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Redfin’s Home Buying Class September 28, 2011 Somerville, MA

Home Buying Class - Boston - September 28, 2011

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Page 1: Home Buying Class - Boston - September 28, 2011

Redfin’s Home Buying Class

September 28, 2011 Somerville, MA

Page 2: Home Buying Class - Boston - September 28, 2011

A Little Bit About Who We AreA Technology Company Becomes a Customer-Service Company• In the beginning…

• Team: engineers, working for free• Goal: give consumers data once limited to

Realtors• Result: first to put listings on a map

• And nothing really changed• Consumers got the same old service…• At the same old price

• So Redfin changed• A website became a brokerage• A technology company became a service

company

Page 3: Home Buying Class - Boston - September 28, 2011

A Little Bit About What We DoRedfin is a brokerage that’s using technology and a customer-service focus to change the real estate game in the consumer’s favor. • What: a brokerage• How we are different:

• Technology• Customer-service

• Why: we want to change the game

Page 4: Home Buying Class - Boston - September 28, 2011

What We Have AccomplishedRedfin 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 33% of our

commission

Page 5: Home Buying Class - Boston - September 28, 2011

To Buy or Not to Buy

Page 6: Home Buying Class - Boston - September 28, 2011

Why You Should Buy a Home• You need room to grow

• You want to stay put for 5+ years• You want a type of property that is difficult to rent• You’re handy, and ready to invest your time in your

home• You’ve saved up a down payment

Considering… Looking… Buying…

Page 7: Home Buying Class - Boston - September 28, 2011

Why You Shouldn’t Buy a Home• You can’t afford a 10% - 20% down payment (FHA

exception*)• 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 - Boston - September 28, 2011

Market Conditions

Page 9: Home Buying Class - Boston - September 28, 2011

0.00

50.00

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150.00

200.00

250.00Case-Shiller: BostonDown 2.1% year-over-yearPeak was September 2005Down 15.3% from peakCurrently at July 2003 prices

Case-Shiller: 20-City CompositeDown 4.5% year-over-yearPeak was July 2006Down 31.5% from peakCurrently at June 2003 prices

Considering… Looking… Buying…

Case-Shiller: Boston v. 20-City

Page 10: Home Buying Class - Boston - September 28, 2011

Middlesex Stats for SF Homes:

Considering… Looking… Buying…

Page 11: Home Buying Class - Boston - September 28, 2011

Middlesex SF August Market Stats

Considering… Looking… Buying…

Page 12: Home Buying Class - Boston - September 28, 2011

Suffolk Stats for Condos:

Considering… Looking… Buying…

Page 13: Home Buying Class - Boston - September 28, 2011

August Suffolk Condo Stats

Considering… Looking… Buying…

Page 14: Home Buying Class - Boston - September 28, 2011

Cambridge Stats for Condos:

Considering… Looking… Buying…

Page 15: Home Buying Class - Boston - September 28, 2011

Cambridge August Stats for Condos:

Considering… Looking… Buying…

Page 16: Home Buying Class - Boston - September 28, 2011

Newton Stats for SF Homes:

Considering… Looking… Buying…

Page 17: Home Buying Class - Boston - September 28, 2011

Newton August Stats for SF Homes:

Considering… Looking… Buying…

Page 18: Home Buying Class - Boston - September 28, 2011

Where to find data…

Considering… Looking… Buying…

Page 19: Home Buying Class - Boston - September 28, 2011

Is it a good time to buy? Maybe.• Unemployment continues to drop/stabilize (7.4% for

July)• Stock Market stabilizes/rises consistently• Rates will be low (Fed says thru 2013)• Elections will bring instability • Jumbo Loan amount changes• FHA limit changes

Consider buying more home than you need and grow into it

Monitor the rental prices for your areasIt is all about your time frame! 5 years plus please…

Page 20: Home Buying Class - Boston - September 28, 2011

How to Search for a Home

Page 21: Home Buying Class - Boston - September 28, 2011

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• Agent Insights: You know what we know

Considering… Looking… Buying…

Page 22: Home Buying Class - Boston - September 28, 2011

Redfin Demo

Page 23: Home Buying Class - Boston - September 28, 2011

Now You are Ready to Tour

• Up to 6 homes per tour in 2 hour blocks• Go on as many tours as you would like• Led by Agent or Field Agent• No commitment

Considering… Looking… Buying…

Page 24: Home Buying Class - Boston - September 28, 2011

Break!

Page 25: Home Buying Class - Boston - September 28, 2011

Mortgages

Page 26: Home Buying Class - Boston - September 28, 2011

Get Pre-Approved• A pre-approval letter is a letter from a bank or a lender

estimating how much they'll lend a borrower• Help you establish how much you can afford and makes

offer process go faster• Information needed:

• W-2, two pay-stubs, tax returns (get them ready), bank statements

• The process only takes a few days while banks get everything verified

• The approval is good for 90 days, depending on lender• Ask for a few different amounts• Redfin asks that you get pre-approved before your third

tourConsidering… Looking… Buying…

Page 27: Home Buying Class - Boston - September 28, 2011

Facts on Getting Pre-Approved• Applications are usually free and credit checks should not

cost more than $20• If you get multiple credit checks from multiple

lenders within a 30 day period, this will only count as one credit check against your credit score

• The application does not bind you to a lender, loan or rate

• You will get a better idea of any other action items you need to complete before you can buy

• Gives you a chance to discuss different financing options• Your pre-approval stays valid as long as your finances

constant (check with your lender to see if they have limits on this)

• Being pre-approved is required by sellers to consider offersConsidering… Looking… Buying…

Page 28: Home Buying Class - Boston - September 28, 2011

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

Looking… Buying…Considering…

Page 29: Home Buying Class - Boston - September 28, 2011

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 1/3rd 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

Looking… Buying…Considering…

Page 30: Home Buying Class - Boston - September 28, 2011

Start Shopping for LendersCompile a list of 4-6 lenders & brokers

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

Looking… Buying…Considering…

Page 31: Home Buying Class - Boston - September 28, 2011

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)

Considering… Looking… Buying…

Page 32: Home Buying Class - Boston - September 28, 2011

Make Your Decision • When possible, get a loan commitment• Lock your interest rate (30 - 60 days)• 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. You’ll have one month of no payments.

Considering… Looking… Buying…

Page 33: Home Buying Class - Boston - September 28, 2011

Current Average Rates

Type of Loan September 15, 2011

September 22, 2011

30-Year Fixed 4.09% 4.09%15-Year Fixed 3.30% 3.29%

5/1 ARM 2.99% 3.02%

1-Year ARM 2.81% 2.82%

Considering… Looking… Buying…

Page 34: Home Buying Class - Boston - September 28, 2011

Change to Jumbo Loan LimitsCounty name One-Unit Limit

until Sept. 30One-Unit Limit starting Oct. 1

Barnstable $462,500 $417,000

Bristol $475,000 $426,650

Dukes $729,750 $625,500

Essex $523,750 $465,750

Middlesex $523,750 $465,750

Nantucket $729,750 $625,500

Norfolk $523,750 $465,750

Plymouth $523,750 $465,750

Suffolk $523,750 $465,750

Page 35: Home Buying Class - Boston - September 28, 2011

Change to FHA Loan LimitsCounty name One-Unit Limit

until Sept. 30One-Unit Limit starting Oct. 1

Barnstable $462,500 $405,950

Bristol $475,000 $426,650

Dukes $729,750 $625,500

Essex $523,750 $465,750

Middlesex $523,750 $465,750

Nantucket $729,750 $625,500

Norfolk $523,750 $465,750

Plymouth $523,750 $465,750

Suffolk $523,750 $465,750

Page 36: Home Buying Class - Boston - September 28, 2011

Where Are Rates Headed?

Page 37: Home Buying Class - Boston - September 28, 2011

Local Recommended Lenders

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

Considering… Looking… Buying…

Page 38: Home Buying Class - Boston - September 28, 2011

Working with Redfin

Working with Redfin

Page 39: Home Buying Class - Boston - September 28, 2011

Working With Redfin is DifferentService• Advocates: client-satisfaction bonuses, not

commissions• Transparency: informed decisions• Best Agents: The right home for the right price

No obligation• Switch Redfin agents• Pause and re-start your search any time• Tour on your schedule and pace

Refund• You get up to 33% the commission

The Best Results• Service: 97% would recommend us to a friend

Considering… Looking… Buying…

Page 40: Home Buying Class - Boston - September 28, 2011

How Commissions Work

• Redfin refunds 33% 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: $6,000

Example: You buy a home for $500,000

Considering… Looking… Buying…

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%) $12,500

Redfin (66.67%) $8,334

Redfin Buyer (33.33%) $4,166

Page 41: Home Buying Class - Boston - September 28, 2011

How Our Team WorksAgent

• Responsible for your success

• Writes your offer• Handles inspection• Handles negotiations

Field Agents

• Assists with Tours• Assists inspections• Answers Questions

Coordinator

• Schedules tours• Coordinates Agents• Answers Questions

Considering… Looking… Buying…

You

Page 42: Home Buying Class - Boston - September 28, 2011

The Offer & The Deal

Page 43: Home Buying Class - Boston - September 28, 2011

Tour homes

Find dream home

Consult with agent, write offer

Submit offer to listing agent

Negotiations

Success! Mutual AcceptanceEarnest money [$1000]

Inspection contingency [5-10 days]

5% of Purchase Price

P&S Review [10-14 days]

Financing contingency [20-25]

Final walk thru - details

Get keys and take possession!

Overview of a Purchase

Success! Mutual Acceptance

Closing!

Receive Redfin refund

Complete Redfin survey

Page 44: Home Buying Class - Boston - September 28, 2011

Your Agent Negotiates Deal• Researches seller

• Reviews agent-only comments• Contacts listing agent• Studies listing agent negotiating patterns• Studies sellers situation and motivations

• Discusses with you• Do you want a comparative market analysis?• Where do you want to start?• Where do you want to end up?

• Crafts Offer to Purchase• Inspection contingency• Financing contingency

• Submits offer• Negotiates terms

Page 45: Home Buying Class - Boston - September 28, 2011

The Offer to Purchase• Binding contract to purchase real estate at

a specific price within a specific timeline.• Typically good for 24-48 hours• $1000 check submitted with contract• Framework for P&S• Verbal contracts are not binding in RE!

• Important Dates• Inspection Contingency (5-10 days)• Purchase and Sales Agreement (7-14 days)• Financing contingency (7-10 days before closing)• Closing (30-60 days)

• Additional Terms• Inclusion/Exclusions• Additional spaces (parking/storage/roof decks…)• Condo docs, budgets, minutes, assessments…

Page 46: Home Buying Class - Boston - September 28, 2011

Deal RoomImportant milestone

tracker

Your team of agents

Your to do list

Page 47: Home Buying Class - Boston - September 28, 2011

What Next…Under Agreement!• Schedule Home Inspection

• Look for pdf. reports with photos• Ask us or use personal references• Mention if you want tests perform:

• Radon- canister or computer?• Lead Paint• Water

• Have a check or CC ready• Shop around – priced by sqft. and # of

bedrooms• Stay involved – home education• Ice Dams? Irene?

Considering… Looking… Buying…

Page 48: Home Buying Class - Boston - September 28, 2011

Home Inspection Hints

• Double-paned windows• Well ventilated attic• Knob and tube wiring

• Mold, mildew or signs of leaking near walls or floors

• Check water pressure

• Galvanized steel pipes • Chimney sweep fireplace inspection

• Stairs have handrails• Check all included appliances

• Cracks in foundation

Considering… Looking… Buying…

Watch out for: Look for and Check:

Page 49: Home Buying Class - Boston - September 28, 2011

What Next…Lawyers!• Get a Lawyer – They’ll have one so

should you!• Ask about pricing up front – flat fee• What they will be doing? – services• Are they a RE attorney?• Who will I be working with?• How long have you been doing this?• Will you work as the bank’s attorney?• Contingencies…

Considering… Looking… Buying…

Page 50: Home Buying Class - Boston - September 28, 2011

What Next…Are we there yet?• Purchase And Sales Contract

• Negotiated by your RE attorney• “The guts of the deal”• Inspection Items –Yes/No• Deposit Money Required (5% typical in

MA)• Personal check acceptable• Goes to Listing Broker/Seller Att. escrow account

• Redfin Rebate!!! - closing costs, reduction…

• 4 signed and initialed copies + check• Copy to your lender ASAPConsidering… Looking… Buying…

Page 51: Home Buying Class - Boston - September 28, 2011

Finally…. Massive Debt• Close contact with your Lender• Appraisal – order it quickly, ask for copy• Private Mortgage Insurance – ask

early/often• Commitment Letter (15-30 days out)

• Clean copy w/no contingencies• Home Insurance -required• Movers – book up quickly• Final Walk Through • Closing – checklist/inspection items

Considering… Looking… Buying…

Page 52: Home Buying Class - Boston - September 28, 2011

So What Now? • Make sure it’s the right time for you• Get pre-approved & look for a lender• Search for homes• Find the right agent & start touring• Make an offer & close the deal

Considering… Looking… Buying…

Page 53: Home Buying Class - Boston - September 28, 2011

After Class…Please fill out the survey we’ll send this week along with this slide deck. We’d love to get your feedback on how the class could improve.

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

Considering… Looking… Buying…

Page 54: Home Buying Class - Boston - September 28, 2011

Appendix: •Important forms/contracts•Favorite Real Estate Resources

Page 55: Home Buying Class - Boston - September 28, 2011

HUD Settlement Statement

Page 56: Home Buying Class - Boston - September 28, 2011

Favorite Real Estate Links

• Property Information• PropertyShark: Zoning data, title history,

permits, neighborhood data; navigation is clunky

• Mass Land Records: Mortgages, liens, permits..

• Boston Magazine: Best Places to Live• Neighborhood Information

• WalkScore: Proximity to points of interest• Trulia Heat Maps: Median prices across a

county

Page 57: Home Buying Class - Boston - September 28, 2011

Favorite Real Estate Links: Listings• 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• Brokerage site of listing agents: more

photos of the listing• RealtyTrac: Foreclosure market detail,

subscription required for full reports

Page 58: Home Buying Class - Boston - September 28, 2011

Favorite Real Estate Links: Pricing Data• 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 more info

Page 59: Home Buying Class - Boston - September 28, 2011

Favorite Real Estate Links: Mortgage• 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 60: Home Buying Class - Boston - September 28, 2011

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 61: Home Buying Class - Boston - September 28, 2011

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

• What to Look for in an

Inspection• American Society of Home Inspectors (A

SHI): Good consumer FAQ & virtual home inspection