Portland Home Buying Class October 24 2012

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Portland Home Buying Class October 24 2012

  1. 1. Redfin’s Home Buying Class October 24, 2012 Portland, OR Follow: @RedfinPortland Like: http://www.facebook.com/RedfinPortlandSlide 1 of 49
  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 49
  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 commissionSlide 3 of 49
  4. 4. To Buy or Not to BuySlide 4 of 49
  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 49
  6. 6. Why You Shouldn’t Buy a Home ● You don’t have a good reason ● 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 49
  7. 7. Understanding the Buying ProcessSlide 7 of 49
  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 49
  9. 9. Understanding the MarketSlide 9 of 49
  10. 10. Case-Shiller: Portland Area v. 20-City 250.00 20 City Composite Portland 200.00 150.00 100.00 50.00 0.00Slide 10 of 55
  11. 11. Case-Shiller – By the Numbers Case-Shiller: Portland Area Up 3.0% year-over-year Peak was July 2007 Down 25.7% from peak Currently at March 2005 prices Case-Shiller: 20-City Composite Up 0.5% year-over-year Peak was July 2006 Down 31.1% from peak Currently at July 2003 pricesSlide 11 of 49
  12. 12. Portland September Stats for HomesSlide 12 of 49
  13. 13. Portland September Stats for HomesSlide 13 of 49
  14. 14. National Market Trends ● Multiple Offers ► 74% of offers in OC faced competition in March, 51% in DC ► Offers increased 50% nationwide but closings only increased by 17% ► Competition is up for getting offers accepted ● Tale of 2 markets ► Prices are mostly soft for condos and townhomes ► Entry level and mid range houses are selling like hotcakes ● Nationally, prices are down 3.8% ● Number of homes for sale is down 27% from March last yearSlide 14 of 49
  15. 15. Where is the Local Market Headed? ● Supply of homes is at a five-year low and won’t increase the rest of the year ● Rents have been rising, making buying more attractive) ● Market stabilizing, though likely 2-3 years before significant appreciation ● Rate increases - biggest issue for buyersSlide 15 of 49
  16. 16. Short Sales and Bank OwnedSlide 16 of 49
  17. 17. 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 17 of 49
  18. 18. 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 18 of 49
  19. 19. MortgagesSlide 19 of 49
  20. 20. Review Your Financial Situation To Buy or Not to Buy ● Pull credit report, look for errors ● Establish comfort level for monthly payment ● 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 ● Source of money ● Current employment statusSlide 20 of 49
  21. 21. Start Shopping for Lenders Compile a list of 3-4 lenders & brokers Good sources include: ● Redfins partner lenders ● Referrals from friends, family & co-workers ● Online review sites, such as Yelp ● Local chains and offices *Know your lenderSlide 21 of 49
  22. 22. 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 ● What’s the difference between Pre-Approval and Pre-Qualification ● Good for 90 days, depending on lender ● Ask for a few different amounts ● Similar, yet different from pre-qualification ● Redfin asks that you get pre-approved before your third tour ● Are gift funds involved? ● How much do you have for a down payment? Information needed: ● W-2, two pay-stubs, tax returns, bank statementsSlide 22 of 49
  23. 23. 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)Slide 23 of 49
  24. 24. Types of Loans ● Conventional: ► As low as 5% down ► Fixed or adjustable rates, conforming or non-conforming ● Federal Housing Administration Loan (FHA): ► Always have mortgage insurance ► Buyers need only a 3.5% down payment ● VA Guaranteed Loan: ► Veterans, active duty personnel, reservists/national guard, surviving spouses ► No down payment ● Ask your lender if they have special loan programs ► Example: BB&T Chips ProgramSlide 24 of 49
  25. 25. Where Are Rates Headed? Type of Loan October 11, 2012 October 4, 2012 30-Year Fixed 3.39% 3.36% 15-Year Fixed 2.70% 2.69% 5/1 ARM 2.73% 2.72% 1-Year ARM 2.59% 2.57%Slide 25 of 49
  26. 26. 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 26 of 49
  27. 27. Break!Slide 27 of 49
  28. 28. Putting it all together to findYOUR homeSlide 28 of 49
  29. 29. Redfin.com-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 homesSlide 29 of 49
  30. 30. 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 30 of 49
  31. 31. Open Book ● Redfin Certified Providers ● Every professional is reviewed and all reviews are shown ● Search for local: ► Inspectors ► Lenders ► Title CompaniesSlide 31 of 49
  32. 32. Choosing the Right AgentSlide 32 of 49
  33. 33. Traditional vs. RedfinSlide 33 of 49
  34. 34. 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 34 of 49
  35. 35. Experience With Multiple Offers 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 35 of 49
  36. 36. 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 36 of 49
  37. 37. TouringSlide 37 of 49
  38. 38. Making the Most of Your Tour 1. Bring a camera, notebook & tape measure 9. Peek into the attic 2. See how much sunlight the place gets 10. Bring a marble or two 3. Check the bathrooms for rot & mold 11. When sharing a wall, make sure it’s thick 4. Look for wavy or discolored wood siding 12. Ignore the appliances and carpets 5. Make sure water spouts drain away from 13. Check the closets house 14. Get the disclosure packet 6. Take stock of storage space 15. Compare the property’s tax records to the 7. Turn off any music playing in house listing details 8. Check for hardwood floorsSlide 38 of 49
  39. 39. 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 39 of 55
  40. 40. Home Inspection and Other ContingenciesSlide 40 of 49
  41. 41. Home Inspection ● We recommend that you have a home inspection ● Cost runs $350 to $1200 depending upon the size of the house ● Your agent will accompany you ● Your time to evaluate the property ● What an inspection contingency covers and doesn’t cover ● Types of inspectionsSlide 41 of 49
  42. 42. Other Contingencies ● Appraisal – Performed in conjunction with financing ● Financing ● Termite ● OtherSlide 42 of 49
  43. 43. Closing – what you need to knowSlide 43 of 49
  44. 44. Closing: HUD–1 Settlement HUD-1 Settlement Statement – Lists all fees/charges/credits By law, the final costs listed on your HUD-1 must be within 10% of the estimates provided on your Good Faith Estimate (GFE). ● Lender charges ► Includes origination fee, appraisal fee, credit report, insurance and tax escrows ● Title charges ► Includes settlement fee, and owner’s and lender’s title insurance ● Government charges ► Includes recording fees, recordation taxes and property taxesSlide 44 of 49
  45. 45. Title Companies ● What does the title company do? ► Prepares the final documents, including the HUD-1 ► Conducts the closing ► Examines and clears the title to the property ► Records the deed, mortgage and any other recordable instruments ► Issues title insurance to the lender and the buyerSlide 45 of 49
  46. 46. Closing: Title Insurance ● Title insurance guarantees that the property is clear and marketable ● 2 types of title insurance policies ► Limited (Standard) Protection against pre-closing defects in title ► Enhanced (Eagle) Costs 20% more than Standard policy Covers post closing fraud, forgery, identity theft Increases with value of the property up to 150% of original price Includes coverage for: mechanic’s liens, invalid permits, forced removal of structure, unrecorded easements, unrecorded leases,Slide 46 of 49
  47. 47. Closing Day ● You’ll have a final walk-through on closing ● Closing typically takes 1 hour day or just before ● Get keys and take possession! ● What to bring: ► Government issued photo ID ► Certified checkSlide 47 of 49
  48. 48. 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 48 of 49
  49. 49. 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 49 of 49
  50. 50. Our next class! Mortgage Class October 25, 2012 6:00pm – 7:30pm The Heathman Lodge Vancouver, WA http://www.redfin.com/buy-a-home/classes-and-eventsSlide 50 of 49
  51. 51. AppendixSlide 51 of 49
  52. 52. Appendix ● Important forms/contracts ● Favorite Real Estate ResourcesSlide 52 of 49
  53. 53. Some Of Our Favorite Sites ● Seattle Bubble: market analysis ● Curbed Seattle: cool houses ● Urbnlivn: for condo shoppers ● WalkScore: see what’s nearbySlide 53 of 49
  54. 54. HUD Settlement Statement
  55. 55. 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
  56. 56. 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
  57. 57. 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
  58. 58. 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
  59. 59. 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
  60. 60. 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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