Our Local Agents Taylor Connolly Maryland Team Lead taylor.connolly@redfin.com Nick Chaconas Maryland Team Lead nick.chaconas@redfin.com Karen Krupsaw Balt./Wash. Region Market Manager karen.krupsaw@redfin.com Fernando Ferrufino DC Team Lead fernando.ferrufino@redfin.com Marshall Park Northern Virginia Team Lead marshall.park@redfin.com
Redfin s Home-Buying Class Falls Church, VA July 22, 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?
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
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
300.00 250.00 200.00 Case-Shiller: DC Metro Area Case-Shiller +7.3% year-over-year Seattle v. 20-City Maximum: May 2006-28.5% from maximum April 2004 price levels 150.00 100.00 50.00 0.00 Case-Shiller: 20-City Composite +4% year-over-year Maximum: July 2006-30% from maximum August 2003 price levels DC Metro Area 20-City Composite
$550,000 NWMLS: MRIS: Median Sold Price $500,000 $450,000 $400,000 $350,000 $300,000 $250,000 $200,000 Area YoY Prior Mo. $Amount Montgomery -0.6% +6.8% $374,750 Fairfax +10.9% +7.7% $435,000 Washington, DC -5.5% +2.3% $395,000 $150,000 $100,000 Montgomery Fairfax Washington DC
2,200 2,000 1,800 1,600 MRIS: Number of Homes Sold Area YoY Prior Mo. No. Montgomery +12.1% +14.3% 1,232 Fairfax -0.9% +9.8% 2,149 Washington, DC +17.0% +8.2% 716 1,400 1,200 1,000 800 600 400 200 Montgomery Fairfax Washington D.C.
12,000 NWMLS: Median Price MRIS: Number of Listings 10,000 8,000 6,000 4,000 2,000 - Area YoY Prior Mo. No. Montgomery -2.9% +1.2% 5.023 Fairfax +2.1% +0.9% 7,777 Washington, DC -7.8% +1.3% 3,227 Montgomery Fairfax Washington, DC
16.00 14.00 MRIS: Months of Supply NWMLS: Median Price 12.00 Montgomery Fairfax Washington D.C. 10.00 8.00 6.00 4.00 2.00 - Area YoY Prior Mo. Months Montgomery -13.4% -11.4% 4.1 Fairfax +3.1% -8.10% 3.6 Washington D.C. -21.2% -6.40% 4.6
Metro DC: Foreclosures as of July 20 th Area Foreclosures Average Price % of Homes Arlington County 441 $488,241 0.07% Fairfax County 6,067 $348,112 0.20% Loudoun County 2,392 $338,162 0.34% Montgomery County 2,549 $291,575 0.16% Washington, DC 1565 NA 0.09% National 2,075,563 $178,871 0.25% Data source: www.realtytrac.com. Data based on homes at any point in the foreclosure process in the last month.
What s Most Likely to Happen? Why home prices could decline another 20% More local layoffs: unemployment rate increases Consumer confidence along with decline in stock prices New wave of foreclosures Cash-strapped first-time home-buyers rent instead Why home prices won t decline 20% Inventory declines impact pricing Government programs stabilize market Economy stabilizes, improving customer confidence Government and quasi-government employment props up DC
Searching 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 (5-20%), 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 Lender No kickbacks, no obligation See all Redfin clients survey responses
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.
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
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 (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
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
Working With a Redfin Agent
How to Find Our Agents
Pick Your Area to Find Local Redfin Agents
Select an Agent
Make Sure He s a Good Fit
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?
Submit an Offer Online
Input Draft Offer Terms 5304 WINDSOR HILLS Dr FAIRFAX, VA 22032 List Price: $609,000 Estimated Redfin Refund*: $9,135
After Submitting Your Offer An 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 We ll guide you through closing
Making an Offer & Closing the Deal
Tour homes Find dream home Consult with agent on pricing and offer strategy Submit offer to listing agent Negotiate Overview of a Purchase Success! Mutual Acceptance Deliver earnest money [Within 7 days] Conduct home inspection [5-10 days] Secure financing [21-30 days] Remove contingencies [asap] Attend Closing! Receive Redfin refund Complete Redfin survey
Meet in the middle! Pricing Strategy: Bridging the Gap Buyers Understand comparable sales Consider other factors beyond offer price Don t get caught in a bidding war if it s not you Sellers Balance price along with timing Respond to lower priced offers with a counter
The Settlement Process Your settlement (title/closing) company: Examines city/county land records Work with your lender to determine closing costs Coordinate the date and time of the settlement Prepare all documents necessary for the settlement
Settlement Companies Ensure smooth settlement experience for all parties involved The settlement company is neutral Represents the Sales Contract Buyer selects settlement company What to look for in a title company: Quality of service Reputation and expertise
Critical Settlement Documents HUD-1 GFE (Good Faith Estimate) TIL (Truth In Lending) disclosure Deed Deed of Trust / Mortgage Other lender required disclosures
Short-Sales & Bank Owned Properties
What is a Short Sale? Owner does not have enough funds to payoff mortgage at settlement May be pre-foreclosure, but not always Requires 1-2 banks approval (usually 2) May have other liens (taxes, utilities, HOA) on the home
Will Redfin Service Short-Sales? Lengthy close time (3-5 months) Roller coaster of emotion High rate of rejection Ties you up in a contract Typically Sold As-is (take-it-or-leave-it) Title issues possible (liens)
What is a Bank-Owned Property? Bank Foreclosure Auction fails Real Estate Owned (REO) AS REO, the bank will list property via traditional broker with an Asset Manager acting as the seller Standard sale, but: Verbal negotiations Long response times Repairs unlikely (FHA, VA financing issues) Limited or no disclosures
REO Quirkiness Banks counter at close to full price Typically negotiate 2 nd time around Homes may/may not have been winterized properly (frozen/cracked pipes = water damage) Bank Addendum required to ratify contract Home may be sold in bulk-package prior to settlement Escrow may be held by listing agent.
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
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 / Trusts
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.
Appendix: Glossary of Common Terms Step-by-step Touring Guide How to Conduct Your Own: Comparative Market Analysis Our Favorite Real Estate Websites
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 Deposit (EMD): The money buyers pay within 7 days after agreeing with the seller on a price for the home to show that they're serious about the offer. Usually 1 5% 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!
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 a. iphone to snap photo and add to Redfin app 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
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