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<ul><li>1.Redfins Home Buying Class December 1, 2012 Sacramento, CA Follow: @RedfinSacramento Like: 1 of 49</li></ul> <p>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 &amp; foreclosures What to know about closingSlide 2 of 49 3. 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 The right home for the right priceNo obligationGet back a portion of our commissionSlide 3 of 49 4. To Buy or Not to BuySlide 4 of 49 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 Youre handy &amp; and ready to invest Youve saved up a down paymentSlide 5 of 49 6. Why You Shouldnt Buy a Home You dont have a good reason You cant afford the down payment You can rent for much less You plan on moving soon Youre worried about job securitySlide 6 of 49 7. Understanding theBuying ProcessSlide 7 of 49 8. Overview of Purchase Process (more details tofollow) Information learn as much as possible about the market, theneighborhood, 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 49 9. Understanding theMarketSlide 9 of 49 10. Case-Shiller: San Francisco Area v. 20-City250.0020 City CompositeSan Francisco200.00150.00100.0050.00 0.00Slide 10 of 55 11. Case-Shiller By the NumbersCase-Shiller: San Francisco AreaUp 5.3% year-over-yearPeak was May 2006Down 34.8% from peakCurrently at September 2002 pricesCase-Shiller: 20-City CompositeUp 2.0% year-over-yearPeak was July 2006Down 29.4% from peakCurrently at September 2003 pricesSlide 11 of 49 12. Sacramento October Stats for HomesSlide 12 of 49 13. Sacramento October Stats for HomesSlide 13 of 49 14. National Market Trends Multiple Offers 74% of offers in OC faced competition in March, 51% in DC Offers increased 50% nationwide but closings onlyincreased by 17% Competition is up for getting offers accepted Tale of 2 markets Prices are mostly soft for condos and townhomes Entry level and mid range houses are selling like hotcakes Nationally, prices are down 3.8% Number of homes for sale is down 27% from March last yearSlide 14 of 49 15. Where is the Local Market Headed? Supply of homes is at a five-year low and wont increase therest of the year Rents have been rising, making buying more attractive) Market stabilizing, though likely 2-3 years before significantappreciation Rate increases - biggest issue for buyersSlide 15 of 49 16. Short Sales and Bank OwnedSlide 16 of 49 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 whats 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 Redfinscommitment to customer service Get a 15% commission refundSlide 17 of 49 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 theyve signed Contract often requires early release of earnest moneySlide 18 of 49 19. MortgagesSlide 19 of 49 20. 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 Dont open any new lines of credit Dont buy any big ticket items Source of money Current employment statusSlide 20 of 49 21. Start Shopping for LendersCompile a list of 3-4 lenders &amp; brokersGood sources include: Redfins partner lenders Referrals from friends, family &amp; co-workers Online review sites, such as Yelp Local chains and offices*Know your lenderSlide 21 of 49 22. Getting Pre-Approved A pre-approval letter is a letter from a bank or a lender estimating how much theyll lend you Establishes what you can afford &amp; makes offer process go faster Whats 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 statementsSlide 22 of 49 23. Comparing Loan Estimates Gather loan estimates A minimum of three, more is better These arent final numbers, but within a few thousand dollars Compare similar loansProgram (FHA, conventional)Timeframe (same day) Compare costs side-by-side Discount &amp; origination points Interest rates Insurance premiums (FHA, PMI) APR (interest rates + fees + points + PMI)Slide 23 of 49 24. 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&amp;T Chips ProgramSlide 24 of 49 25. Where Are Rates Headed?Type of LoanNovember 21, 2012 November 15, 201230-Year Fixed3.31% 3.34%15-Year Fixed2.63% 2.65%5/1 ARM2.74% 2.74%1-Year ARM 2.56% 2.55%Slide 25 of 49 26. 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 first loan payment wont be for two months.Slide 26 of 49 27. Break!Slide 27 of 49 28. Putting it all together to findYOUR homeSlide 28 of 49 29. of a MLS PoweredSite 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 29 of 49 30. Highlights of Redfins Site Search by zip codeor 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 30 of 49 31. Open Book Redfin Certified Providers Every professional is reviewed and all reviews are shown Search for local: Inspectors Lenders Title CompaniesSlide 31 of 49 32. Choosing the Right AgentSlide 32 of 49 33. Traditional vs. RedfinSlide 33 of 49 34. 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 34 of 49 35. Experience With Multiple Offers This occurs when inventory is down and buyer interest is up 5 Tips for Winning in a Bidding War1. Make the competition eat your dust2. Get pre-approved with a local lender &amp; get underwriterapproval3. Start the conversation early4. Write a letter &amp; appeal to the seller5. Know your limitsSlide 35 of 49 36. Redfins 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. Well refer you to a partner agent when: A home is outside of our direct service area A home is below our price minimum Were 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 36 of 49 37. TouringSlide 37 of 49 38. Making the Most of Your Tour 1. Bring a camera, notebook &amp; tape measure 9.Peek into the attic 2. See how much sunlight the place gets10. Bring a marble or two 3. Check the bathrooms for rot &amp; mold11. When sharing a wall, make sure its thick 4. Look for wavy or discolored wood siding 12. Ignore the appliances and carpets 5. Make sure water spouts drain away from13. Check the closetshouse 14. Get the disclosure packet 6. Take stock of storage space 15. Compare the propertys tax records to the 7. Turn off any music playing in house listing details 8. Check for hardwood floorsSlide 38 of 49 39. 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 39 of 55 40. Home Inspection andOther ContingenciesSlide 40 of 49 41. 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 doesnt cover Types of inspectionsSlide 41 of 49 42. Other Contingencies Appraisal Performed in conjunction with financing Financing Termite OtherSlide 42 of 49 43. Closing what youneed to knowSlide 43 of 49 44. Closing: HUD1 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 owners and lenders titleinsurance Government charges Includes recording fees, recordation taxes and propertytaxesSlide 44 of 49 45. 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 buyerSlide 45 of 49 46. 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 policy Covers post closing fraud, forgery, identity theft Increases with value of the property up to 150% of original price Includes coverage for: mechanics liens, invalid permits, forced removal of structure, unrecorded easements, unrecorded leases,Slide 46 of 49 47. Closing Day Youll have a final walk-through on closing Closing typically takes 1 hourday or just before Get keys and take possession! What to bring: Government issued photo ID Certified checkSlide 47 of 49 48. So What Now? Make sure its 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 &amp; close the dealSlide 48 of 49 49. 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 49 of 49 50. AppendixSlide 50 of 49 51. Appendix Important forms/contracts Favorite Real Estate ResourcesSlide 51 of 49 52. Some Of Our Favorite Sites Seattle Bubble: market analysis Curbed Seattle: cool houses Urbnlivn: for condo shoppers WalkScore: see whats nearbySlide 52 of 49 53. HUD Settlement Statement 54. 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 55. Favorite Homes For Sale Links Redfin: MLS + FSBO + REO, updated every 15 minutes, with DOM, price history, Zestimate craigslist: Major FSBO source that Redfin doesnt have HotPads: Foreclosure heat maps RealtyTrac: Foreclosure market detail, subscription required for full reports Brokerage site of listing agents: more photos of the listing 56. 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 &amp; credit score SmartMoneys Home Buying Worksheet: Similar to the MSN calculator, but requires more info 57. 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 58. Favorite Links Loans for first-time home buyers Federal Housing Administration (FHA) Fannie Mae and Freddy Mac Government sites Federal Trade Commission: Articles &amp; alerts for home- buyers. Dept. of Justice: Role of competition in real estate 59. Favorite Links Cont. Remodeling &amp; 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 </p>