Our Agents Here Tonight

Our Agents Here Tonight Dorcas Bean Coordinator West Seattle Allie Howard Team Lead Downtown, Capitol Hill, Madrona Febe Cude Team Lead Northeast Seattle, Mercer Island Robin McCue Agent Green Lake, Greenwood, Ballard

Redfin s Home-Buying Class Seattle, WA June 8, 2010

Agenda Intro to Redfin 6:00 7:00 Market Conditions When to Buy & Why The Market: what s going on? Searching for a home Mortgages Break: 7:00 7:30 Home Buying Process 7:30 8:15 Touring & Finding an Agent Making an Offer Closing the Deal Short-sales & Foreclosures 8:15 8:30 General Q & A 8:30 9:00

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

To Buy or Not to Buy?

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

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

Market Conditions

250.00 200.00 Case-Shiller: Seattle v. 20-City Case-Shiller: Seattle Area -3.6% year-over-year Maximum: July 2007-25% from maximum March 2005 price levels 150.00 100.00 50.00 0.00 Case-Shiller: 20-City Composite -0.5% year-over-year Maximum: July 2006-31% from maximum July 2003 price levels Seattle Area 20-City Composite

May King Co. Median Sold Price: $347,520 $450,000 $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000-3.6% Y-o-Y change +1.3% M o-m change $50,000 $0

May King Co. # of Homes Sold: 2,506 3,000 2,500 2,000 1,500 1,000 500 +32.3% Y-o-Y change +5.7% M-o-M change 0

May King Co. # of Listings: 15,180 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000-4.4% Y-o-Y change +2.4% M-o-M change 2,000 -

May King Co. Months of Supply: 6.1 16.00 14.00 12.00-27.7% Y-o-Y change -3.1% M-o-M change 10.00 8.00 6.00 4.00 2.00 05-2010: it would take 6.1 months to sell all the inventory if there were no new listings. 05-2009: 8.4 months of supply 0.00

Seattle-Area Foreclosures Area Foreclosures Average Price % of Homes Seattle 2,725 $284,433 0.11% Bellevue 459 $497,692 0.12% Redmond 156 $318,542 0.08% King County 8,234 $313,645 0.15% Snohomish County 4,391 $254,338 0.23% Nationally 2,110,860 $173,230 0.26% Data source: www.realtytrac.com numbers represent the number of foreclosed homes currently on the market.

What s Most Likely to Happen? Why home prices could decline another 10% Unemployment breaks into double digits Foreclosures impact appraisals Rapid rise in interest rates Why home prices won t decline 10% Interest rates remain very low Foreclosures released on market in controlled manner

How to Search for a Home

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

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 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

Local Recommended Lenders

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

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)

Comparing GFE 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 Insurance premiums (FHA, PMI) APR (interest rates + fees + points + PMI)

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.

May 30 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

Current Average Rates Type of Loan May 27, 2010 June 3, 2010 30-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 http://www.freddiemac.com/pmms/

Redfin Home Buying Guide Currently in development First section: mortgages, pre-approval, lenders Looking for feedback from real home shoppers Check the box on the sign-in sheet We email you a copy you send feedback to our writer Thanks!

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 (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

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

Find a Home to Tour

Schedule a Tour or Add More Homes

Fill Out Some Basics

You re All Set!

Finding a Redfin Agent

How to Find Our Agents

Pick Your Area to Find Local Redfin Agents

Select an Agent

Make Sure She s a Good Fit See all deals & reviews Team members & roles

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?

Making an Offer & Closing the Deal

Tour homes Find dream home Consult with agent, write offer Submit offer to listing agent Negotiations Overview of a Purchase Success! Mutual Acceptance Earnest money [Within 3 days] Inspection contingency [5-10 days] Title review [5 days] Financing contingency [20-25 days] Waiting for loan approval Escrow signing appointment Closing! Get keys and take possession! Receive Redfin refund Complete Redfin survey

Tour homes Find dream home Consult with agent, write offer Submit offer to listing agent Negotiations Overview of a Purchase: Finding a Home Success! Mutual Acceptance Earnest money [Within 3 days] Inspection contingency [5-10 days] Title review [5 days] Financing contingency [20-25 days] Waiting for loan approval Escrow signing appointment Closing! Get keys and take possession! Receive Redfin refund Complete Redfin survey

Tour homes Find dream home Consult with agent, write offer Submit offer to listing agent Negotiations Overview of a Purchase: Making an Offer Success! Mutual Acceptance Earnest money [Within 3 days] Inspection contingency [5-10 days] Title review [5 days] Financing contingency [20-25 days] Waiting for loan approval Escrow signing appointment Closing! Get keys and take possession! Receive Redfin refund Complete Redfin survey

Tour homes Find dream home Consult with agent, write offer Submit offer to listing agent Negotiations Overview of a Purchase: Contingencies Success! Mutual Acceptance Earnest money [Within 3 days] Inspection contingency [5-10 days] Title review [5 days] Financing contingency [20-25 days] Waiting for loan approval Escrow signing appointment Closing! Get keys and take possession! Receive Redfin refund Complete Redfin survey

Tour homes Find dream home Consult with agent, write offer Submit offer to listing agent Negotiations Overview of a Purchase: Closing the Deal Success! Mutual Acceptance Earnest money [Within 3 days] Inspection contingency [5-10 days] Title review [5 days] Financing contingency [20-25 days] Waiting for loan approval Escrow signing appointment Closing! Get keys and take possession! Receive Redfin refund Complete Redfin survey

Tour homes Find dream home Consult with agent, write offer Submit offer to listing agent Negotiations Overview of a Purchase: Take Ownership Success! Mutual Acceptance Earnest money [Within 3 days] Inspection contingency [5-10 days] Title review [5 days] Financing contingency [20-25 days] Waiting for loan approval Escrow signing appointment Closing! Get keys and take possession! Receive Redfin refund Complete Redfin survey

Short-Sales & 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 Hardship Package paperwork between seller and their bank, getting pre-approval for short sale before taking an offer

Redfin Can Help You With A Short Sale Tour short sales with Redfin If you want to buy, Redfin refers you to a short sale partner agent Redfin partner agents work for other brokerages but share Redfin s commitment to customer service Get a 15% commission rebate

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)

Bank-Owned Quirkiness Homes often winterized (can t test utilities) Banks demand use of their own contracts Often takes weeks to get signed contract Bank can back out any time until they ve signed Contract often requires early release of earnest money

Cut to the Chase: Where s the Best Deal? Bank-owned & short-sales myth Always 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 Short Sales with hardship packages

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.

Appendix: Glossary of common real estate terms Important forms/contracts Mortgage Types & Programs Favorite Real Estate Resources

Common Real Estate Jargon Contingency: Conditions included with an offer on a home that must be fulfilled before the deal can close. If a buyer or seller is unable to satisfy a contingency, then the offer on a home may become void. Deed: A legal document filed with the county that documents the transfer of home ownership. This is a document the buyer signs when her deal closes and she'll receive a copy once the original is recorded by the county. Earnest Money: The money buyers pay one to three business days after agreeing with the seller on a price for the home to show that they're serious about the offer. Usually 1 3% of the purchase price (though sometimes it's a fixed amount), the money is deposited into an escrow account via a cashier's check or money order. Escrow: A neutral third party or attorney that handles the exchange of money and documents once mutual acceptance is reached on an offer. Escrow handles the transfer of the buyer's loan documents and property taxes and works with a buyer's lender and real estate agent to make sure that the title of the home is clear of liens before the transfer of ownership. Title: A legal document listing the history of ownership of the home. Buyers get a preliminary title report from an escrow agent or attorney within a week after they reach mutual acceptance on an offer. See even more definitions in Redfin s Real Estate Glossary!

NWMLS Purchase & Sale Agreement

HUD Settlement Statement

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