Redfin’s Home Buying ClassPresented by: Redfin’s DC TeamMay 23, 2013 Washington, DCFollow: @RedfinDCLike: http://www.facebook.com/RedfinDC
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 closing
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● Right home for the right priceNo obligationCommission credit
Slide 8 of 55Case-Shiller: DC Area v. 20-City0.0050.00100.00150.00200.00250.00300.00
Case-Shiller – By the NumbersCase-Shiller: DC AreaUp 6.9% year-over-yearPeak was May 2006Down 25.7% from peakCurrently at June 2004 pricesCase-Shiller: 20-City CompositeUp 5.5% year-over-yearPeak was July 2006Down 29.4% from peakCurrently at June 2001 prices
National Market TrendsThe March key metrics across 19 major metropolitan markets:● Home sales rose 25% from February, but were barely up from2012, rising just 0.9% year-over-year, the smallest gain in 14months.● The number of homes for sale declined 31% from March2012 to March 2013 (a slight improvement over the 32% dropin February), and were flat month over month.● Home prices in March increased 15% year over year, androse 6% just since February.● The percentage of listings that were under contract within 14days of their debut inched up yet again from 33.2% inFebruary to 34.8% in March, the highest point on record.
Making the Most of Your Tour1. Bring a camera, notebook & tape measure2. See how much sunlight the place gets3. Check the bathrooms for rot & mold4. Look for wavy or discolored wood siding5. Make sure water spouts drain away fromhouse6. Take stock of storage space7. Turn off any music playing in house8. Check for hardwood floors9. Peek into the attic10. Bring a marble or two11. When sharing a wall, make sure it’s thick12. Ignore the appliances and carpets13. Check the closets14. Get the disclosure packet15. Compare the property’s tax records to thelisting details
Slide 18 of 55How Touring with Redfin Works● Up to six homes per tour intwo hour blocks● Go on as many toursas you need● Led by agent or field agent● Need to be verified● No obligation
Review Your Financial SituationTo 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 status
Start Shopping for LendersCompile a list of 3-4 lenders & brokersGood sources include:● Redfins partner lenders● Referrals from friends, family & co-workers● Online review sites, such as Yelp● Local chains and offices*Know your lender
Getting Pre-ApprovedA pre-approval letter is a letter from a bank or a lender estimating howmuch 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● 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 statements
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 loansProgram (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)
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, survivingspouses► No down payment● Ask your lender if they have special loan programs► Example: BB&T Chips Program
Where Are Rates Headed?Type of Loan May 9, 2013 May 16, 201330-Year Fixed 3.42% 3.51%15-Year Fixed 2.61% 2.69%5/1 ARM 2.58% 2.62%1-Year ARM 2.53% 2.55%
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 firstloan payment won’t be for two months.
Redfin.com - Benefits of MLSPowered (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 homes
Highlights of Redfin’s Site● Search by zip codeor neighborhood● Search by schools● Saved searches/instant alerts● Agent notes● Download results● Price your home● Forums● Home buying guide● Home inspection guide● Any questions about the site?
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?
Experience With Multiple OffersThis occurs when inventory is down and buyer interest is up● 5 Tips for Winning in a Bidding War►Make the competition eat your dust►Get pre-approved with a local lender & get underwriterapproval►Start the conversation early►Write a letter & appeal to the seller►Know your limits
Redfin’s Partner Program● Partner agents are employed by other brokerages, but have teamed upwith Redfin to provide Redfin-quality service to a wider range ofcustomers.● Well refer you to a partner agent when:► A home is outside of our direct service area.► A home is below our minimum price.► Were experiencing unusually high customer demand.● We survey every client, and publish every response.● We credit 15% of the commission, usually worth $1,000 - $2,000.**● We fire agents who get bad reviews.● As a result, you get the same customer focus offered by a Redfin Agent
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 partneragent● Redfin partner agents work for other brokerages but share Redfin’scommitment to customer service● Get a 15% commission refund
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►Earnest money deposit usually held by listing agent
Home Inspection● We recommend that you have a home inspection● Cost runs $350 to $1200 depending upon the size of thehouse● Your agent will accompany you● Your time to evaluate the property● What an inspection contingency covers and doesn’t cover● Types of inspections
Other Contingencies● Appraisal – Performed in conjunction with financing● Financing● Termite● Other
Closing: HUD–1 SettlementHUD-1 Settlement Statement – Lists all fees/charges/creditsBy 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 titleinsurance● Government charges►Includes recording fees, recordation taxes and propertytaxes
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 recordableinstruments►Issues title insurance to the lender and the buyer
Closing: Title Insurance● Title insurance guarantees that the property is clear andmarketable● 2 types of title insurance policies►Limited (Standard)Protection against pre-closing defects in title►Enhanced (Eagle)Costs 20% more than Standard policyCovers post closing fraud, forgery, identity theftIncreases with value of the property up to 150% oforiginal priceIncludes coverage for: mechanic’s liens, invalidpermits, forced removal of structure, unrecordedeasements, unrecorded leases,
Closing Day● You’ll have a final walk-through on closingday or just before● What to bring:► Government issued photo ID► Certified check● Closing typically takes 1 hour● Get keys and take possession!
Better Service, Lower FeesYou get top-notch service and still save thousands when you sell with Redfin!TraditionalSale price $500,000 $500,000Seller fee $12,500 (2.5%) $7,500 (1.5%)Buyer fee $12,500 (2.5%) $12,500 (2.5%)Total fee $25,000 $20,000With a minimum fee of $5,500Savings on a $500,000 home:$5,000
We go above and beyond the ordinary brokerage● Maximum exposure on Redfin.com and the webTop-of-list placement and marketing blitz● Free, professional photography and floor plansFlawless HDR from Boston Virtual Imaging● Your team are your boots on the groundOpen houses, showings, inspections, contractors● Data-driven pricing methodology you can trackRespond to numbers, not hunchesBetter Service, Lower Fees
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 deal
Thanks for Coming!Please fill out the survey that was handed out at the beginning ofclass. We appreciate the feedback!Check out our upcoming classes and events athttp://www.redfin.com/buy-a-home/classes-and-events
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
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, subscriptionrequired for full reports● Brokerage site of listing agents: more photos of the listing
Favorite Data Links● Case-Schiller Indices: Pricing trends by metropolitan area● Altos Research: Median price trends and days on marketby city, but some complain data is unreliable● MSN Home Affordability Calculator: Based on your income& credit score● SmartMoneys Home Buying Worksheet: Similar to theMSN calculator, but requires more info
Favorite Mortgage Links● Bankrate: Many ads, but is great for comparing locallenders● Zillows Mortgage Marketplace Help Center: Articlesmortgage rates, types of mortgages, credit reports, and aseries of mortgage calculators● The Mortgage Professor: Bare bones information onmortgages, definitions of common terms, myriad ofmortgage calculators● HUD FHA page: Most reliable explanation of FHA loans,good site for first-time buyers
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
Favorite Links Cont.● Remodeling & renovations►DoItYourself.com: A few ads, but a useful clearinghouse ofinformation on remodeling►National Association of Home Builders (NAHB): Articles onremodeling your home, most are good