Your Assets Lenders Will Require 2 Months of Statements ●Liquid ► Do not move money around—hard to paper trail ●Retirement Accounts ► Consider a 401k Loan ●Gift Funds ► Family members onlySlide 31 of 61
  32. 32. Review Your Debt | Credit HistoryKnow Current Credit Score Know Your Debt Tolerance●Mycreditreport.com: pay to get ●Cost of rentingyour score; no affect on scores ●Tax benefits of home ownership●Use your mortgage lender’s report;limit multiple checks ●Budget considerationsFix Errors Lender Tolerance May Be●Remove duplicates Different●Resolve disputes ●45% DTI, Fannie Mae●Reduce credit card debt (33%) ●43% DTI, Jumbo●Do not open, close, or change ●50% DTI, FHAcredit lines●Do not make large purchasesSlide 32 of 61
  33. 33. Pre-approval ScenariooEarns $6,500/month $400,000 LoanoHas car payment $300 o30/Yr Fixed, 3.75%oWants to buy a home for = $1,852$500,000 oProperty TaxesoHas 20% down payment o1.41% on purchase price o $6,500 x 45% = $2,925 = $588 ($7,050/yr) o $2,925 – 300 (other oHomeowners Insurance debt) = $100 ($1,200/yr) oTotal: $1852+588+100= Allowed $2,625/Month! = Qualified $2,540/Month!Slide 33 of 61
  34. 34. Choose a Lender Pre-Approval Letter is Critical ●Part of the offer ●Sellers want accountability, Local lenders preferred Using Referrals to find your lender ●From Redfin’s partner lenders ●From friends who recently financed a home ●From Realtor Research Your Lender ●Check Yelp, Berkeley Parents Network, Google ●Schedule a meeting by phone or in personSlide 34 of 61
  35. 35. Questions to Ask Any Lender ● Please describe your mortgage banking experience? ● How many transactions do you close each year and what % are purchase transactions? ● What does a "loan pre-approval“ with your bank involve? ● Do you pre-underwrite my application, subject to the property address? ● Who handles your appraisals? ● Do you know your underwriters first name? ● If I provide everything you request, how long will it generally take to get loan approval? ● Are you available on weekends or evenings if needed?Slide 35 of 61
  36. 36. Rate Shopping● Within a one hour period, call ● Then ask: your top three prospective ► What are the standard lender lenders and ask: fees for this scenario? ► What is your rate for: ► Can you close this in 30 days? $417,000 and $625,500 ● Did you close your last three Single Family Home transactions on time? Assume 780 credit ● Did the homes appraise at or Assume Owner Occupied above the purchase price? Assume 20% down ● Last ask: payment (and what if I ● What do Realtors say about have 30% down?) you? Assume no impounds No points, no lender creditsSlide 36 of 61
  37. 37. Understand Your CostsGet a Good Faith Estimate o Itemized List of Fees: o Lender: Appraisal, Credit, Processing, Underwriting, Points o Escrow: Title Insurance, Documents, Notary Public o Government: Recording fee, Transfer Tax o Prepaid Items: Mortgage Interest, Homeowner’s insurance, impounds Good news! Loan payments are made in arrears, so your first loan payment will not be for almost two months!Slide 37 of 61
  38. 38. Local Recommended Lenders *In no way does Redfin benefit financially from recommending lenders – we just think they’re great lenders!Slide 38 of 61
  39. 39. Where Are Rates Headed? Type of Loan November 8, 2012 November 1, 2012 30-Year Fixed 3.40% 3.39% 15-Year Fixed 2.69% 2.70% 5/1 ARM 2.73% 2.74% 1-Year ARM 2.59% 2.58%Slide 39 of 61
  40. 40. Where Are Rates Headed?Slide 40 of 61
  41. 41. 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 41 of 61
  42. 42. 10-Minute Break 10 mins 5 mins End Let’s Get Started!Slide 42 of 61
  43. 43. 15-Minute Break 15 mins 7.5 mins End Let’s Get Started!Slide 43 of 61
  44. 44. Short Sales and Bank Owned NameSlide 44 of 61
  45. 45. 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 45 of 61
  46. 46. 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 46 of 61
  47. 47. Putting it all together to findYOUR homeSlide 47 of 61
  48. 48. Redfin.com - Benefits of MLS Powered (Multiple Listing Service) ● 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 48 of 61
  49. 49. Agent NotesSlide 49 of 61
  50. 50. CMA ToolSlide 50 of 61
  51. 51. Home Buying GuideSlide 51 of 61
  52. 52. Home Inspection Guide http://www.redfin.com/home-buying-guide/interactive-home-inspectionSlide 52 of 61
  53. 53. Redfin Open Book ● Redfin Certified Providers ► Proven track record, vetted by Redfin ● We survey every client & post the good, bad, & ugly ● Read real reviews & find a great local team ► Inspectors ► Lenders ► Title Companies ► AttorneysSlide 53 of 61
  54. 54. Choosing the Right AgentSlide 54 of 61
  55. 55. 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 55 of 61
  56. 56. 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? ● Can I see some reviews of your work?Slide 56 of 61
  57. 57. Overview of a PurchaseSlide 57 of 61
  58. 58. 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 [10-17 days]Purchase Title review [5 days] Loan & Appraisal Contingency [17 days] Waiting for loan approval Escrow signing appointment Closing! Get keys and take possession! Receive Redfin refund Complete Redfin surveySlide 58 of 61
  59. 59. 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 ● Look for a lender and get pre-approved ● Start seeing homes ● Make an offer & close the dealSlide 59 of 61
  60. 60. 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 60 of 61
  61. 61. AppendixSlide 61 of 61
  62. 62. Appendix ● Important forms/contracts ● Favorite Real Estate ResourcesSlide 62 of 61
  63. 63. Some Of Our Favorite Sites ● Curbed Seattle: cool houses ● WalkScore: see what’s nearbySlide 63 of 61
  64. 64. HUD Settlement Statement
  65. 65. 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
  66. 66. 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
  67. 67. 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
  68. 68. 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
  69. 69. 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
  70. 70. 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

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