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Slide 1 of 50 Redfin’s Home Buying Class January 24, 2013 Boulder, CO Presented by: Paul Stone Redfin’s Denver Team

Denver hbc 1.24.13

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Redfin’s Home Buying Class

January 24, 2013 Boulder, COPresented by: Paul StoneRedfin’s Denver Team

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Agenda● To buy or not to buy● Overview of purchase process● Understanding the Market● Touring● Mortgages● Break!● Choosing an agent● Redfin as a tool ● Short sales & foreclosures● What to know about closing

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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 a portion of our commission

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To Buy or Not to Buy

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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’re handy & and ready to invest● You’ve saved up a down payment

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

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Understanding the Buying Process

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Overview of Purchase Process (more details to follow)● Information – learn as much as possible about the market, the

neighborhood, price trends● Tour some houses to get a general idea● Interview Lenders- get pre-approved● Choose an Agent● Tour more seriously and find YOUR home● Mutual Acceptance on your offer● Home Inspection “Contingency”● Financing and Appraisal “Contingencies”● Closing

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Understanding the Market

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National Market Trends● Multiple Offers

►74% of offers in OC faced competition in March, 51% in DC►Offers increased 50% nationwide but closings only

increased by 17%►Competition is up for getting offers accepted

● Tale of 2 markets►Prices are mostly soft for condos and townhomes►Entry level and mid range houses are selling like hotcakes

● Nationally, prices are down 3.8%● Number of homes for sale is down 27% from March last year

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Case-Shiller: Denver Area v. 20-City

0.00

50.00

100.00

150.00

200.00

250.0020 City CompositeDenver

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Case-Shiller – By the Numbers Case-Shiller: Denver Area

Up 4.0% year-over-yearPeak was August 2006Down 6.6% from peakCurrently at March 2005 prices

Case-Shiller: 20-City CompositeUp 0.5% year-over-yearPeak was July 2006Down 31.1% from peakCurrently at July 2004 prices

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Denver December Stats for Homes

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Denver December Stats for Homes

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National Market TrendsMultiple Offers - More than a Quarter of Listings Still Selling Fast● In Dec. 27.5% of new listings were under contract in two weeks or less. ● This measure of how competitive the market is for buyers has been

holding steady for the last seven months.● Multiple offers are not only against 3 or 5 buyers, but more like 10, 20 and

sometimes even 30 or more

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National Market Trends● The key metrics across 19 major metropolitan markets are:

► Prices 11.3% higher YoY (9th month in a row with increasing prices YoY)► Inventory falls 33% YoY► At the close of 2012 there were < 160,000 listings nationally► Inventory been dropping YoY for 22 months in a row

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Short Sales and Bank Owned

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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)

We Can Help With a Short Sale!● See short sales with a Redfin agent● If you want to buy, work with a Redfin agent or 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

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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

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Mortgages

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Review Your Financial SituationTo Buy or Not to Buy

● Pull credit report, look for errors● Establish comfort level for monthly payment● 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● Source of money● Current employment status

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

Good sources include:● Redfin's partner lenders ● Referrals from friends, family & co-workers● Online review sites, such as Yelp● Local chains and offices

*Know your lender

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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● What’s the difference between Pre-Approval and Pre-Qualification● Good for 90 days, depending on lender● Ask for a few different amounts● Redfin asks that you get pre-approved before your third tour● Are gift funds involved?● How much do you have for a down payment?

Information needed:

● W-2, two pay-stubs, tax returns, bank statements

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Comparing Loan Estimates● Gather loan estimates

►A minimum of three, more is better► These aren’t final numbers, but within a few thousand dollars►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)

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Types of Loans● Conventional:

► As low as 5% down► Fixed or adjustable rates, conforming or non-conforming

● Federal Housing Administration Loan (FHA):► Always have mortgage insurance► Buyers need only a 3.5% down payment

● VA Guaranteed Loan:► Veterans, active duty personnel, reservists/national guard, surviving

spouses► No down payment

● Ask your lender if they have special loan programs► Example: First Time Home Buyer, Good Neighbor…

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Where Are Rates Headed?

Type of Loan January 10, 2013 January 17, 2013

30-Year Fixed 3.40% 3.38%

15-Year Fixed 2.66% 2.66%

5/1 ARM 2.67% 2.67%

1-Year ARM 2.60% 2.57%

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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.

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Break!

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Putting it all together to findYOUR home

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Redfin.com-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

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Open Book● Redfin Certified Providers● Every professional is reviewed and all reviews are shown● Search for local:

► Inspectors►Lenders►Title Companies

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Highlights of Redfin’s Site● Search by zip code,

neighborhood, schools● Saved searches/instant alerts● Agent notes● Download results● Price your home● Forums● Home buying guide● Home inspection guide

● Any questions about the site?

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Choosing the Right Agent

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Traditional vs. Redfin

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Redfin’s Partner ProgramPartner agents are employed by other brokerages, but

have teamed up with us to provide Redfin-Certified service to a wider range of customers.

We’ll refer you to a partner agent when:►A home is outside of our direct service area►A home is below our price minimum►We’re experiencing an unusually high customer demand

We survey all partner agent clients►All surveys are published on their Redfin page►97% of customers would recommend Redfin partners

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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?● Can I see some reviews of your work?

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This occurs when inventory is down and buyer interest is up

5 Tips for Winning in a Bidding War1. Make the competition eat your dust2. Get pre-approved with a local lender & get underwriter

approval3. Start the conversation early4. Write a letter & appeal to the seller5. Know your limits

Experience With Multiple Offers

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Touring

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Making the Most of Your Tour1. Bring a camera, notebook & tape measure2. See how much sunlight the place gets3. Check the bathrooms for rot & mold4. Look for wavy or discolored wood siding5. Make sure water spouts drain away from

house6. Take stock of storage space7. Turn off any music playing in house8. Check for hardwood floors

9. Peek into the attic10. Bring a marble or two11. When sharing a wall, make sure it’s thick12. Ignore the appliances and carpets13. Check the closets14. Get the disclosure packet15. Compare the property’s tax records to the

listing details

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How Touring with Redfin Works

● Up to six homes per tour in two hour blocks

● Go on as many tours as you need

● Led by Agent or AssociateAgent

● Need to be verified● No obligation

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Home Inspection and Other Contingencies

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Home Inspection● We recommend that you have a home inspection● Cost runs $350 to $1200 depending upon the size of the

house● Your agent will accompany you● Your time to evaluate the property● What an inspection contingency covers and doesn’t cover● Types of inspections

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Other Contingencies● Appraisal – Performed in conjunction with financing● Financing● HOA● Other

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Closing – what you need to know

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Closing: HUD–1 SettlementHUD-1 Settlement Statement – Lists all fees/charges/creditsBy law, the final costs listed on your HUD-1 must be within 10%

of the estimates provided on your Good Faith Estimate (GFE).● Lender charges

► Includes origination fee, appraisal fee, credit report, insurance and tax escrows

● Title charges► Includes settlement fee, and owner’s and lender’s title

insurance● Government charges

► Includes recording fees, recordation taxes and property taxes

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Title Companies● What does the title company do?

►Prepares the final documents, including the HUD-1►Conducts the closing►Examines and clears the title to the property►Records the deed, mortgage and any other recordable

instruments► Issues title insurance to the lender and the buyer

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Closing: Title Insurance● Title insurance guarantees that the property is clear and

marketable● 2 types of title insurance policies

►Limited (Standard)Protection against pre-closing defects in title

►Enhanced (Eagle)Costs 20% more than Standard policyCovers post closing fraud, forgery, identity theftIncreases with value of the property up to 150% of original priceIncludes coverage for: mechanic’s liens, invalid permits, forced removal of structure, unrecorded easements, unrecorded leases,

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Closing Day● You’ll have a final walk-through on closing

day or just before● What to bring:

► Government issued photo ID► Certified check

● Closing typically takes 1 hour● Get keys and take possession!

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So What Now? ● Make sure it’s the right time for you● Start browsing online● Check out our Home Buying Guide and Events page● Find the right agent● Look for a lender and get pre-approved● Start seeing homes● Make an offer & close the deal

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Thanks for Coming!Please fill out the survey that was handed out at the beginning ofclass. We appreciate the feedback!

Check out our upcoming classes and events at http://www.redfin.com/buy-a-home/classes-and-events

Some Favorite Links:www.costhelper.com www.walkscore.comwww.schooldigger.com www.crimereports.comwww.mortgagenewsdaily.comwww.bankrate.com/finance/mortgages/

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Appendix