Our Local Agents Jen Beehler Transaction Coordinator jen.beehler@redfin.com Brad Le Silicon Valley Agent brad.le@redfin.com Miawand Bayan Southern East Bay Team Lead miawand.bayan@redfin.com Frank Wong Southern East Bay Agent frank.wong@redfin.com
Redfin s Home-Buying Class San Jose, CA July 21, 2010
Agenda Intro to Redfin 6:30 7:00 Market Conditions When to Buy & Why The Market: what s going on? Searching for a home Mortgages Break: 7:00 7:20 Home Buying Process 7:20 7:45 Touring & Finding an Agent Making an Offer Closing the Deal Short-sales & Foreclosures 7:45 8:00 General Q & A 8:00 8:30
What Redfin Is All About Our Mission: To use technology and a customer service focus to make buying & selling homes better for consumers. The Redfin Difference: Service, Not Sales Agents 100% focused on clients, not prospecting Every client surveyed, every response published Every agent paid on client satisfaction What You Get: Deep local expertise Service at every step Agents focused on your goals, not theirs
Why Buy a Home? You want to settle down You ve got a family, and need room to grow You want creative control You re handy, and ready to invest your time You ve saved up a down payment You want the tax savings
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
Median Single Family Home Sold Price in June: San Mateo & Santa Clara Counties $1,000,000.00 $900,000.00 $800,000.00 $700,000.00 San Mateo: Up 4% YoY Up 6% MoM $600,000.00 $500,000.00 $400,000.00 Santa Clara: Up 16% YoY Up 1% MoM $300,000.00 $200,000.00 $100,000.00 $0.00 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10
Median Condo Sold Price in June: San Mateo & Santa Clara Counties $600,000.00 $500,000.00 $400,000.00 $300,000.00 San Mateo: Down 3% YoY Up 16% MoM Santa Clara: Up 3% YoY Down 6% MoM $200,000.00 $100,000.00 $0.00 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10
# of Single Family Homes Sold in June: San Mateo & Santa Clara Counties 1400 1200 1000 Santa Clara: Down 8% YoY Down 11% Mo 800 600 400 200 San Mateo: Up 6% YoY Up 7% MoM 0 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10
# of Condos Sold in June: San Mateo & Santa Clara Counties 500 450 400 Santa Clara: Down 6% YoY Down 23% Mo 350 300 250 200 150 100 50 San Mateo: Up 21% YoY Down 11% Mo 0 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10
War Stories from the Field Background: Santa Clara SFH 3BR/2BA Listed at $768k Our client offered $800k, as-is, 14-day contingencies Result: Sold for $839k Received 27 offers 76 Arcadia Ave
War Stories from the Field Background: Berryessa 3BR/2BA Listed at $449k Our client offered $490k, as-is, NO contingencies Result: Sold for $538k Received 50offers 3120 Kermath Dr
War Stories from the Field Background: Cupertino 4BR/2BA Listed for $975k Our client offered $1M, as-is, 10-day contingencies Result: Sold for $1,120,000 Received 17 offers 19773 Wintergreen Dr
What s Most Likely to Happen? Why home prices could decline Massive layoffs New wave of distressed properties on the market Stringent guidelines on obtaining credit and financing Interest rates increase any more Why home prices won t decline Decently strong rental market Historically low interest rates Bidding wars on distressed and normal properties Increased consumer confidence in the housing market Stabilization of weakened economy
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
Searching for a Home
Why Redfin MLS Search is Better Multiple Listing Services (MLS) are databases that agents use to list homes You see nearly everything an agent sees Refreshes every 15-30 minutes on Redfin See all the info on homes when they sell Quicker, better, more 30% more listings than other search sites Schools, market data, neighborhood trends
Searching on Redfin Find open houses Search recent sales Exclude short sales
Doing the Research Yourself Get email alerts See neighborhood/ city trends & school info Download to Excel
Finding Redfin s Forums
Mortgages: What Can You Afford?
You Need a Loan More importantly, you ll need to find someone willing to lend you money. Assuming you ve got good credit (>740), and can come up with a decent down payment (10-20%), we ll go over the standard loan process.
Organize Your Assets Get ready for the down payment Cash accounts (liquid funds) 401(k), stocks, other investments Gift funds? (Max. allowed varies) Move funds around before you start shopping
Review Your Debt Pull credit report, look for errors Figure out how much monthly income goes 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
Get Paperwork Ready Gather documentation (you & co-borrower 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
Get Pre-Approved Establishes your price ranges & shows you re serious Information needed: W-2, two pay-stubs, tax returns (get them ready), bank statements Time required: 30 minutes Duration: 90 days, depending on lender Ask for a few different amounts Redfin asks that you get pre-approved before your third tour
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)
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
June 2010 30 Yr-Fixed Rate: 4.74% 8.00% 7.00% 6.00% 5.00% 4.00% 30-Yr Fixed 3.00% 2.00% 1.00% -13% Y-o-Y change -3% M-o-M change 0.00% Jun-07 Oct-07 Feb-08 Jun-08 Oct-08 Feb-09 Jun-09 Oct-09 Feb-10 Jun-10
National Average: 1963-2009 Graph Reproduced with the permission of www.mortgage-x.com
Current Average Rates Type of Loan July 8, 2010 July 15, 2010 30-Year Fixed 4.57% 4.57% 15-Year Fixed 4.07% 4.06% 5/1 ARM 3.75% 3.85% 1-Year ARM 3.75% 3.74% Source: Freddie Mac http://www.freddiemac.com/pmms/
20 Minute Break Eat, drink & talk real estate. Up Next... Working with Redfin 7:30 7:45 Making an Offer 7:45 8:15 Short Sales & Foreclosures 8:15 8:30 General Q&A 8:30 9:00
Working with Redfin
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
How Commissions Work Example: You buy a home for $500,000 Traditional Agents Commission Seller s Agent (2.5%) $12,500 Buyer s Agent (2.5%) $12,500 Redfin Agents Commission Seller s Agent (2.5%) $15,000 Redfin (1.25%) $6,250 Redfin Buyer (1.25%) $6,250 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
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
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
Finding a Redfin Agent
How to Find Our Agents
Pick Your Area to Find Local Redfin Agents
Make Sure He s a Good Fit
What to Ask an Agent Is this your full-time job? When were your last five deals? Tell me about those deals. Who else will be working with me? When am I committed to working with you? Has a client ever filed a complaint? How are you paid? Are you familiar with foreclosures or short-sales?
Submit an Offer Online
Input Draft Offer Terms
Tour homes Find dream home Consult with agent, write offer Submit offer to listing agent Negotiations Success! Mutual Acceptance Overview of a Purchase Earnest money [Within 3 days] Inspection contingency [10-14 days] Financing contingency [14 days] Waiting for loan docs Escrow signing appointment Closing! Get keys and take possession! Receive Redfin refund Complete Redfin survey
Short-Sales and Bank Owned Properties
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
Redfin Can Help You With A Short Sale Tour short sales with Redfin If you want to buy, we refer you to a short sale specialist partner agent* Get a 15% commission rebate *Did you know: Redfin partner agents work for other brokerages but share our commitment to customer service
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)
REO Quirkiness Long response times Banks put seller-friendly clauses into contracts Banks, brokers and attorneys not accommodating Property purchased As-Is Closings often don t happen as planned A major hassle!
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
Cut to the Chase: Where s the Best Deal? REOs & 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
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
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. Redfin s hiring! Check out our open positions or email Sophia Gray at sophia.gray@redfin.com for information about a specific position.
THANK YOU!
Appendix: Step-by-step Touring Guide How to Conduct Your Own: Comparative Market Analysis Mortgage Types & Programs Our Favorite Real Estate Websites
How to Tour
Search for Properties Online
Find a Home to Tour
Schedule a Tour or Add More Homes
Fill Out Some Basics
You re All Set!
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: http://p1.rfimg.us/static-images/images/text/redfin_home_tour_worksheet.pdf
Comparative Market Analysis
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
You Want This Home
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
Search for Homes Sold (zip code or neighborhood)
Download Results
Filter Out Stuff You Don t Need Delete sale type, home type, city, state
Sort Based on Your Criteria Remember: Square feet: 1,740 3 Beds/1.75 baths Year built: 1927 Craftsman
Throw Out Outliers Remember: Square feet range: 1,450 2,000 3 Beds/1.75 baths Year built: 1927
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
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
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
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? 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. 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: http://www.redfin.com/buy-a-home/comparative-market-analysis?src=printable-listing-text
Loans & Programs
Types of Loans Fixed-rate: 15 50 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
Loan Programs Federal Housing Authority Conventional Combination (1 st & 2 nd ) Veteran s Affairs Jumbo
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
Conventional (conforming) Typical term: 30 years Lowest rates 10-20% down payment Credit score >720 Veteran s Affairs Loans (VA Loans) Fixed-rate: 10-30 year terms Open to veterans of active military service Easy qualification Jumbo (non-conforming) Loans up to $3,000,000 Higher rate
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
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
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
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
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
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