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Redfin’s Home Buying Class December 14, 2011 Bellevue, WA

Home Buying Class - 12.14.2011 - Bellevue,WA

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Page 1: Home Buying Class - 12.14.2011 - Bellevue,WA

Redfin’s Home Buying Class

December 14, 2011 Bellevue, WA

Page 2: Home Buying Class - 12.14.2011 - Bellevue,WA

AgendaConsidering…• To buy or not to buy• Market conditions• Searching for a homeLooking…• Finding a real estate agent• Working with RedfinBreak!Buying…• Mortgages• The offer and the deal• Short sales and bank owned

Considering… Looking… Buying…

Page 3: Home Buying Class - 12.14.2011 - Bellevue,WA

Considering… Looking… Buying…

Page 4: Home Buying Class - 12.14.2011 - Bellevue,WA

A Little Bit About Who We AreRedfin is a real estate brokerage that has helped over 20,000 people buy or sell a home; 97% would refer us to a friend.

• Customers, not commissions• Informed decisions• The right home for the right price

No obligationGet back up to 50% of our commission

Considering… Looking… Buying…

Page 5: Home Buying Class - 12.14.2011 - Bellevue,WA

To Buy or Not to Buy

Page 6: Home Buying Class - 12.14.2011 - Bellevue,WA

Why You Should Buy a Home• You have a family and need room to grow• You expect to stay put for 5 or more years• You want a home that is difficult to rent• You’re handy & and ready to invest• You’ve saved up a down payment

Considering… Looking… Buying…

Page 7: Home Buying Class - 12.14.2011 - Bellevue,WA

Why You Shouldn’t Buy a Home• You don’t have a good reason like family or schools• You can’t afford the down payment• You can rent for much less• You plan on moving soon• You’re worried about job security

Considering… Looking… Buying…

Page 8: Home Buying Class - 12.14.2011 - Bellevue,WA

Market Conditions

Page 9: Home Buying Class - 12.14.2011 - Bellevue,WA

Case-Shiller: Seattle Area v. 20-City

0.00

50.00

100.00

150.00

200.00

250.00

Seattle Area20-City Composite

Case-Shiller: Seattle AreaDown 6.1% year-over-yearPeak was July 2007Down 28.7% from peakCurrently at November 2004 prices

Case-Shiller: 20-City CompositeDown 3.8% year-over-yearPeak was July 2006Down 31% from peakCurrently at July 2003 prices

July/Aug2009

July/Aug2010

July/Aug2011

Looking… Buying…Considering…

Page 10: Home Buying Class - 12.14.2011 - Bellevue,WA

# Homes for Sale – Nov. 2011City Compared to

October 2011Compared to

November 2010Seattle -14.1% -32.7%

Bellevue -15.7% -32.4%

Issaquah -13.1% -25.2%

Kent -8.3% -23.8%

Kirkland -17.8% -36.9%

Renton -6.0% -34.8%

Shoreline -18.0% -33.9%

Redmond -15.3% -25.4%

Page 11: Home Buying Class - 12.14.2011 - Bellevue,WA

# of Sales – November 2011

City Compared to October 2011

Compared to November 2010

Seattle -12.5% -0.5%

Bellevue +4.2% +46.5%

Issaquah +29.4% +24.5%

Kent -15.1% +40.6%

Kirkland -18.3% +20.5%

Renton -10.7% +43.4%

Shoreline -38.8% +36.7%

Redmond +10.5% +12.5%

Page 12: Home Buying Class - 12.14.2011 - Bellevue,WA

Price Changes – Nov. 2011

City Median Sold Price Nov. 2011

Median Listed Price Nov. 2011

Median Sold $/SqFt Change since Oct. 2011

Median Sold$/SqFt Change since Nov. 2010

Seattle $315,000 $350,000 -0.1% -2.6%

Bellevue $416,000 $475,000 -0.1% +1.4%

Issaquah $382,000 $358,000 +3.3% -5.6%

Kent $190,000 $200,000 -4.5% -15.3%

Kirkland $338,000 $357,000 -4.8% -9.6%

Renton $225,000 $244,000 +2.3% -11.8%

Shoreline $214,000 $249,000 -1.9% -11.7%

Redmond $399,000 $330,000 +2.5% -4.6%

Page 13: Home Buying Class - 12.14.2011 - Bellevue,WA

Where is the Market Headed?• Supply of homes is at a five-year low and

won’t increase the rest of the year• Foreclosures have been driving price

declines, likely years of inventory remain• Rents have been rising, making buying

more attractive (Seattle Times article)• Market stabilizing, though likely 2-3 years

before significant appreciation• Rate increases - biggest issue for buyers

Page 14: Home Buying Class - 12.14.2011 - Bellevue,WA

Searching for a Home

Page 15: Home Buying Class - 12.14.2011 - Bellevue,WA

Benefits of a MLS Powered Site• 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

Considering… Looking… Buying…

Page 16: Home Buying Class - 12.14.2011 - Bellevue,WA

Demo of Redfin’s Site

Page 17: Home Buying Class - 12.14.2011 - Bellevue,WA

Working with Redfin

Working with Redfin

Page 18: Home Buying Class - 12.14.2011 - Bellevue,WA

FIELD AGENTTakes you to see homesSee 50+ homes a week

YOU

AGENTResponsible for your successWrites your offerHandles negotiations

COORDINATORSchedules toursPrepares paperworkWorks with escrow

How Our Team Works

Considering… Looking… Buying…

Page 19: Home Buying Class - 12.14.2011 - Bellevue,WA

Considering… Looking… Buying…

Page 20: Home Buying Class - 12.14.2011 - Bellevue,WA

Now You are Ready to Tour

• Up to six homes per tour in two hour blocks• Go on as many tours as you need• Led by field agent or agent• No obligation

Considering… Looking… Buying…

Page 21: Home Buying Class - 12.14.2011 - Bellevue,WA

How Commissions Work

Traditional Agents CommissionSeller’s Agent (3%) $15,000Buyer’s Agent (3%) $15,000Redfin Agents CommissionSeller’s Agent (3%) $15,000Redfin (50% of commission) $7,500Redfin Buyer (50% of commission) $7,500

• Commissions are determined by the seller• Redfin refunds 50% of the buyer’s agent commission

• Applied to closing costs• Refund is tax-free

• Minimum Redfin fee: $6,000

Example: You buy a home for $500,000

Considering… Looking… Buying…

Page 22: Home Buying Class - 12.14.2011 - Bellevue,WA

Finding an Agent

Page 23: Home Buying Class - 12.14.2011 - Bellevue,WA

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?

Considering… Looking… Buying…

Page 24: Home Buying Class - 12.14.2011 - Bellevue,WA

Make Sure She’s a Good Fit

Map view of Kathryn’s

transactions

See alldeals & reviews

Click here when you

decide

Page 25: Home Buying Class - 12.14.2011 - Bellevue,WA

Break!

Page 26: Home Buying Class - 12.14.2011 - Bellevue,WA

Mortgages

Page 27: Home Buying Class - 12.14.2011 - Bellevue,WA

Getting Pre-ApprovedA pre-approval letter is a letter from a bank or a lender estimating how much they'll lend you

• Establishes what you can afford & makes offer process go faster• Good for 90 days, depending on lender• Ask for a few different amounts• Redfin asks that you get pre-approved before your third tour• Similar, yet different from pre-qualification

Information needed:• W-2, two pay-stubs, tax returns, bank statements

Considering… Looking… Buying…

Page 28: Home Buying Class - 12.14.2011 - Bellevue,WA

Organize Your Assets • Get ready for the down payment• Cash accounts (liquid funds)• 401k, stocks, other investments• Gift funds? (max. allowed varies)• Move funds around early

Looking… Buying…Considering…

Page 29: Home Buying Class - 12.14.2011 - Bellevue,WA

Review Your Debt• Pull credit report, look for errors• Figure out how much monthly income

goes towards debt: 28 – 33% healthy• Pay down credit balances to 1/3rd• Don’t open any new lines of credit• Don’t buy any big ticket items• Co-borrower will need to do the same

Looking… Buying…Considering…

Page 30: Home Buying Class - 12.14.2011 - Bellevue,WA

Start Shopping for LendersCompile a list of 3-4 lenders & brokers

Good sources include:• Redfin's partner lenders • Referrals from friends, family & co-workers• Banks or credit unions you have accounts at• A large, national bank with an advertised rate• Your real estate agent• Online review sites, such as Yelp

Looking… Buying…Considering…

Page 31: Home Buying Class - 12.14.2011 - Bellevue,WA

Local Recommended Lenders

*In no way does Redfin benefit financially from recommending lenders –we just think they’re great lenders!

Page 32: Home Buying Class - 12.14.2011 - Bellevue,WA

Current Average Rates Type of Loan December 1, 2011 December 8, 2011

30-Year Fixed 4.00% 3.99%

15-Year Fixed 3.30% 3.27%

5/1 ARM 2.90% 2.93%

1-Year ARM 2.78% 2.80%

Considering… Looking… Buying…

Page 33: Home Buying Class - 12.14.2011 - Bellevue,WA

Where Are Rates Headed?

Page 34: Home Buying Class - 12.14.2011 - Bellevue,WA

Comparing GFE Results • Gather 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)

Considering… Looking… Buying…

Page 35: Home Buying Class - 12.14.2011 - Bellevue,WA

Make Your Decision • When possible, get a loan commitment• Make alternative funds liquid (401k, stock)

Good news! Loan payments are made in arrears, so your first loan payment won’t be for two months.

Considering… Looking… Buying…

Page 36: Home Buying Class - 12.14.2011 - Bellevue,WA

Making Your Offer

Page 37: Home Buying Class - 12.14.2011 - Bellevue,WA

Overview•Search homes online & tour•Get pre-approved•Find a dream home•Consult with agent, write offer•Submit offer to listing agent•Negotiations•Success!

Finding Your Home

Mutual Acceptance

•Earnest money•Inspection contingency•Title review•Financing contingency•Waiting for loan approval•Escrow signing appointment

Closing•Get keys and take possession!•Receive Redfin refund•Complete Redfin Survey

Page 38: Home Buying Class - 12.14.2011 - Bellevue,WA

Overview of a Purchase•Search homes online & tour•Get pre-approved•Find a dream home•Consult with agent, write offer•Submit offer to listing agent•Negotiations•Success!

Finding Your Home

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

Page 39: Home Buying Class - 12.14.2011 - Bellevue,WA

Short-Sales & Bank Owned

Page 40: Home Buying Class - 12.14.2011 - Bellevue,WA

What is a Short Sale?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)

Considering… Looking… Buying…

Page 41: Home Buying Class - 12.14.2011 - Bellevue,WA

We Can Help With A Short Sale• See short sales with a Redfin agent• 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 refund

Considering… Looking… Buying…

Page 42: Home Buying Class - 12.14.2011 - Bellevue,WA

What is a Bank-Owned Property? A foreclosed home owned by a bank or lender

Standard sale but:• Verbal negotiations• Long response times• Repairs unlikely• Legal addenda may require an attorney• Limited or no disclosures• Banks demand use of their own contracts• Bank can back out any time until they’ve signed• Contract often requires early release of earnest money

Considering… Looking… Buying…

Page 43: Home Buying Class - 12.14.2011 - Bellevue,WA

So… Where’s the Best Deal? • Bank-owned & short-sales myths:

• 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

Considering… Looking… Buying…

Page 44: Home Buying Class - 12.14.2011 - Bellevue,WA

After Class…Please fill out the survey. We will also you this slide deck. We’d love to get your feedback so we can improve.

To get even more info on the home buying process, check out our home buying guide:Redfin.com/home-buying-guide

Considering… Looking… Buying…

Page 45: Home Buying Class - 12.14.2011 - Bellevue,WA

Some Of Our Favorite Sites• Seattle Bubble: market analysis• Curbed Seattle: cool houses• Urbnlivn: for condo shoppers• WalkScore: see what’s nearby

Page 46: Home Buying Class - 12.14.2011 - Bellevue,WA

Appendix • Important forms/contracts• Favorite Real Estate Resources

Page 47: Home Buying Class - 12.14.2011 - Bellevue,WA

NWMLS Purchase & Sale Agreement

Page 48: Home Buying Class - 12.14.2011 - Bellevue,WA

HUD Settlement Statement

Page 49: Home Buying Class - 12.14.2011 - Bellevue,WA

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• Trulia Heat Maps: Median prices across a

county

Page 50: Home Buying Class - 12.14.2011 - Bellevue,WA

Favorite Homes For Sale Links• Redfin: MLS + FSBO + REO, updated

every 15 minutes, with DOM, price history, Zestimate

• craigslist: Major FSBO source that Redfin doesn’t have

• HotPads: Foreclosure heat maps• RealtyTrac: Foreclosure market detail,

subscription required for full reports• Brokerage site of listing agents: more

photos of the listing

Page 51: Home Buying Class - 12.14.2011 - Bellevue,WA

Favorite Data Links• Case-Schiller Indices: Pricing trends by

metropolitan area• 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

Page 52: Home Buying Class - 12.14.2011 - Bellevue,WA

Favorite Mortgage Links• 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

Page 53: Home Buying Class - 12.14.2011 - Bellevue,WA

Favorite 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

Page 54: Home Buying Class - 12.14.2011 - Bellevue,WA

Favorite Links Cont. • 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