Redfin's San Jose Multiple Offer Class 8.15.13


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  • Redfin's San Jose Multiple Offer Class 8.15.13

    1. 1. Redfin’s Multiple Offer Class Host: Angelica Robles~ August 15, 2013 Follow: @Redfinbayarea Like: Presented by: Redfin’s San Jose Team
    2. 2. Agenda ● Why All the Multiple Offers? ● Getting Ready to Make an Offer ● Writing a Winning Offer  Price  Terms  Getting personal ● Financing ● Inspections ● Earnest Money ● Closing ● How Redfin Helps
    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 ● Right home for the right price  No obligation  Commission credit
    4. 4. Understanding the Market
    5. 5. Santa Clara County Homes for Sale
    6. 6. Santa Clara County stats for a Home
    7. 7. Area Overview for Santa Clara County
    8. 8. Market Trends
    9. 9. Why all the Multiple Offers? What’s driving the sudden demand for homes? ● Interest rates still at historical lows ● Recent IPOs - “Paper millionaires” have cashed out to buy homes ● Foreign investors, all-cash buyers ● Buyers are not shying away from bidding wars ● Low inventory: ► Months of Supply – The time it would take to sell through all the homes on the market, given the current pace of sales ► In a balanced market, Months of Supply is between 5-6 months. Anything less is a seller’s market
    10. 10. What Trends Are We Noticing? ● Homes are being listed at strategically low prices ► So properties are selling way above list price ► Base your offer price on comps & trends – NOT on list price ● Deadlines are being set to accept & review offers ► Sellers usually review offers after about 7 days on market ► To give property exposure and create buzz amongst buyers ● Multiple offers are not only against 3 or 5 buyers, but more like 10, 20 and sometimes even 30 others ● Some buyers are waiving their inspection contingency
    11. 11. 5 Tips for Winning 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 limits
    12. 12. 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
    13. 13. 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
    14. 14. 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 Example: $5,000 more equals $?/month ● Know when to walk away - you can’t control what someone else is willing to pay
    15. 15. 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)
    16. 16. 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
    17. 17. 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
    18. 18. 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?
    19. 19. 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
    20. 20. Pre-Commitment Letter
    21. 21. Financing ● Cash ► Cash offers can close in just a few days as there is no 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
    22. 22. 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
    23. 23. Use a Redfin Preferred Lender *In no way does Redfin benefit financially from recommending lenders – we just think they’re great lenders!
    24. 24. Inspections: To Waive or Not To? ● Pre-Inspection ► 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? ● Waived Inspection ► High Risk ► Waiving contingencies is not advisable
    25. 25. Earnest Money ● Deposited after offer acceptance, 2nd deposit due with P&S (5% of purchase price) ● 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 (seller can’t keep more than 5%) ● 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
    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. ● 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. Future Events!
    29. 29. Thanks for Coming! Questions? Get in touch: Angelica Robles Check out our upcoming classes: