Wellesley Home Buying Class - September 18 2012

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Wellesley Home Buying Class - September 18 2012

  1. 1. Redfin’s Home Buying ClassSeptember 18, 2012 Wellesley, MAFollow: @RedfinBostonLike: http://www.facebook.com/RedfinBoston
  2. 2. Agenda● Who is Redfin?● To buy or not to buy● Overview of purchase process● Understanding the Market● Touring● Mortgages & Attorneys● Break!● Choosing an agent● Redfin as a tool● Short sales & foreclosures● What to know about closing
  3. 3. A Little Bit About Who We AreA Technology Company Becomes a Customer-ServiceCompany● In the beginning… ► Team: engineers, working for free ► Goal: give consumers data once limited to Realtors ► Result: first to put listings on a map● And nothing really changed ► Consumers got the same old service… ► At the same old price● So Redfin changed ► A website became a brokerage ► A technology company became a service company
  4. 4. And What We’ve Become Redfin has helped over 20,000 people buy or sell a home 97% would refer us to a friend.● A website became a brokerage● A technology company became a service company● Customers, not commissions● Informed decisions● The right home for the right price● 1400 properties sold in MA since 07’● 40 + Agents● No obligation● Rebate, Rebate, Rebate
  5. 5. How Our Team WorksAgent Field Agents•Primary Contact•Writes your Offer •Assists with Tours•Handles Negotiations •Assists Inspections•Assists Inspections •Answers Questions•Coordinates with Partners You Coordinator •Schedules tours •Coordinates Agents •Answers Questions
  6. 6. How Commissions Work
  7. 7. Redfin Rebate is on the site!
  8. 8. To Buy or Not to Buy
  9. 9. 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 payment
  10. 10. 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 security
  11. 11. Understanding the Buying Process
  12. 12. Can Seem More a Marathon Than a Sprint● Information – learn as much as possible about the market, the neighborhood, price trends● Tour some homes & Open 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● Choose an Attorney● Home Inspection “Contingency”● Financing and Appraisal “Contingencies”● Closing
  13. 13. Tour homes Find a contender Agent consultation Submit offer Negotiate terms Success! Mutual Acceptance Earnest money deposit $1,000Overview of a Success! Mutual Acceptance Inspection contingencyPurchase The Purchase and Sale Additional deposit Financing contingency Final walk thru Closing! Get keys and take possession! Receive Redfin refund Complete Redfin survey
  14. 14. Understanding the Market
  15. 15. Case-Shiller – By the NumbersCase-Shiller: Boston Area Up 0% year-over-year Peak was September 2005 Down 15.4% from peak Currently at July 2003 pricesCase-Shiller: 20-City Composite Up 0.5% year-over-year Peak was July 2006 Down 31.1% from peak Currently at July 2003 prices
  16. 16. Wellesley August Stats for Houses
  17. 17. National Market Trends● Redfin’s data for 19 U.S. markets show June prices increasing 3.0% over last year● CoreLogic reported that May home prices increased 2.0% year-over-year, rising for the third consecutive month● One in four homes under contract in less than two weeks● Low rates and low inventory are creating the price pressure.● The interest rate on a 30-year mortgage hit an all-time low last week of 3.56%.● The number of homes for sale is down 19% from last year, and down nearly 50% in California and Seattle● Completed foreclosures are down 27% from their 2010 peak, and seriously delinquent mortgages hit a three-year low.
  18. 18. Where is the Local Market Headed?● Supply of homes is at a five-year low● Unlikely to increase much the rest of the year● Rents have been rising, making buying more attractive● Market stabilizing, though likely 2-3 years before significant appreciation● Mortgage rate increases - biggest issue for buyers
  19. 19. Short Sales and Bank Owned
  20. 20. 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 refund
  21. 21. 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 would 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 money
  22. 22. Touring
  23. 23. How Touring with Redfin Works● Up to six four 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 obligation
  24. 24. Making the Most of Your Tour1. Bring a camera, notebook & tape measure 9. Peek into the attic2. See how much sunlight the place gets 10. Bring a marble3. Check the bathrooms for dampness & mold 11. If sharing a wall, how thick?4. Look for wavy or discolored wood siding 12. Ignore the appliances and fixtures5. Check if water spouts drain away from house 13. Check the closets6. Take stock of storage space 14. Get disclosure packet, if any7. Turn off any music playing in house 15. Compare the property’s tax records to the8. Hardwood floors vs. carpet listing details
  25. 25. Mortgages
  26. 26. 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 status
  27. 27. Start Shopping for LendersCompile a list of 3 lenders & brokersGood sources include:● Redfin Open Book ► Redfin Certified lenders ► Reviews you can trust● Your real estate agent● Friends, family & co-workers● Banks or credit unions you have accounts with● Beware of out-of-state lenders!
  28. 28. Getting Pre-ApprovedA pre-approval letter is a letter from a bank or a lender estimatinghow 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 statements
  29. 29. 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)
  30. 30. 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 Program
  31. 31. Where Are Rates Headed?Type of Loan September 6, 2012 September 13, 201230-Year Fixed 3.55% 3.55%15-Year Fixed 2.86% 2.85%5/1 ARM 2.75% 2.72%1-Year ARM 2.61% 2.61%
  32. 32. Make Your Decision● When possible, get a loan commitment● Make alternative funds liquid (401k, stock)Good news! Loan payments are made in arrears, so yourfirst loan payment won’t be for two months.
  33. 33. Attorneys
  34. 34. Is an Attorney Required?*No but there are a few reasons why you should…• This is likely the largest purchase you will make in your life• You are entering into a legally binding contract• All other parties involved will likely be represented by counsel and you should be adequately protected
  35. 35. How to Choose?● Get a Real Estate attorney.● Ask about pricing up front – flat fee?● What they will be doing? – services?● How long have you been an attorney?● Will you work as the bank’s attorney?● Do you work as part of a team?● Condos and Contingencies…
  36. 36. The Purchase & Sale● Purchase And Sales Contract ► Negotiated by your Real Estate attorney ► “The guts of the deal” ► Inspection Items –Yes/No ► Deposit Money Required (5% typical in MA) Personal check acceptable To Listing Broker/Seller’s Attorney Escrow Account ► Redfin Rebate!!! - closing costs, reduction… ► Copy to your lender ASAP
  37. 37. Break!
  38. 38. Putting it All Together to Find YOUR home
  39. 39. Redfin.com - Benefits of a MLS (Multiple Listing Service) Powered● 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
  40. 40. 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?
  41. 41. Where to find the data…
  42. 42. Redfin Open Book● Redfin Certified Providers ► Proven track record, vetted by Redfin● We review every client & post the good, bad, & ugly● Read real reviews & find a great local team ► Inspectors ► Lenders ► Attorneys
  43. 43. Redfin Open Book
  44. 44. Choosing the Right Agent
  45. 45. Traditional vs. Redfin
  46. 46. 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?
  47. 47. Experience With Multiple OffersThis occurs when inventory is down and buyer interest is up5 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 limits
  48. 48. Redfin’s Partner ProgramPartner 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 demandWe survey all partner agent clients ► All surveys are published on their Redfin page ► 97% of customers would recommend Redfin partners
  49. 49. Home Inspection Contingencies
  50. 50. 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 inspections
  51. 51. Closing:What You Need to Know
  52. 52. 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 title insurance● Government charges ► Includes recording fees, recordation taxes and property taxes
  53. 53. 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,
  54. 54. 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 check
  55. 55. 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
  56. 56. 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 at http://www.redfin.com/buy-a-home/classes-and-events
  57. 57. Appendix
  58. 58. HUD Settlement Statement
  59. 59. 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
  60. 60. 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
  61. 61. 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
  62. 62. 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
  63. 63. 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
  64. 64. 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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