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Redfin Home Buying ClassFirst Time Home Buyers & How to Win in Multiple Offers Redfin In-Town Atlanta TeamApril 10th, 2014 Brookhaven, GA Hosted by: Danielle Coats @Redfin | facebook.com/Redfin
Agenda Overview of the process Are you ready to buy? Understanding the market Never miss a home Choosing an agent Touring Mortgages Multiple Offers Making a Winning Offer! Acceptance to closing
A Little Bit About Redfin Redfin is a real estate brokerage on a mission to make buying and selling a home better for you. Accountability: we’re on your side, giving you honest advice Technology: sellers get more traffic; buyers tour homes first Value: a full-service brokerage that saves you thousands No obligation
Understanding the Buying Process
Overview of a Buying a Home
Are You Ready to Buy?
Are You Ready to Buy? Do you have a family and need room to grow? Do you expect to stay put for 5 or more years? Have you saved up for a down payment? 3.5% to 20+% Have you saved up for closing costs? Typically 0-2% Can you rent for less?
Understanding the Market
Brookhaven, GA Inventory
Where Is the Market Headed? Supply of homes is at a five-year low and won’t increase much more this year Rents have been rising, making buying more attractive Market stabilized – price increases in many areas Rate increases – biggest potential issue for buyers
Never Miss A Home
Real Estate Sites: What to Look For Has all the homes for sale Updated every 15 minutes Real-time sales data Insights from agents Lots of data Mobile apps
Never Miss a Home
Choosing the Right Agent
What to Ask Any Agent Is this your full-time job? Where were your last five deals? Who else will be working with me? 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?
Redfin Agent Reviews
Redfin Partner Program Partner agents are employed by other brokerages, and have teamed up with us to provide Redfin-certified service We’ll refer you to a Partner Agent when: A home is below Redfin’s minimum price A home is outside of our service area If it’s in your financial advantage to work with a partner We’re experiencing 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
Seeing Homes in Person
Making the Most of Your Tour Bring a camera, notebook & tape measure See how much sunlight the place gets Check the bathrooms for rot & mold Look for wavy or discolored wood siding Make sure water spouts drain away from house Take stock of storage space Turn off any music playing in house Check for hardwood floors Peek into the attic Bring a marble or two When sharing a wall, make sure it’s thick Ignore the appliances and carpets Check the closets Get the disclosure packet Compare the property’s tax records to the listing details
How Touring with Redfin Works Led by agent or associate agent Up to six homes per tour in two hour blocks Go on as many tours as you need No obligation, no pressure
Why all the Multiple Offers? What’s driving the sudden demand for homes? Interest rates still at historical lows Foreign investors, all-cash buyers Buyers are not shying away from bidding wars LOW INVENTORY Months of Supply – The time it would take to sell through all the homes on the market, given the current pace of sales In a balanced market, Months of Supply is between 5-6 months --- Anything less is a seller’s market
Get Ready! Let’s Do our Homework Buyer’s agent should call the listing agent, to find out what the sellers situation is & why they are selling What are the sellers’ motivations? Will they need to remain at the property after closing? Do they need a quick sale? Request for copies of disclosures and reports Find out how many disclosure packages have been sent out to other buyers, has there been heavy traffic? Is there an offer due date? How should offers be submitted – via email, drop off at listing office or in person? Build rapport with listing agent and check scouting report
Get Ready! Obtain a Pre-Approval Letter Your Lender is part of our Team! Ask your loan officer how they can help you in a competitive situation (shorter contingency period, quick closing?) Request that your LO be available to speak with the listing agent Get a preapproval letter with your maximum approval amount, you can customize later if necessary Use a lender with local expertise- in a competitive situation it can be the difference between winning and losing Get full underwriter approval --No pre-qualification letters please
Get Ready! Know the Numbers - Knowing what to offer and being confident in your offer price makes the process less stressful. Run a Comparative Market Analysis (CMA) Understand pricing for the area Determine your maximum price Calculate payment difference at incremental price points $5,000 more equals $?/month Know When To Walk Away You can’t control what someone else is willing to pay
Get Ready! Documentation Having your finances and other required documents in order prior to making an offer can accelerate the process. Here’s what we’ll need at a minimum to include with your offer: Pre-Approval Letter Not a pre-qualification Proof of Funds Bank statement, 401k, brokerage statement Earnest Money Deposit Check Just a copy (picture, scan or fax)
Writing a Winning Offer Offer Price - Price & Terms are the King & Queen of Winning in Multiple Offer Situations Study Comparables Understand pricing trends in the area Base your offer on the comparables – not the listing price especially if it is strategically low List Price to Sales Price Ratio for the Area How much negotiating room is there? Days on Market Fewer DOM – sellers are less flexible More DOM – sellers are usually more motivated/open to negotiating Know the Sellers Current Loan Situation
Writing a Winning OfferHighest & Best In a multiple offer situation you may have only one shot at offering and no opportunity to further negotiate Blind betting – you don’t know what the other offers are What is the maximum price you are willing to pay for this property? How much do you really want this property? Determine your walk away price Go in with your highest price and best terms right from the start
Writing a Winning Offer TERMS - Understand & offer the terms that seller desires Contingencies protect the buyer and gives the option to negotiate further, or cancel the transaction if no agreement is reached. Inspection Contingency - Typically 7 to 12 days Financing Contingency - Typically 14 to 17 days Appraisal Contingency - Typically 14 to 17 days Shorter contingency periods makes your offer stronger & shows how serious you are as buyers Need a home warranty? Seller rent back?
Earnest Money Deposit 1-3% of purchase price is typical for this area A higher EMD shows you are serious buyers and could make the sellers consider your offer more To be submitted to escrow within 3 business days of acceptance – include copy with offer The check is cashed, held at escrow & applied to your down payment at closing Refunded if you cancel as a result of a contingency Could be in jeopardy if you cancel after you’ve removed all contingencies
Inspections: To Waive or Not To? Pre-Inspection Out $300 - $1000 and may not get the house Timing can be difficult Seller may not allow Post-Inspection May scare sellers – they usually want a truly as-is sale Deal can quickly fall apart What’s reasonable to negotiate further? Waived Inspection High Risk Waiving contingencies is not advisable
Writing a Winning OfferUse a Redfin Preferred Lender *In no way does Redfin benefit financially from recommending lenders – we just think they’re great lenders!
Financing Cash Cash offers can close in just a few days as there is no approval process. Strongest of all financing options Conventional 5% or more down payment. Few restrictions on condition of home, buyer has good credit. Strong second best financing option FHA / VA Least down payment (as little as 0%-3.5%), lender may require repairs, longest closing period. Lower credit ok. Also viable financing options
Writing a Winning Offer Financing (continued)… Making the seller comfortable with your ability to purchase their property is key to getting your financed offer accepted. Present a Solid Pre-Approval Get a Loan Commitment – this will set you ahead of almost all other offers Show the maximum amount you qualify for List your FICO scores, DTI’s, etc. if possible Use a Lender with Local Presence & Expertise Easy to contact and part of our team Offer to have lender speak directly to Listing Agent (LA) and/or seller
Writing a Winning Offer Personal Touch Including a short letter to the seller and a picture may help the seller connect and consider your offer. Include a bit about you, your family, your profession. Comment on the things you liked about the seller’s home. Send your agent a family photo to include. Won’t help with a bank owned properties or investor sellers
Writing a Winning OfferClosing & Possession Closing - Chat with your lender and see how quick they can close. Flexibility with closing can make a huge difference Take Possession At closing or does the seller need a Rent Back? The seller may needs to stay longer but want to close sooner to have access to the funds Seller pays buyers PITI while occupying the home after settlement Deposit & Rent is held at escrow upon closing Usually a max of 30 days – anything more requires lender approval
How Redfin Helps Redfin agents close more deals than an average agent, we know the market and how to get the job done. Help determine market price CMA, trends and stats Understand the listing agent’s negotiation style Average discount, market time and offer process Established relationships with listing agents We know what questions to ask, what to say, when to say it Write crisp, clean offer quickly Docusign, electronic offer process Team structure allows agent to focus on writing your offer
Acceptance to Closing
Steps After Mutual Acceptance (Binding) Earnest money deposit – usually about 1%, within 3 days Inspection – approximately $400 - $600, depending on size Other inspections – sewer scope, well, septic, stucco, pool, radon, mold, tree, termite, etc. Loan application – 5 days or less Title review Appraisal Loan approval Other Contingencies Walk through Closing Receive your keys!
What are Contingencies? This means the seller has accepted an offer on the property, but success may still depend on passing a home inspection or getting financing. Other types: Appraisal – Performed in conjunction with financing Financing Termite Other
What is Escrow? Escrow is a third party intermediary that represents neither the buyer nor the seller. What do they do? Hold the earnest money Arrange for payoff of any liens (seller’s mortgage, utilities, etc.) Coordinate the signing appointments for all parties Receive and disburse funds for closing Arrange to notify county offices to change ownership
Title Companies Prepares the final documents, including the HUD-1 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
Closing: HUD–1 Settlement
Signing and Closing A few days before closing you will sign your closing documents and have a walk through. On closing day, you’ll probably get your keys at about 5pm.
Selling Your Home with Redfin
We’re on your side Agents paid on your satisfaction Double your exposure Premium placement on Redfin Zillow, Trulia, Craigslist and Realtor 1.5% listing fee Professional photos Beautiful flyers Better Service, Lower Fees
So What Now? Make sure it’s the right time for you Start browsing online Check out our Home Buying Guide Find the right agent Look for a local lender and get pre-approved Start seeing homes in person Make an offer & close the deal
Thanks for Coming! Questions? Get in touch: Danielle Coats firstname.lastname@example.org Check out our upcoming classes: http://www.redfin.com/events