Redfin’s Home Buying Class  January 24, 2013 Emeryville  Follow: @Redfinbayarea  Like: http://www.facebook.com/Redfinbayar...
Agenda     ●   To buy or not to buy     ●   Overview of purchase process     ●   Understanding the Market     ●   Touring ...
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; 9...
To Buy or Not to BuySlide 4 of 62
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 ●   Y...
Why You Shouldn’t Buy a Home  ●   You can’t afford the down payment  ●   You can rent for much less  ●   You plan on movin...
Understanding the    Buying ProcessSlide 7 of 62
Overview of Purchase Process ( more details to  follow)  ● Information – learn as much as possible about the market, the  ...
Understanding the      MarketSlide 9 of 62
Case-Shiller: San Francisco Area v. 20-City  250.00           San Francisco           20-City Composite  200.00  150.00  1...
Case-Shiller – By the Numbers  San Francisco Area    Up 7.5% year-over-year    Peak was May 2006    Down 34% from peak    ...
Oakland Dec. Stats for HomesSlide 12 of 62
Oakland Dec. Stats for HomesSlide 13 of 62
Area OverviewSlide 14 of 62
National Market Trends  Multiple Offers - More than a Quarter of Listings Still Selling Fast  ● In Dec. 27.5% of new listi...
National Market Trends  ● The key metrics across 19 major metropolitan markets are:       ► Prices 11.3% higher YoY (9th m...
Multiple Offer SituationsSlide 17 of 62
Multiple Offer Situations This occurs when inventory is down and buyer interest is up 5 Tips for Winning in a Bidding War ...
Pre-Approval LetterSlide 19 of 62
Earnest Money  ● Typically 3% of offer price  ● Deposited 3 business days after offer acceptance  ● Applied towards your d...
Personal Touch      Write a heart-felt letter to seller           Include a bit about you, your family, your profession   ...
Slide 22 of 62
Slide 23 of 62
What to do?  ● Go see the home as soon as you can!     ► First couple days on market  ● Homes that are priced well, and mo...
TouringSlide 25 of 62
Highlights of Redfin’s Site  ● Search by zip code    or neighborhood  ● Saved searches/instant alerts  ● Agent notes  ● Do...
Making the Most of Your Tour 1.     Bring a camera, notebook & tape measure   8.    Check for hardwood floors 2.     See h...
How Touring with Redfin Works       ● Up to six homes per tour in         two hour blocks       ● Go on as many tours     ...
MortgagesSlide 29 of 62
Getting Pre-Approved                                Income                                oSalary—Past 30 days            ...
Show Stable EmploymentSalaried Employee   o W2’s are historic   o Most recent paystubs       o    Salary increases count i...
Organize Your Assets          Lenders Will Require 2 Months of Statements          ●Liquid                 ► Do not move m...
Review Your Debt | Credit HistoryKnow Current Credit Score           Know Your Debt Tolerance●Mycreditreport.com: pay to g...
Pre-approval ScenariooEarns $10,000/month          $600,000 LoanoHas car payment $300         o30/Yr Fixed, 3.75%oWants to...
Single Family Home Loan Limits  ● Fannie/Freddie: Conforming Loan                $417,000 – Lowest Rates                 m...
Choose a Lender Pre-Approval Letter is Critical ●Part of the offer ●Sellers want accountability, Local lenders preferred U...
Questions to Ask Any Lender  ● Please describe your mortgage banking experience?  ● How many transactions do you close eac...
Rate Shopping● Within a one hour period, call  ● Then ask:  your top three prospective                                    ...
Understand Your CostsGet a Good Faith Estimate   o Itemized List of Fees:   o Lender: Appraisal, Credit, Processing, Under...
Local Recommended Lenders                 *In no way does Redfin                 benefit financially from                 ...
Where Are Rates Headed?  Type of Loan    January 10, 2013   January 3, 2013  30-Year Fixed       3.40%              3.34% ...
Where Are Rates Headed?Slide 42 of 62
Make Your Decision     ● When possible, get a loan commitment     ● Make alternative funds liquid (401k, stock) Stay in to...
10-Minute Break    10 mins             5 mins        End                 Let’s Get Started!Slide 44 of 62
15-Minute Break    15 mins             7.5 mins      End                 Let’s Get Started!Slide 45 of 62
Short Sales and Bank Owned  NameSlide 46 of 62
What is a Short Sale?  The owner owes more on the mortgage than the home is worth  ● Usually pre-foreclosure, but not alwa...
What is a Bank-Owned Property?  ● A foreclosed home owned by a bank or lender  ● Standard sale but:     ► Verbal negotiati...
Putting it all together to findYOUR homeSlide 49 of 62
Redfin.com - Benefits of MLS Powered          (Multiple Listing Service)     ● All the homes for sale: 30% more listings  ...
Agent NotesSlide 51 of 62
CMA ToolSlide 52 of 62
Home Buying GuideSlide 53 of 62
Home Inspection Guide           http://www.redfin.com/home-buying-guide/interactive-home-inspectionSlide 54 of 62
Redfin Open Book  ● Redfin Certified Providers     ► Proven track record, vetted by Redfin  ● We survey every client & pos...
Choosing the Right AgentSlide 56 of 62
Redfin’s Partner Program   Partner agents are employed by other brokerages, but     have teamed up with us to provide Redf...
What to Ask Any Agent  ●   Is this your full-time job?  ●   Familiar with foreclosures or short-sales?  ●   Where were you...
Overview of a PurchaseSlide 59 of 62
Get pre-approved                 Tour homes                 Find dream home                 Consult with agent, write offe...
So What Now?  ●   Make sure it’s the right time for you  ●   Start browsing online  ●   Check out our Home Buying Guide an...
Thanks for Coming!  Please fill out the survey that was handed out at the beginning of  class. We appreciate the feedback!...
AppendixSlide 63 of 62
Appendix  ● Important forms/contracts  ● Favorite Real Estate ResourcesSlide 64 of 62
Some Of Our Favorite Sites  ● Curbed Seattle: cool houses  ● WalkScore: see what’s nearbySlide 65 of 62
HUD Settlement Statement
Favorite Real Estate Links● Property information   ► PropertyShark: Zoning data, title history, permits,     neighborhood ...
Favorite Homes For Sale Links ● Redfin: MLS + FSBO + REO, updated every 15 minutes,   with DOM, price history, Zestimate ●...
Favorite Data Links ● Case-Schiller Indices: Pricing trends by metropolitan area ● Altos Research: Median price trends and...
Favorite Mortgage Links ● Bankrate: Many ads, but is great for comparing local   lenders ● Zillows Mortgage Marketplace He...
Favorite Links● Loans for first-time home buyers   ► Federal Housing Administration (FHA)   ► Fannie Mae and Freddy Mac● G...
Favorite Links Cont.● Remodeling & renovations   ► DoItYourself.com: A few ads, but a useful clearinghouse of     informat...
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Oakland Home Buying Class - January 24

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Oakland Home Buying Class - January 24

  1. 1. Redfin’s Home Buying Class January 24, 2013 Emeryville Follow: @Redfinbayarea Like: http://www.facebook.com/RedfinbayareaSlide 1 of 62
  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 62
  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 62
  4. 4. To Buy or Not to BuySlide 4 of 62
  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 62
  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 62
  7. 7. Understanding the Buying ProcessSlide 7 of 62
  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 62
  9. 9. Understanding the MarketSlide 9 of 62
  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 7.5% year-over-year Peak was May 2006 Down 34% from peak Currently at September 2008 prices 20-City Composite Up 3% year-over-year Peak was July 2006 Down 29% from peak Currently at September 2009 pricesSlide 11 of 62
  12. 12. Oakland Dec. Stats for HomesSlide 12 of 62
  13. 13. Oakland Dec. Stats for HomesSlide 13 of 62
  14. 14. Area OverviewSlide 14 of 62
  15. 15. National Market Trends Multiple Offers - More than a Quarter of Listings Still Selling Fast ● In Dec. 27.5% 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. ● Multiple offers are not only against 3 or 5 buyers, but more like 10, 20 and sometimes even 30 or moreSlide 15 of 62
  16. 16. National Market Trends ● The key metrics across 19 major metropolitan markets are: ► Prices 11.3% higher YoY (9th month in a row with increasing prices YoY) ► Inventory falls 33% YoY ► At the close of 2012 there were < 160,000 listings nationally ► Inventory been dropping YoY for 22 months in a rowSlide 16 of 62
  17. 17. Multiple Offer SituationsSlide 17 of 62
  18. 18. 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 18 of 62
  19. 19. Pre-Approval LetterSlide 19 of 62
  20. 20. 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 20 of 62
  21. 21. 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 21 of 62
  22. 22. Slide 22 of 62
  23. 23. Slide 23 of 62
  24. 24. 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 24 of 62
  25. 25. TouringSlide 25 of 62
  26. 26. 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 26 of 62
  27. 27. 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 27 of 62
  28. 28. 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 28 of 55
  29. 29. MortgagesSlide 29 of 62
  30. 30. 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 30 of 62
  31. 31. Show Stable EmploymentSalaried Employee o W2’s are historic o Most recent paystubs o Salary increases 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 31 of 62
  32. 32. 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 32 of 62
  33. 33. 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 33 of 62
  34. 34. Pre-approval ScenariooEarns $10,000/month $600,000 LoanoHas car payment $300 o30/Yr Fixed, 3.75%oWants to buy a home for = $2,779$750,000 oProperty TaxesoHas 20% down payment o1.25% on purchase price o $10,000 x 45% = $4500 = $781 ($9,375/yr) o $4,500 – 300 (other oHomeowners Insurance debt) = $150 ($1,800/yr) oTotal: $2,779+781+150= Allowed $4,200/Month! = Qualified $3,710/Month!Slide 34 of 62
  35. 35. Single Family Home Loan Limits ● Fannie/Freddie: Conforming Loan $417,000 – Lowest Rates minimum 5% down payment ● High Balance Conforming Loan $625,500 - + .25% For high cost areas, such as Bay Area Minimum 10% down payment ● Jumbo Loan $625,501 and up Minimum 20% down payment – FHA Loan: $729,750 with 3.5% downSlide 35 of 62
  36. 36. 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 web site ●From friends who recently financed a home ●From Realtor Research Your Lender ●Check Yelp, Their Website, Google ●Schedule a meeting by phone or in personSlide 36 of 62
  37. 37. 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 37 of 62
  38. 38. 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 38 of 62
  39. 39. 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 39 of 62
  40. 40. Local Recommended Lenders *In no way does Redfin benefit financially from recommending lenders – we just think they’re great lenders!Slide 40 of 62
  41. 41. Where Are Rates Headed? Type of Loan January 10, 2013 January 3, 2013 30-Year Fixed 3.40% 3.34% 15-Year Fixed 2.66% 2.64% 5/1 ARM 2.67% 2.71% 1-Year ARM 2.60% 2.57%Slide 41 of 62
  42. 42. Where Are Rates Headed?Slide 42 of 62
  43. 43. Make Your Decision ● When possible, get a loan commitment ● Make alternative funds liquid (401k, stock) Stay in touch with your Lender as you continue your search. ● Have updated documentation ready to retrieve for periodic file updates ● Keep all credit-related activity to a minimum (no new credit, keep credit balances low)Slide 43 of 62
  44. 44. 10-Minute Break 10 mins 5 mins End Let’s Get Started!Slide 44 of 62
  45. 45. 15-Minute Break 15 mins 7.5 mins End Let’s Get Started!Slide 45 of 62
  46. 46. Short Sales and Bank Owned NameSlide 46 of 62
  47. 47. 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 47 of 62
  48. 48. 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 48 of 62
  49. 49. Putting it all together to findYOUR homeSlide 49 of 62
  50. 50. 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 50 of 62
  51. 51. Agent NotesSlide 51 of 62
  52. 52. CMA ToolSlide 52 of 62
  53. 53. Home Buying GuideSlide 53 of 62
  54. 54. Home Inspection Guide http://www.redfin.com/home-buying-guide/interactive-home-inspectionSlide 54 of 62
  55. 55. 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 55 of 62
  56. 56. Choosing the Right AgentSlide 56 of 62
  57. 57. 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 57 of 62
  58. 58. 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 58 of 62
  59. 59. Overview of a PurchaseSlide 59 of 62
  60. 60. 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 60 of 62
  61. 61. 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 61 of 62
  62. 62. 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 62 of 62
  63. 63. AppendixSlide 63 of 62
  64. 64. Appendix ● Important forms/contracts ● Favorite Real Estate ResourcesSlide 64 of 62
  65. 65. Some Of Our Favorite Sites ● Curbed Seattle: cool houses ● WalkScore: see what’s nearbySlide 65 of 62
  66. 66. HUD Settlement Statement
  67. 67. 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
  68. 68. 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
  69. 69. 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
  70. 70. 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
  71. 71. 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
  72. 72. 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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