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Southern east bay hb webinar 2.26.13


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Southern east bay hb webinar 2.26.13

  1. 1. Redfin’s Home Buying Class February 26, 2013 Fremont, CA Presented By: Bita Salamat Redfin’s Southern East Bay TeamSlide 1 of 55
  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 55
  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 55
  4. 4. To Buy or Not to BuySlide 4 of 55
  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 55
  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 55
  7. 7. Understanding the Buying ProcessSlide 7 of 55
  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 55
  9. 9. TouringSlide 9 of 55
  10. 10. 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 10 of 48
  11. 11. 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 11 of 55
  12. 12. Understanding the MarketSlide 12 of 55
  13. 13. Fremont January Stats for HomesSlide 13 of 55
  14. 14. 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 14 of 55
  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 55
  16. 16. Short Sales and Bank OwnedSlide 16 of 55
  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 55
  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 55
  19. 19. MortgagesSlide 19 of 55
  20. 20. 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 20 of 55
  21. 21. 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 21 of 55
  22. 22. 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 22 of 55
  23. 23. Review Your Debt | Credit HistoryKnow Current Credit Score Know Your Debt Tolerance● 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 23 of 55
  24. 24. 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 24 of 55
  25. 25. 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 25 of 55
  26. 26. 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 26 of 55
  27. 27. 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 27 of 55
  28. 28. 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 28 of 55
  29. 29. 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 29 of 55
  30. 30. Local Recommended Lenders *In no way does Redfin benefit financially from recommending lenders – we just think they’re great lenders!Slide 30 of 55
  31. 31. Current Average Rates Type of Loan February 7, 2013 January 31, 2012 30-Year Fixed 3.53% 3.53% 15-Year Fixed 2.77% 2.81% 5/1 ARM 2.63% 2.70% 1-Year ARM 2.53% 2.59%Slide 31 of 55
  32. 32. Where Are Rates Headed?Slide 32 of 55
  33. 33. 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 33 of 55
  34. 34. Break!Slide 34 of 55
  35. 35. Putting it all together to findYOUR homeSlide 35 of 55
  36. 36. 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 36 of 55
  37. 37. 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 37 of 55
  38. 38. Open Book ● Redfin Certified Providers ● Every professional is reviewed and all reviews are shown ● Search for local: ► Inspectors ► Lenders ► Title CompaniesSlide 38 of 55
  39. 39. Choosing the Right AgentSlide 39 of 55
  40. 40. Traditional vs. RedfinSlide 40 of 55
  41. 41. 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 41 of 55
  42. 42. 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 42 of 55
  43. 43. 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 43 of 55
  44. 44. Home Inspection and Other ContingenciesSlide 44 of 55
  45. 45. 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 45 of 55
  46. 46. Other Contingencies ● Appraisal – Performed in conjunction with financing ● Financing ● Termite ● OtherSlide 46 of 55
  47. 47. Closing – what you need to knowSlide 47 of 55
  48. 48. 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 48 of 55
  49. 49. 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 49 of 55
  50. 50. 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 50 of 55
  51. 51. 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 51 of 55
  52. 52. 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 52 of 55
  53. 53. 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
  54. 54. Favorite Links Cont.● Remodeling & renovations ► 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
  55. 55. 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 55 of 55