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Redfin's Free Multiple Offer Class - Pasadena, CA


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Redfin's Free Multiple Offer Class - Pasadena, CA

  1. 1. How To Win In Multiple Offer Situations Presented by: Redfin’s San Gabriel Valley Team Pasadena, CA August 22, 2013 Follow: Like:
  2. 2. Agenda  A little about Redfin  Why All the Multiple Offers?  Preparing to Buy  Starting an Offer  Writing a Winning Offer  Price  Financing  Contingencies  Earnest Money  Personal Touch  How Redfin Helps
  3. 3. Working with Redfin
  4. 4. 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 ● Right home for the right price  No obligation  Commission credit
  5. 5. The Redfin Refund You buy and pay for your dream home. The 6% sales commission is split. The Listing Agent gets 3% commission. Your Buyers’ Agent gets 3% commission. You save with Redfin. Redfin keeps a portion as our fee.
  6. 6. Partners in the Process AGENT Responsible for your success Writes your offer Handles negotiations TRANSACTION COORDINATOR Prepares paperwork Works with escrow TOUR COORDINATOR Schedules tours Prepares paperwork ASSOCIATE AGENT Takes you to see homes Sees 50+ homes a week
  7. 7. Why All The Multiple Offers?
  8. 8. Why all the Multiple Offers? ● What’s driving the sudden demand for homes? ● It’s time to buy! Buyers are confident again ● Interest rates still at historical lows ► Foreign investors, all-cash buyers ► Buyers are not shying away from bidding wars ► LOW INVENTORY  Los Angeles July offers facing competition: 79.9%  45.7% over asking  24.8% homes go pending in one week, 44% in two  1.6 months of supply
  9. 9. What trends are we noticing? ● Nationally, the percentage of offers written by Redfin agents that faced multiple bids fell to 63.3% in July, down from 68.6% in June, and 75.7% at the peak in March. ● Why? ► Buyer fatigue: buyers are growing tired from losing bidding wars and are pulling back for now ► Budget: Rising prices and mortgage rates continues to price buyers out of the market, reducing competition for available inventory. Nationally, the median home price per square foot for single-family homes was up 18.7%. ► Growing inventory: Rising prices and mortgage rates are also driving homeowners to list their homes in greater numbers. ► Summer vacation: distracted some buyers from house hunting in July.
  10. 10. 5 Tips for Winning a Bidding War 1. Make the competition eat your dust – sign up a redfin listing alert! 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 limits
  11. 11. Get Ready! Obtain a Pre-Approval Letter Your Lender is part of our Team!  Ask your loan officer how they can help you in a competitive situation (shorter contingency period, quick closing?)  Request that your LO be available to speak with the listing agent  Get a preapproval letter with your maximum approval amount, you can customize later if necessary  Use a lender with local expertise- in a competitive situation it can be the difference between winning and losing  Get full underwriter approval --No pre-qualification letters please
  12. 12. Get Ready! Let’s Do our Homework  Buyer’s agent should call the listing agent, to find out what the sellers situation is & why they are selling  What are the sellers’ motivations?  Will they need to remain at the property after closing?  Do they need a quick sale?  Request for copies of disclosures and reports  Find out how many disclosure packages have been sent out to other buyers, has there been heavy traffic?  Is there an offer due date? How should offers be submitted – via email, drop off at listing office or in person?  Build rapport with listing agent and check scouting report
  13. 13. Get Ready! Know the Numbers - Knowing what to offer and being confident in your offer price makes the process less stressful.  Run a Comparative Market Analysis (CMA)  Understand pricing for the area  Determine your maximum price  Calculate payment difference at incremental price points  $5,000 more equals $?/month  Know When To Walk Away  You can’t control what someone else is willing to pay
  14. 14. Get Ready! Documentation Having your finances and other required documents in order prior to making an offer can accelerate the process. Here’s what we’ll need at a minimum to include with your offer:  Pre-Approval Letter  Not a pre-qualification  Proof of Funds  Bank statement, 401k, brokerage statement  Earnest Money Deposit Check  Just a copy (picture, scan or fax)
  15. 15. Writing a Winning Offer Offer Price - Price & Terms are the King & Queen of Winning in Multiple Offer Situations  Study Comparables  Understand pricing trends in the area  Base your offer on the comparables – not the listing price especially if it is strategically low  List Price to Sales Price Ratio for the Area  How much negotiating room is there?  Days on Market  Fewer DOM – sellers are less flexible  More DOM – sellers are usually more motivated/open to negotiating  Know the Sellers Current Loan Situation
  16. 16. Writing a Winning Offer Highest & Best In a multiple offer situation you may have only one shot at offering and no opportunity to further negotiate  Blind betting – you don’t know what the other offers are  What is the maximum price you are willing to pay for this property?  How much do you really want this property?  Determine your walk away price  Go in with your Highest Price and Best Terms right from the start
  17. 17. Writing a Winning Offer TERMS - Understand & offer the terms that seller desires  Contingencies protect the buyer and gives the option to negotiate further, or cancel the transaction if no agreement is reached.  Inspection Contingency – Typically 7 to 12 days  Financing Contingency - Typically 14 to 17 days  Appraisal Contingency - Typically 14 to 17 days  Shorter contingency periods makes your offer stronger & shows how serious you are as buyers  Need a Home Warranty? Seller Rent Back?
  18. 18. Pre-Commitment Letter
  19. 19. Financing ● Cash ► Cash offers can close in just a few days as there is no loan approval process. ► Strongest of all financing options ● Conventional ► 5% or more down payment. Few restrictions on condition of home, buyer has good credit. ► Strong second best financing option ● FHA / VA ► Least down payment (as little as 0%-3.5%), lender may require repairs, longest closing period. Lower credit ok. ► Also viable financing options
  20. 20. Writing a Winning Offer Financing (continued)… Making the seller comfortable with your ability to purchase their property is key to getting your financed offer accepted.  Present a Solid Pre-Approval  Get a Loan Commitment – this will set you ahead of almost all other offers  Show the maximum amount you qualify for  List your FICO scores, DTI’s, etc. if possible  Use a Lender with Local Presence & Expertise  Easy to contact and part of our team  Offer to have lender speak directly to Listing Agent (LA) and/or seller
  21. 21. Writing a Winning Offer Use a Redfin Preferred Lender *In no way does Redfin benefit financially from recommending lenders – we just think they’re great lenders!
  22. 22. Writing a Winning Offer Closing & Possession Closing - Chat with your lender and see how quick they can close. Flexibility with closing can make a huge difference Take Possession At closing or does the seller need a Rent Back?  The seller may needs to stay longer but want to close sooner to have access to the funds  Seller pays buyers PITI while occupying the home after settlement  Deposit & Rent is held at escrow upon closing  Usually a max of 30 days – anything more requires lender approval
  23. 23. Writing a Winning Offer Personal Touch Including a short letter to the seller and a picture may help the seller connect and consider your offer.  Include a bit about you, your family, your profession.  Comment on the things you liked about the seller’s home.  Send your agent a family photo to include.  Won’t help with a bank owned properties or investor sellers
  24. 24. Inspections: To Waive or Not To? ● Pre-Inspection(not that common in our market) ► Out $300 - $1000 and may not get the house ► Timing can be difficult ► Seller may not allow ● Post-Inspection ► May scare sellers – They usually want a truly As-Is sale ► Deal can quickly fall apart ► What’s reasonable to negotiate further? Health and Safety ● Waived Inspection ► High Risk ► Waiving contingencies is not advisable but buyers are doing it.
  25. 25. Earnest Money ● Deposited after offer acceptance at beginning of escrow ● A higher EMD shows you are serious buyers and could make the sellers consider your offer more ● To be submitted to escrow within 3 business days of acceptance – include copy with offer ● The check is cashed, held at escrow & applied to your down payment at closing ● Refunded if you cancel as a result of a contingency ● Could be in jeopardy if you cancel after you’ve removed all contingencies ● A higher deposit makes for a stronger offer ● Go BIG and put down 5% with the offer!
  26. 26. Closing & Possession ● Chat with your lender and see how quick they can close. Flexibility with closing can make a huge difference ● Take Possession ● At closing or does the seller need a Rent Back? ● The seller may needs to stay longer but want to close sooner to have access to the funds ● Seller pays buyers PITI while occupying the home after settlement ● Deposit & Rent is held at escrow upon closing ● Usually a max of 30 days – anything more requires lender approval, rental agreement contract
  27. 27. How Redfin Helps ● Redfin agents close more deals than an average agent, we know the market and how to get the job done. We are advocates for our clients ● Help determine market price - CMA, trends and stats ● Understand the listing agent’s negotiation style ► average discount ► market time and ► offer process ● Established relationships with listing agents - we know what questions to ask, what to say, when to say it ● Write crisp, clean offer quickly (Docusign) ● Team structure allows agent to focus on writing your offer
  28. 28. Thank You! Questions? Email me: