Our Agents. Mark Bennett Market Manager. General Q&A. Joyti Goundar Los Angeles. General Q&A

Transcription

1 Our Agents Mark Bennett Market Manager General Q&A Joyti Goundar Los Angeles General Q&A

2 Redfin s Home-Buying Class Studio City, CA April 29, 2009

3 Agenda Evaluating the Market 6:15 7:15 When to Buy & Why The Market: what s going on? Costs of Ownership: alternatives Online Resources Break: 7:15 7:35 Working with Redfin 7:35 8:00 Touring Working With an Agent Making an Offer Short-sales & foreclosures 8:00 8:15 Mortgages 8:15 8:30 General Q&A 8:30 9:00

4 When to Buy A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. Warren Buffett, October 2008 I was seldom able to see an opportunity until it had ceased to be one. Mark Twain, 19 th Century

5 Why Buy a Home? You ve got a family, and need room to grow You want deep roots You want creative control You want a type of property that is difficult to rent You re handy, and ready to invest your time You ve saved up a down payment You want the tax savings You ve got an anaconda, a dog, a boat, a camper

6 Why You Shouldn t Buy a Home You don t have a good reason Family Schools You can t afford a 10% - 20% down payment You can rent for much less You plan on moving soon Three years minimum Seven years is ideal You re worried about job security Renting allows you to move where jobs are Renting allows you to down-size more easily The most common real estate mistake is viewing a house first as a financial investment and only second as a home. June 2008, New York Times

7 Case-Shiller: Los Angeles Area -26% Case-Shiller year-over-year Seattle v. 20-City Maximum: April % from maximum October 2003 price levels Case-Shiller: 20-City Composite -19% year-over-year Maximum: May % from maximum October 2003 price levels

8 Median Home Price: Studio City March % to % to

9 No. of Sold Properties Monthly: Studio City, March % to % to

10 No. of Properties for Sale: Studio City, March % to % to

11 Months of Supply: Studio City March 09 inventory would take 7+ months to sell out if there were no new listings. March months % to % to

12 Median Home Price: Glendale March % to % to

13 No. of Sold Properties Monthly: Glendale, March % to % to

14 No. of Properties for Sale: Glendale, March % to % to

15 Median Home Price: Reseda March % to % to

16 No. of Sold Properties Monthly: Reseda, March % to % to

17 No. of Properties for Sale: Reseda, March % to % to

18 Months of Supply: Reseda March 09 inventory would take 2+ months to sell out if there were no new listings. March months % to % to

19 Los Angeles County: 92,099 Foreclosures 182 in Studio City 928 in Glendale Average price $525,095 (Glendale) 0.41% of all housing units 0.27% nationally Data source:

20 Sale v. List Price: Single Family Homes Los Angeles County: SP/LP 98% Area List Price Sale Price SP/LP SP/OLP Studio City $790,652 $748,482 %95 %88 Glendale $527,363 $507,293 %96 %92 Burbank $495,022 $480,566 %98 %94 Woodland Hills $533,105 $511,106 %97 %92 Sherman Oaks $700,640 $674,809 %97 %91 Northridge $471,434 $461,701 %98 %94 90-days prior to April 29, 2009 Source: CARETS

21 Sale v. List Data: SFR, REO Los Angles County: 99%/LP Area List Price Sale Price SP/LP SP/OLP Studio City $746,162 $713,500 %96 %90 Glendale $465,062 $459,413 %98 %95 Burbank $406,493 $409,177 %100 %97 Woodland Hills $434,875 $434,341 %101 %99 Sherman Oaks $505,865 $500,565 %99 %94 Northridge $389,209 $390,280 %100 %97 90-days prior to April 29, 2009 Source:CARETS

22 Fixed-Rate Mortgage Trend National Average 30-Year Fixed-Rate Mortgage: -16.2% to % to Average March rate: 5.00%

23 What Does This Mean For You? Rates are down: 4.80% (week ending April 23rd) Home values have dropped: Nationally: -19% to % since peak May 2006 Los Angeles: -26% to % since peak April 2006 Peak Price/Rate* Los Angeles (-38%) Price $400,000 $248,000 Rate 6.51% 4.80% Payment $ 2,531 $ 1,301 The peak represented is for Los Angeles, April 2006 per Case-Shiller, national rate quoted per Freddie Mac

24 Home-Buyer Tax Incentives Stimulus tax credit 10% of purchase price Tax credit, $8,000 maximum No repayment required Haven t owned home in past three years Must own the home for three years post credit Income limit: single $75,000, couples $150,000 Purchases through November 30, 2009 Replaces $7,500 credit in effect For more information visit:

25 Consider the Alternative: Renting Search Craigslist for a comparable rental Same neighborhood Same property type: house or condo +/- 10% on square feet Rule-of-thumb: would 20 years of rent buy the home? Q3 2008: Los Angeles, 16.3 National, year average: Los Angeles, 16.4 National, 17.7 Range : x rent in Los Angeles is a good deal Sale Price Rent Annual Rent Years of Rent to Pay for Home $395,000 $2,100 $25,200 $395,000 / $25,200 = Source:

26 What s Most Likely to Happen? Why homes prices could decline another 20% More local layoffs: unemployment 10+% New wave of foreclosures Listings pulled in winter re-listed in March First-time home-buyers rent instead Why homes prices won t decline 20% Low interest rates spur demand, limit foreclosures New construction starts remain low Stimulus package incites more buying activity Programs to stall/stop foreclosures succeed

27 Online Resources

28 What s for Sale MLS: brokerage sites (Redfin) Conventional sales Short sales Bank-owned For-Sale-By-Owner Craigslist Zillow (also on Redfin) Foreclosures: RealtyTrac, hotpads

29 Online Resources Other Websites Heatmaps: Trulia, Hotpads Analytics: DQ News For-Sale-By-Owner: Craigslist Other Data: WalkScore Redfin Sweet Digs Forums Stats & Trends Neighborhood Data

30 Finding Sweet Digs & Forums

31 Sweet Digs Neighborhood pricing Sale-to-list data Real estate trends Case-Shiller indices Forums: 8,402 posts What s up with the buy/rent ratios in Los Angeles? Someone is flipping, should I buy? What is HELOC??

32 20 Minute Break Eat, drink & talk real estate. Up Next... Working with Redfin 7:35 8:00 Touring Working With an Agent Making an Offer Short-sales & foreclosures 8:00 8:15 Mortgages 8:15 8:30 General Q&A 8:30 9:00

33 How to Work with Redfin

34 Home-Buying: The Redfin Way Find out what you can afford Tour homes using our Field Agent Choose a Lead Agent Find a home you like Determine what to offer Make an offer Work with your Lead Agent to negotiate An Associate Agent will guide you through closing

35 Before We Get Started: Get Pre-Approved Information needed W-2, two pay-stubs, tax returns (get them ready) Bank statements Time required: 30 minutes Duration: days, depending on lender Uses Tour homes: verify you can afford home Make offers: substantiate your offer Ask for a few different amounts

36 How Touring Works Unlimited tours Up to 6 homes per tour Weekends book early Led by Field Agent Get advice from a Lead Agent first Or just tour without talking to anyone first No commitment See a home through Redfin Buy through another agent if you choose Pre-approval required Redfin can connect you with a lender (no kickbacks) Start shopping for loans

37 Touring With Redfin: Demo Walk through a live demo that includes: Searching for a home on the map Clicking the Go See This Home button Filling out the tour wizard Selecting another home to tour Submitting the final tour request

38 Working With a Lead Agent

39 Found a Home You Like? You can talk to an Lead Agent first or Propose offer terms online

40 What to Ask an 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?

41 Talk to an Agent

42 Get in Touch

43 Or, Find an Agent You Like

44 Make Sure She s a Good Fit Talk With an Agent: If you d like guidance on what to offer Need insight into the market To confirm who you d like to work with

45 Lead Agent Negotiates Deal Researches seller Reviews agent-only comments Contacts listing agent Studies listing agent negotiating patterns Discusses with you Do you want a comparative market analysis? Where do you want to start? Where do you want to end up? Crafts purchase & sale agreement Inspection contingency Financing contingency Submits offer Negotiates terms

46 How is Redfin Different? Lead Agent not paid on commissions Base salary, benefits Customer satisfaction bonus You can evaluate our agents Online: transaction history, reviews Meet face-to-face or talk via telephone No commitment Switch Redfin agents Use another brokerage entirely

47 Submit an Offer Online

48 Input Draft Offer Terms

49 After Submitting Your Offer A Lead Agent will review it We ll follow up with you over the phone We ll guide you on price You re not committed until you sign We ll negotiate with the seller on your behalf Guide you through closing

50 Let s Talk Strategy: The 7 Tells 1. Seller has to move 2. On the market for 90+ days at one price 3. Last or first in a development 4. Property is vacant 5. Estate sale 6. Owner s are getting a divorce

51 How Commissions Work You ve purchased a home for: $500,000 The seller owes his agent 3%: $15,000 The seller owes the buyer s agent 3%: $15,000 Redfin refunds 50% of buyer s agent fee: $7,500 Reduces closing costs Excess paid as a check within 10 days of closing Refund is tax free Minimum Redfin fee: $5,500 Traditional Commission Seller s Agent $15,000 Buyer s Agent $15,000 Redfin Commission Seller s Agent $15,000 Buyer s Agent* $7,500 Redfin Buyer $7,500

52 Short-Sales & Bank Owned Properties

53 What is a Short-Sale? Usually pre-foreclosure, but not always Listed for less than what s owed to the bank Requires 1-2 bank s approval (usually 2) Redfin maps short-sales but does not support them.

54 Why Doesn t Redfin Service Short-Sales? Lengthy close time (3-5 months) Roller coaster of emotion High rate of rejection Ties you up in a contract No repairs (take-it-or-leave-it) Title issues common (liens)

55 What is a Bank-Owned Property? Auction fails Bank owns, markets property via broker, MLS Standard sale but: Verbal negotiations Long response times Repairs unlikely Legal addenda may require an attorney Limited or no disclosures Also known as Real Estate Owned (REO)

56 REO Quirkiness Must Pre-Qualify with Lender or Bank Banks counter by asking for Highest and Best Homes will often be without utilities Banks put weird clauses into contracts Passive contingencies Per Diem Charges Bank can back out any time Escrow may not be local

57 What About Auctions? Cash buyers only Dates are posted in small publications Dress warm, auctions are on the courthouse steps Bidding starts at what the bank owes Be prepared, homes move fast You can t count on getting a good deal You re on your own

58 Cut to the Chase: Where s the Best Deal? REO s & short-sales often aren t the best deal: Banks are stingy Not a fire sale Your best bet for a good deal: Sellers who own their home outright Sellers who are relocating Estate Sales

59 Mortgages

60 You Need a Loan More importantly, you ll need to find someone willing to lend you money. Assuming you ve got good credit (>720), and can come up with a decent down payment (10-20%), we ll go over the standard loan process.

61 Before You Get Started Get your finances in order Cash accounts (liquid funds) 401(k), stocks, other investments Gift funds? (up to $10,000) Move funds around before you start shopping Review your debt Pull credit report, look for errors Pay down balances to 1/3 rd of credit available Don t open any new lines Don t buy any big ticket items (wait till later) Co-borrower will need to do the same

62 Start Shopping Gather documentation (you & co-borrower) Last two paystubs Last two year s W-2s & tax returns Bank statements (last 30-days) Copy of driver s license Employer information PDF everything so you re prepared, avoid delays Shop for loans from Banks & credit unions: mainstream loans (20%, FHA) Brokers: more options, rate shopping ( niche loans) Mortgage bankers: lend their own money (flexibility)

63 Compare Results Gather good faith estimates (loan quotes) A minimum of three, more is better Compare similar loans Program (FHA, conventional) Timeframe (same day) Compare costs side-by-side Discount & origination points Interest rates APR (interest rates + fees + points + PMI) Insurance premiums (FHA, PMI) Ask what fees may change

64 Make Your Decision When possible, get a loan commitment Lock your interest rate (30-60 days) Make alternative funds liquid (401(k), stock) Final stop: closing table Good news! Loan payments are made in arrears, so your first loan payment won t be for two months. You ll have one month of no payments!

65 National Average: Graph Reproduced with the permission of

66 Current Average Rates: Freddie Mac Survey Type of Loan April 16, 2009 April 23, Year Fixed 4.82% 4.80% 15-Year Fixed 4.48% 4.48% 5/1 ARM 4.88% 4.85% 1-Year ARM 4.91% 4.82%

67 Appendix: Step-by-step Touring Guide How to Conduct Your Own: Comparative Market Analysis Mortgage Types & Programs Our Favorite Real Estate Websites

68 How to Tour

69 Search for Properties Online

70 Find a Home to Tour

71 Schedule a Tour

72 You re All Set Remember! Bring your ID & pre-approval letter.

73 Tours: Top-Ten Tips 1. Bring a camera and a notebook 2. Bring a (handy) friend 3. Bring a tape measure 4. Keep your thoughts to yourself 5. Visit during the day 6. Check under oddly placed furniture 7. Check the bathrooms for rot and mold 8. Look for wavy or discolored siding 9. When sharing a wall, make sure it's thick 10. Be wary of signing a guest register Print out our checklist for your next home tour:

74 Comparative Market Analysis

75 CMA Standard Criteria Sold properties (within the last three months) Same type (don t mix townhomes with condos) Look no further than ¼ mile radius from home Square footage within 10-15% Same beds & baths Similar style (craftsman, modern, split-level) Lot Size Year built Consider extenuating circumstances (REO)

76 You Want This Home

77 Identify Major Criteria Type: single family residence Square feet: 1,740 (range 1,450 2,000) Lot size: 4,000 square feet (range 3,500 4,500) Year built: 1927 Style: craftsman Beds: 3 Baths: 1.75 Unique: view

78 Search for Homes Sold (zip code or neighborhood)

79 Download Results

80 Filter Out Stuff You Don t Need Delete sale type, home type, city, state

81 Sort Based on Your Criteria Remember: Square feet: 1,740 3 Beds/1.75 baths Year built: 1927 Craftsman

82 Throw Out Outliers Remember: Square feet range: 1,450 2,000 3 Beds/1.75 baths Year built: 1927

83 Scrutinize the Leftovers Use the links from your download Focus on 2-3 solid comparables Use Google street view when available Consider neighboring homes Street type: arterial Always drive by your final selections

84 Determine a Final Price Range Found two solid comparables Price range: $399,950 - $440,000 Asking price: $497,500 (higher than the range) Identify Unique Attributes Remodeled View Finished basement Quality landscaping

85 Next Step: Active Listings Find out what s on the market (competition) Run a CMA on active listings Select a few comparables: Are they similarly priced? What s the price range? Drive by to confirm details, attend open house Review Pending Sales Ask your agent to pull comparable pending sales, photos Establish a final range for homes sold in the last month Use this as a final gut check for your offer price

86 Ask Your Agent How much depreciation has taken place since the sale of your comps? Finally, Compare Results Establish a final range Consult your agent for specifics Adjust the range for unique attributes Submit an offer

87 Do I make an offer now, or wait? General Rule of Thumb (this ain t gospel) Does it meet the criteria of most of the seven tells? How far below list price are you? 0%-6% : Green Light 7%-12% : Use Discretion 13%-15% : Stop and Evaluate Weigh the Pro s and Con s The price could reduce on it s own (no offers) There s a higher chance of success (days on market) Interest rates could change (up or down) Another party could make an offer (you lose the home) You could jeopardize future negotiations by low balling

88 Quick & Dirty CMA Using Listing Details 1. Find the home you want 2. Click on View Details 3. Scroll down to find: Google street view Property history Median house values Value estimates Similar listings & sales Community information Want to know more about CMAs? Link:

89 Loans & Programs

90 Types of Loans Fixed-rate: years, usually 30-year Simplest The most popular Adjustable Rate Mortgages Low initial rate Rate increase after 1, 3, 5, 7, 10 years Then re-adjusts every 1, 2, 3 years Usually a standard rate + 2% Lingo: 5/1 ARM

91 Loan Programs Federal Housing Authority Conventional Combination (1 st & 2 nd ) Veteran s Affairs Jumbo

92 FHA Loans Insured by U.S. government Insurance 1.75% rolled into the loan Subject to PMI.05% Available for fixed and ARM loans Rate is usually lower Minimum down-payment: 3.5%... FHA appraisal value Purchase price (whichever is lower) No maximum income limits Best choice for Folks with a lower credit score Small down-payment Self-employed

93 Conventional (conforming) Typical term: 30 years Lowest rates 10-20% down payment Credit score >720 Veteran s Affairs Loans (VA Loans) Fixed-rate: year terms Open to veterans of active military service Easy qualification Jumbo (non-conforming) Loans up to $3,000,000 Higher rate

94 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 Terabitz: Custom neighborhood dashboard, pages load slowly and U/I is awkward. Trulia Heat Maps: Median prices across a county

95 Favorite Real Estate Links Listing Search Redfin: MLS + FSBO + REO, updated every 15 minutes, with DOM, price history, Zestimate craigslist: Major FSBO source that Redfin can't crawl HotPads: Foreclosure heat maps, slow to load & the zoom can be funky Brokerage site of listing agents: more photos of the listing RealtyTrac: Foreclosure market detail, subscription required for full reports

96 Favorite Real Estate Links Pricing Data & Tools Case-Schiller Indices: Pricing trends by metropolitan area HouseMath: Compares a housing investment to a stock market investment 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 SmartMoney's Home Buying Worksheet: Similar to the MSN calculator, but requires more info

97 Favorite Real Estate Links Mortgage Calculators & Loan Information Bankrate: Many ads, but is great for comparing local lenders Zillow's 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

98 Favorite Real Estate Links Loans for First-Time Home-Buyers Federal Housing Administration (FHA) Fannie Mae and Freddy Mac CalHFA: California State agency that helps certain buyers Government Sites Federal Trade Commission: Articles & alerts for home-buyers. Dept. of Justice: Role of competition in real estate

99 Favorite Real Estate Links 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 What to Look for in an Inspection American Society of Home Inspectors (ASHI): Good consumer FAQ & virtual home inspection