Slide 1 of 53

Redfin’s Home Buying Class

February 21, 2013 Chandler, AZPresented By: Kevin Wachel, Redfin’s Phoenix Team

Follow: @RedfinPhoenixLike: http://www.facebook.com/RedfinPhoenix

Slide 2 of 53

0%

10%

20%

30%

40%

50%

60%

70%

80%

2009 2010 2011 2012 2013

Distressed

0%

10%

20%

30%

40%

50%

60%

70%

80%

2009 2010 2011 2012 2013

DistressedTraditional

0%

10%

20%

30%

40%

50%

60%

70%

80%

2009 2010 2011 2012 2013

REO/HUD/AuctionShort SaleTraditional

Home Sales By Property Type

Slide 3 of 53

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

Slide 4 of 53

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

Slide 5 of 53

To Buy or Not to Buy

Slide 6 of 53

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’ve saved up a down payment

Slide 7 of 53

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

Slide 8 of 53

Understanding the Buying Process

Slide 9 of 53

Overview of Purchase Process

● Gather information● 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

Slide 10 of 53

Understanding the Market

Slide 11 of 53

Case-Shiller: Phoenix Area v. 20-City

0.00

50.00

100.00

150.00

200.00

250.0020 City CompositePhoenix

Slide 12 of 53

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

Up 22.8% year-over-yearPeak was June 2006Down 45.4% from peakCurrently at September 2003 prices

Case-Shiller: 20-City CompositeUp 5.5% year-over-yearPeak was July 2006Down 29.4% from peakCurrently at September 2003 prices

Slide 13 of 53

Glendale January Stats for Homes

Slide 14 of 53

Glendale January Stats for Homes

Slide 15 of 53

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

Slide 16 of 53

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

Slide 17 of 53

5 Tips for Winning in a Bidding War

1. 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

More About Multiple Offers

Slide 18 of 53

Short Sales and Bank Owned

Slide 19 of 53

Top 5 Buyer Headaches withShort Sales● 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)

Slide 20 of 53

8 Reasons Short Sales Take SO LONG to Get Approved

►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

Slide 21 of 53

Mortgages

Slide 22 of 53

Review Your Financial Situation

● Pull credit report, look for errors● www.annualcreditreport.com

● Establish comfort level for monthly payment● Consider different down payment options● Figure out how much monthly income goes towards debt:

28 – 33% healthy● Don’t open any new lines of credit● Don’t buy any big ticket items● Current employment status● ASK QUESTIONS!

Slide 23 of 53

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

But what about too many inquires into my credit report?

What happens?

Slide 24 of 53

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● Similar, yet different from pre-qualification● Are gift funds involved?● How much do you have for a down payment?● Review the process: HUD SETTLEMENT BOOKLET

Information needed:

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

Slide 25 of 53

Industry Buzz Words

• LQI – Loan Quality Initative•Government Oversight

• Consumer Financial Protection Bureau • Federal Reserve – Loan Officer Pay•FHA•VA•Fannie Mae/Freddie Mac – Seller Servicing Guide •Dodd/Frank

• OVERLAYS!

Slide 26 of 53

Loan Estimates & Loan Types● Gather loan estimates

►Good Faith Estimate►Cost Estimate ► Itemized Fee Worksheet

● Compare costs side-by-side

Know the different types of loans● Conventional● Federal Housing Administration Loan (FHA)● VA Guaranteed Loan● Ask your lender if they have special loan programs

Slide 27 of 53

Where Are Rates Headed?

Type of Loan January 31, 2013 February 7, 2013

30-Year Fixed 3.53% 3.53%

15-Year Fixed 2.81% 2.77%

5/1 ARM 2.70% 2.63%

1-Year ARM 2.59% 2.53%

Slide 28 of 53

Slide 29 of 53

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 up to two months.

Slide 30 of 53

Break!

Slide 31 of 53

Putting it all together to findYOUR home

Slide 32 of 53

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

Slide 33 of 53

Highlights of Redfin’s Site● Search by zip code

or neighborhood● Saved searches/instant alerts● Agent notes● Download results● Forums● Home buying guide● Home inspection guide

● Any questions about the site?

Slide 34 of 53

Choosing the Right Agent

Slide 35 of 53

10 Questions to Ask Any Agent1. Is this your full-time job?2. Are you familiar with foreclosures and short-sales?3. What can you tell me about the market?4. Where in the valley do you work?5. How do you like to negotiate?6. Who else will be working with me?7. Will you show me all properties for sale?8. When am I committed to working with you?9. Has a client ever filed a complaint? 10. How are you paid?

● Open ended questions, provide the best response►Don’t lead the agent to the answer►Ask for a story or two to get more details

Slide 36 of 53

Traditional vs. Redfin

Slide 37 of 53

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

Slide 38 of 53

Are you a Good Buyer?

Slide 39 of 53

What Agents Look For in a Buyer● Sense of urgency (need to buy)● Realistic about

► the market►what they want in a home► the buying process

● Respectful of the agent’s time and schedule● See’s the agent as a trusted advisor● Good communication skills● Fully prequalified

Slide 40 of 53

Need to Know About Agents● Traditional agents work for free until a deal closes● Only about 10% of home buyers will buy a home

►That’s a lot of time worked for no pay● This is a 24/7 job

►But we still need personal time and family time● This is a career/job that is constantly changing

● Agents often become life long friends with their clients

Slide 41 of 53

Creating a Solid Relationship● Start by clearly communicating

►Your expectations of your Realtor►Your work schedule►Preferred communication method►Motivations for

buying a home and timeline (doesn’t have to be immediate)

Slide 42 of 53

Touring

Slide 43 of 53

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 field agent● Need to be verified

● No obligation

Slide 44 of 53

8 Things to Look For1. Does the home fit your needs?2. Does the home fit some or all of your wants?3. What cosmetic repairs are needed?4. How is the curb appeal?----------------------------------------------------------------------1. How has the home been cared for?

► Deferred Maintenance► Intentional Neglect

2. Are there any unwanted critters?3. What repairs are needed in the next 12 months?4. What repairs are needed in the next 36 months?

Slide 45 of 53

Home Inspection and Other Contingencies

Slide 46 of 53

Home Inspection Basics

● We recommend that you have a home inspection● Cost runs $350 to $600

►Depends on the size and age of the home● Your agent will accompany you● Your time to evaluate the property● What an inspection contingency covers and doesn’t cover● Types of inspections

Slide 47 of 53

Other Contingencies● Appraisal ● Financing● HOA● SPDS

● Things to consider►Buyer favored contract►Cure Notice

Slide 48 of 53

Closing – what you need to know

Slide 49 of 53

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 ● Title charges● Government charges

Slide 50 of 53

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

Slide 51 of 53

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!

Slide 52 of 53

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

Slide 53 of 53

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

Slide 54 of 53

Appendix

Slide 55 of 53

Appendix ● Important forms/contracts● Favorite Real Estate Resources

Slide 56 of 53

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

HUD Settlement Statement

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

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

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

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

Favorite Links● Loans for first-time home buyers

►Federal Housing Administration (FHA)►Fannie Mae and Freddy Mac

● Government sites►Federal Trade Commission: Articles & alerts for home-

buyers.►Dept. of Justice: Role of competition in real estate

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