Our San Diego Agents. Mark Bennett Market Manager. Stephanie Walker Agent. Anna Nevares Team Lead. Sara Masey Team Lead

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1 Our San Diego Agents Sara Masey Team Lead Mark Bennett Market Manager Stephanie Walker Agent Anna Nevares Team Lead

2 Redfin s Home-Buying Class Del Mar, CA June 9, 2010

3 Agenda Evaluating the Market 6:15 7:15 When to Buy & Why The Market: what s going on? Searching for a Home Break: 7:15 7:35 Working with Redfin 7:35 8:00 Touring Working With an Agent Making an Offer & Closing the Deal Short-sales & foreclosures 8:00 8:15 Mortgages 8:15 8:30 General Q&A 8:30 9:00

4 What Redfin Is All About Redfin is a real estate brokerage that focuses on customer-service and technology to make buying and selling homes better for consumers. The Most Trusted Service Customer focus: client-satisfaction bonuses, not commissions Transparency: public reviews No obligation: sign up online, it s easy to tour The Best Results Service: 97% would recommend us to a friend Lower fees: $7,500

5 To Buy or Not to Buy?

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

7 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

8 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. New York Times

9 Terms: Average v. Median The average of a set of numbers is the sum divided by their number. Example : 1, 2, 12 Average = ( )/3 = 5 The median is the middle value of a set of numbers. Example : 1, 2, 12 Median = 2

10 Case-Shiller: San Diego Seattle Area v. 20-City +11% year-over-year Maximum: November % from maximum April 2003 price levels Case-Shiller: 20-City Composite -0.5% year-over-year Maximum: July % from maximum July 2003 price levels San Diego Area 20-City Composite

11 Median Sold Price: San Diego, May 2010 Sold price up 19% from May 09 Sold price up 2% from April 10

12 No. of Properties for Sale: San Diego, May 2010 Down 2% from May 09 Down 4% from April 10

13 Months of Supply: San Diego May 10 inventory would take 4.0 months to sell out if there were no new listings. Average months of supply is flat from April 09 to May 10 Average months of supply of inventory up 33% from April 10

14 Median Sold Price: Encinitas, May 2010 Sold price down 8% from May 09 Sold price down 4.4% from April 10

15 No. of Properties for Sale: Encinitas, May 2010 Number of homes for sale down 10% from May 09 Number of homes for sale down 2.4% from April 10

16 Months of Supply: Encinitas May 10 inventory would take 5 months to sell out if there were no new listings. In May 09, 7 months. Average months of supply down 28.5% from May 09 Average months of supply down 16% from April 10

17 Median Sold Price: Del Mar, May 2010 Sold price down 19.3 % from May 09. Sold price down 12.5% from April 10

18 No. of Properties for Sale: Del Mar, May 2010 Number of homes for sale down 17.5% from May 09 Number of homes for sale up 4% from April 10.

19 Months of Supply: Del Mar May 10 inventory would take 23 months to sell out if there were no new listings. In May 09, it was 12 months. Number of months of supply is up 91% from May 09 Number of months of supply is up 130% from April 10

20 New California Tax Credit Up to 5% of the purchase price or $10K Payment spread over three years All first timers eligible Current homeowners only eligible if buying new construction Must close between May 1 & December 31

21 What s Most Likely to Happen? Why home prices could decline another 20% More local layoffs: unemployment 10+% New wave of foreclosures First-time home-buyers rent instead Why home prices won t decline 20% Low interest rates spur demand, limit foreclosures New construction starts remain low CA tax credit incites more buying activity Programs to stall/stop foreclosures succeed

22 How to Search for a Home

23 Why Redfin s Search is Better 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

24 Searching on Redfin Find open houses Search recent sales Exclude short sales

Doing the Research Yourself Get email alerts See

25 Doing the Research Yourself Get alerts See neighborhood/ city trends & school info Download to Excel

26 Finding Redfin s Forums

27 20 Minute Break Eat, drink & talk real estate. Up Next... Break: 7:00 7:30 Working with Redfin 7:30 7:45 Short Sales & Foreclosures 7:45 8:15 Making an Offer 8:15 8:30 General Q&A 8:30 9:00

28 Working with Redfin

29 Working With Redfin is Different See all our agents deals & reviews We survey everyone who tours, signs an offer, buys or sells a home Satisfaction measured by a Net Promoter Score Our agents focus on service, not sales No obligation Switch Redfin agents Use another brokerage entirely You get up to 50% commission refund

30 How Commissions Work Example: You buy a home for $500,000 Traditional Agents Commission Seller s Agent (3%) $15,000 Buyer s Agent (3%) $15,000 Redfin Agents Commission Seller s Agent (3%) $15,000 Redfin (1.5%) $7,500 Redfin Buyer (1.5%) $7,500 Redfin refunds 50% of the buyer s agent commission Applied to closing costs Remainder paid as a check within 10 days of closing Refund is tax-free Minimum Redfin fee: $5,500

31 How Touring Works See as many homes as you need Up to six homes per tour in two hour blocks Led by field agent Get advice from an agent first Or just tour without talking to anyone first No commitment See a home through Redfin Buy through another agent if you choose Get pre-approved Redfin can connect you with a lender (no kickbacks) Start shopping for loans

32 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

33 Finding a Redfin Agent

34 How to Find Our Agents

35 Pick Your Area to Find Local Redfin Agents

36 Select an Agent

37 Make Sure She s A Good Fit

38 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?

39 Making an Offer & Closing the Deal

40 Submit an Offer Online

41 Input Draft Offer Terms

42 After Submitting Your Offer A Redfin 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

43 Tour homes Find dream home Consult with agent, write offer Overview of a Purchase Submit offer to listing agent Negotiations Success! Mutual Acceptance Earnest money [Within 3 days] Inspection contingency [17days] Title review [17 days] Financing contingency [17 days] Waiting for loan documents Escrow signing appointment Closing! Get keys and take possession! Receive Redfin refund Complete Redfin survey

44 Short-Sales & Bank Owned Properties

45 What is a Short Sale? A home where 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) on the home

46 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)

47 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

48 Cut to the Chase: Where s the Best Deal? REO s & short-sales may or may not be the best deals: 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

49 Mortgages: What Can You Afford?

50 Getting Started: Review Your Debt Pull credit report, look for errors Figure out how much monthly income will go towards paying off debt: 28 33% healthy Pay down balances to 1/3 rd of credit available Don t open any new lines of credit Don t buy any big ticket items Co-borrower will need to do the same

51 Get Paperwork Ready Gather documentation (you & coborrower) Last two paystubs Last two years W-2s (tax returns if selfemployed) Bank statements (last 60 days) Copy of driver s license Employer information Residence history PDF everything so you re prepared, avoid delays

52 Start Shopping for Loans Banks & credit unions: Mainstream loans (20% Conventional, FHA) Brokers: More options, rate shopping ( niche loans) Mortgage bankers: Lend their own money (flexibility)

53 Comparing GFE Results Gather Good Faith Estimates (loan quotes) A minimum of three, more is better Compare similar loans Type of program (FHA, conventional) Same time of day (rates change all day) Compare costs side-by-side Discount & origination points Interest rates Insurance premiums (FHA, PMI) APR (interest rates + fees + points + PMI)

54 Make Your Decision When possible, get a loan commitment Lock your interest rate (30-60 days) Make alternative funds liquid (401(k), stock) 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.

55 May Yr-Fixed Rate: 4.89% 8.00% 7.00% 6.00% 5.00% 4.00% 30-Yr Fixed 3.00% 2.00% 1.00% National Average 30-Year Fixed-Rate Mortgage: +1% Y-o-Y change -4% M-o-M change Average May rate: 4.89% 0.00% Jun-07 Nov-07 Apr-08 Sep-08 Feb-09 Jul-09 Dec-09 May-10

56 Current Average Rates Type of Loan May 27, 2010 June 3, Year Fixed 4.78% 4.79% 15-Year Fixed 4.21% 4.20% 5/1 ARM 3.97% 3.94% 1-Year ARM 3.95% 3.95% Source: Freddie Mac

57 So What Now Make sure it s the right time to buy Research market pricing conditions Get pre-approved & start shopping for mortgages Search for homes & get out on tours Find the right agent Make an offer & close the deal

58 Help Us Improve Our Class Please fill out the survey we ll send tomorrow along with the slide deck. We d love to get your feedback on how the class could improve. If you d like to get in touch with an agent, just chat with us now or contact us on Redfin.com.

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

60 How to Tour

61 Search for Properties Online

62 Find a Home to Tour

63 Schedule a Tour or Add More Homes

64 Fill Out Some Basics

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

66 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

67 Loans & Programs

68 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

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

70 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

71 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

72 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

73 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

74 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

75 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

76 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

77 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

78 Comparative Market Analysis

79 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

80 You Want This Home

81 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

82 Search for Homes Sold (zip code or neighborhood)

83 Download Results

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

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

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

87 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

88 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

89 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

90 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

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?

91 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

Quick & Dirty CMA Using Listing Details 1.

sales Community information Want to know more about CMAs?

92 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:

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