Our Local Agents

Taylor Connolly Nick Chaconas Karen Krupsaw Fernando Ferrufino Marshall Park Maryland Maryland Balt./Wash. Region DC Northern Virginia Team Lead Team Lead Market Manager Team Lead Team Lead taylor.connolly@.com [email protected] [email protected] [email protected] [email protected] Redfin’s Home-Buying Class

Falls Church, VA July 22, 2010 Agenda Intro to Redfin 6:00 – 7:00 Market Conditions • When to Buy & Why • The Market: what’s going on? • Searching for a home • Mortgages Break: 7:00 – 7:30 Home Buying Process 7:30 – 8:15 • Touring & Finding an Agent • Making an Offer • the Deal Short-sales & 8:15 – 8:30 General Q & A 8:30 – 9:00 What Redfin Is All About Redfin is a brokerage that focuses on customer-service and technology to make buying and selling homes better for consumers.

The Most Trusted Service • Customer focus: client-satisfaction bonuses, not commissions • Transparency: public reviews • No obligation: sign up online, it’s easy to tour

The Best Results • Service: 97% would recommend us to a friend • Lower fees: $7,500 To Buy or Not to Buy? When to Buy

A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. Warren Buffett

I was seldom able to see an opportunity until it had ceased to be one. Mark Twain, 19th Century Why Buy a Home? • You’ve got a family and need room to grow • You want deep roots • You want creative control • You want a type of that is difficult to rent • You’re handy and ready to invest your time • You’ve saved up a down payment • You want the tax savings • You’ve got an anaconda, a dog, a boat, a camper… Why You Shouldn’t Buy a Home

• You don’t have a good reason • Family • Schools • You can’t afford a 10% - 20% down payment • You can rent for much less • You plan on moving soon • Three years minimum • Seven years is ideal • You’re worried about job security • allows you to move where jobs are • Renting allows you to down-size more easily The most common real estate mistake is viewing a first as a financial investment and only second as a home. New York Times 300.00 Case-Shiller: DC Metro Area Case+7.3% year-Shiller-over-year v. 20-City Maximum: May 2006 250.00 -28.5% from maximum April 2004 price levels

200.00

150.00

100.00 Case-Shiller: 20-City Composite DC Metro Area +4% year-over-year 20-City Composite 50.00 Maximum: July 2006 -30% from maximum August 2003 price levels 0.00 $550,000 NWMLS: MedianMRIS: Median Price Sold Price $500,000

$450,000

$400,000

$350,000

$300,000 Area YoY Prior Mo. $Amount $250,000 Montgomery -0.6% +6.8% $374,750 Fairfax +10.9% +7.7% $435,000 $200,000 , DC -5.5% +2.3% $395,000

$150,000

Montgomery Fairfax Washington DC $100,000 2,200 MRIS: Number of Homes Sold 2,000 Area YoY Prior Mo. No. 1,800 Montgomery +12.1% +14.3% 1,232 Fairfax -0.9% +9.8% 2,149 1,600 Washington, DC +17.0% +8.2% 716

1,400

1,200

1,000

800

600

400

200

Montgomery Fairfax Washington D.C. 12,000 NWMLS: MedianMRIS: Number Price of Listings

10,000

8,000

6,000

4,000

Area YoY Prior Mo. No. 2,000 Montgomery -2.9% +1.2% 5.023 Fairfax +2.1% +0.9% 7,777 Washington, DC -7.8% +1.3% 3,227 -

Montgomery Fairfax Washington, DC 16.00 NWMLS: MedianMRIS: Months Price of Supply 14.00

Montgomery Fairfax 12.00 Washington D.C.

10.00

8.00

6.00

4.00 Area YoY Prior Mo. Months Montgomery -13.4% -11.4% 4.1 2.00 Fairfax +3.1% -8.10% 3.6 Washington D.C. -21.2% -6.40% 4.6 - Metro DC: Foreclosures as of July 20th

Area Foreclosures Average Price % of Homes Arlington County 441 $488,241 0.07% Fairfax County 6,067 $348,112 0.20% Loudoun County 2,392 $338,162 0.34% Montgomery County 2,549 $291,575 0.16% Washington, DC 1565 NA 0.09% National 2,075,563 $178,871 0.25%

Data source: www.realtytrac.com. Data based on homes at any point in the process in the last month. What’s Most Likely to Happen? • Why home prices could decline another 20% • More local layoffs: unemployment rate increases • Consumer confidence along with decline in stock prices • New wave of foreclosures • Cash-strapped first-time home-buyers rent instead • Why home prices won’t decline 20% • Inventory declines impact pricing • Government programs stabilize market • Economy stabilizes, improving customer confidence • Government and quasi-government employment props up DC Searching for a Home 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 Searching on Redfin

Find open

Search Exclude recent short sales sales Doing the Research Yourself

Get email alerts

See neighborhood/ city trends & school info

Download to Excel Finding Redfin’s Forums Mortgages: What Can You Afford? You Need a Loan More importantly, you’ll need to find someone willing to lend you money.

Assuming you’ve got good credit (>740), and can come up with a decent down payment (5 - 20%), we’ll go over the standard loan process. 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 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 Get Pre-Approved • Establishes your price ranges & shows you’re serious • Information needed: • W-2, two pay-stubs, tax returns (get them ready), bank statements • Time required: 30 minutes • Duration: 90 days, depending on lender • Ask for a few different amounts • Redfin asks that you get pre-approved before your third tour Local Recommended Lender

•No kickbacks, no obligation •See all Redfin clients’ survey responses Get Paperwork Ready

• Gather documentation (you & co-borrower) • Last two paystubs • Last two years’ W-2s (tax returns if self- employed) • Bank statements (last 60 days) • Copy of driver’s license • Employer information • Residence history • PDF everything so you’re prepared, avoid delays Start Shopping for Loans • Banks & credit unions: • Mainstream loans (20% Conventional, FHA) • Brokers: • More options, rate shopping (“niche” loans) • Mortgage bankers: • Lend their own money (flexibility) 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) Make Your Decision • When possible, get a loan commitment • Lock your interest rate (30 - 60 days) • Make alternative funds liquid (401(k), 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. June 2010 30 Yr-Fixed Rate: 4.74% 8.00%

7.00%

6.00%

5.00%

30-Yr Fixed 4.00%

3.00%

2.00% -13% Y-o-Y change 1.00% -3% M-o-M change

0.00% Jun-07 Oct-07 Feb-08 Jun-08 Oct-08 Feb-09 Jun-09 Oct-09 Feb-10 Jun-10 Current Average Rates

Type of Loan July 8, 2010 July 15, 2010

30-Year Fixed 4.57% 4.57%

15-Year Fixed 4.07% 4.06%

5/1 ARM 3.75% 3.85%

1-Year ARM 3.75% 3.74%

Source: http://www.freddiemac.com/pmms/ 20 Minute Break Eat, drink & talk real estate. Up Next...

Working with Redfin 7:30 – 7:45 Making an Offer 7:45 – 8:15 Short Sales & Foreclosures 8:15 – 8:30 General Q&A 8:30 – 9:00 Working with Redfin Working With Redfin is Different • See all our agents deals & reviews • We survey everyone who tours, signs an offer, buys or sells a home • Satisfaction measured by a Net Promoter Score • Our agents focus on service, not sales • No obligation • Switch Redfin agents • Use another brokerage entirely • You get up to 50% commission refund How Commissions Work Example: You buy a home for $500,000 Traditional Agents Commission Seller’s Agent (3%) $15,000

Buyer’s Agent (3%) $15,000 Redfin Agents Commission Seller’s Agent (3%) $15,000 Redfin (1.5%) $7,500 Redfin Buyer (1.5%) $7,500 • Redfin refunds 50% 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: $5,500 How Touring Works

• See as many homes as you need • Up to six homes per tour in two hour blocks • Led by field agent • Get advice from an agent first • Or just tour without talking to anyone first • No commitment • See a home through Redfin • Buy through another agent if you choose • Get pre-approved • Redfin can connect you with a lender (no kickbacks) • Start shopping for loans Touring With Redfin: Demo • Walk through a live demo that includes: • Searching for a home on the map • Clicking the “Go See This Home” button • Filling out the tour wizard • Selecting another home to tour • Submitting the final tour request Working With a Redfin Agent How to Find Our Agents Pick Your Area to Find Local Redfin Agents Select an Agent Make Sure He’s a Good Fit What to Ask an 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 for sale? • When am I committed to working with you? • Has a client ever filed a complaint? • How are you paid? Submit an Offer Online Input Draft Offer Terms

5304 WINDSOR HILLS Dr FAIRFAX, VA 22032 List Price: $609,000 Estimated Redfin Refund*: $9,135 After Submitting Your Offer • An agent will review it • We’ll follow up with you over the phone • We’ll guide you on price • You’re not committed until you sign • We’ll negotiate with the seller on your behalf • We’ll guide you through closing Making an Offer & Closing the Deal Tour homes Find dream home Consult with agent on pricing and offer strategy Submit offer to listing agent Negotiate Success! Mutual Acceptance Overview of a Deliver earnest money [Within 7 days] Purchase Conduct home inspection [5-10 days] Secure financing [21-30 days]

Remove contingencies [asap] Attend Closing!

Receive Redfin refund Complete Redfin survey Pricing Strategy: Bridging the Gap

Buyers Sellers • Understand • Balance price comparable sales along with • Consider other timing factors beyond • Respond to offer price lower priced • Don’t get caught offers with a in a bidding war counter if it’s not you

Meet in the middle! The Settlement Process Your settlement (title/closing) company: • Examines city/county land records • Work with your lender to determine closing costs • Coordinate the date and time of the settlement • Prepare all documents necessary for the settlement Settlement Companies • Ensure smooth settlement experience for all parties involved • The settlement company is neutral • Represents the Sales Contract • Buyer selects settlement company • What to look for in a title company: • Quality of service • Reputation and expertise Critical Settlement Documents • HUD-1 • GFE (Good Faith Estimate) • TIL (Truth In Lending) disclosure • • Deed of Trust / Mortgage • Other lender required disclosures

Short-Sales & Bank Owned Properties What is a Short Sale?

• Owner does not have enough funds to payoff mortgage at settlement • May be pre-foreclosure, but not always • Requires 1 - 2 banks’ approval (usually 2) • May have other liens (taxes, utilities, HOA) on the home Will Redfin Service Short-Sales?

• Lengthy close time (3 - 5 months) • Roller coaster of emotion • High rate of rejection • Ties you up in a contract • Typically Sold “As-is” (take-it-or-leave-it) • Title issues possible (liens) What is a Bank-Owned Property?

• Bank Foreclosure Auction fails • (REO) • AS REO, the bank will list property via traditional broker with an Asset Manager acting as the seller • Standard sale, but: • Verbal negotiations • Long response times • Repairs unlikely (FHA, VA financing issues) • Limited or no disclosures REO Quirkiness

• Banks counter at close to full price • Typically negotiate 2nd time around • Homes may/may not have been winterized properly (frozen/cracked pipes = water damage) • Bank Addendum required to ratify contract • Home may be sold in bulk-package prior to settlement • Escrow may be held by listing agent. What About Auctions?

• Cash buyers only • Dates are posted in small publications • Dress warm, auctions are on the courthouse steps • Bidding starts at what the bank owes • Be prepared, homes move fast • You can’t count on getting a good deal Cut to the Chase: Where’s the Best Deal?

• REOs & short-sales often aren’t the best deal: • 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 / Trusts So What Now… • Make sure it’s the right time to buy • Research market pricing conditions • Get pre-approved & start shopping for mortgages • Search for homes & get out on tours • Find the right agent • Make an offer & close the deal Help Us Improve Our Class Please fill out the survey we’ll send tomorrow along with the slide deck. We’d love to get your feedback on how the class could improve.

If you’d like to get in touch with an agent, Just chat with us now or contact us on Redfin.com.

Redfin’s hiring! Check out our open positions or email Sophia Gray at [email protected] for information about a specific position. Appendix: •Glossary of Common Terms •Step-by-step Touring Guide •How to Conduct Your Own: Comparative Market Analysis •Our Favorite Real Estate Websites Common Real Estate Jargon

• Contingency: Conditions included with an offer on a home that must be fulfilled before the deal can close. If a buyer or seller is unable to satisfy a contingency, then the offer on a home may become void. • Deed: A legal document filed with the county that documents the transfer of home ownership. This is a document the buyer signs when her deal closes and she'll receive a copy once the original is recorded by the county. • Earnest Money Deposit (EMD): The money buyers pay within 7 days after agreeing with the seller on a price for the home to show that they're serious about the offer. Usually 1 – 5% of the purchase price (though sometimes it's a fixed amount), the money is deposited into an escrow account via a cashier's check or money order. • Escrow: A neutral third party or attorney that handles the exchange of money and documents once mutual acceptance is reached on an offer. Escrow handles the transfer of the buyer's loan documents and property taxes and works with a buyer's lender and to make sure that the title of the home is clear of liens before the transfer of ownership. • Title: A legal document listing the history of ownership of the home. Buyers get a preliminary title report from an escrow agent or attorney within a week after they reach mutual acceptance on an offer.

See even more definitions in Redfin’s Real Estate Glossary! How to Tour Search for Properties Online Find a Home to Tour Schedule a Tour or Add More Homes Fill Out Some Basics… You’re All Set! Tours: Top-Ten Tips 1. Bring a camera and a notebook a. iPhone to snap photo and add to Redfin app 2. Bring a (handy) friend 3. Bring a tape measure 4. Keep your thoughts to yourself 5. Visit during the day 6. Check under oddly placed furniture 7. Check the bathrooms for rot and mold 8. Look for wavy or discolored siding 9. When sharing a wall, make sure it's thick 10. Be wary of signing a guest register

Print out our checklist for your next home tour: http://p1.rfimg.us/static-images/images/text/redfin_home_tour_worksheet.pdf Comparative Market Analysis CMA Standard Criteria

• Sold properties (within the last three months) • Same type (don’t mix townhomes with condos) • Look no further than ¼ mile radius from home • Square footage within 10-15% • Same beds & baths • Similar style (craftsman, modern, split-level) • Lot Size • Year built • Consider extenuating circumstances (REO) You Want This Home Identify Major Criteria • Type: single family residence • Square feet: 1,740 (range 1,450 – 2,000) • Lot size: 4,000 square feet (range 3,500 – 4,500) • Year built: 1927 • Style: craftsman • Beds: 3 • Baths: 1.75 • Unique: view Search for Homes Sold (zip code or neighborhood) Download Results Filter Out Stuff You Don’t Need Delete sale type, home type, city, state… Sort Based on Your Criteria

Remember: •Square feet: 1,740 •3 Beds/1.75 baths •Year built: 1927 •Craftsman Throw Out Outliers

Remember: •Square feet range: 1,450 – 2,000 •3 Beds/1.75 baths •Year built: 1927 Scrutinize the Leftovers • Use the links from your download • Focus on 2-3 solid comparables • Use Google street view when available • Consider neighboring homes • Street type: arterial • Always drive by your final selections Determine a Final Price Range • Found two solid comparables • Price range: $399,950 - $440,000 • Asking price: $497,500 (higher than the range) Identify Unique Attributes • Remodeled • View • Finished basement • Quality landscaping Next Step: Active Listings • Find out what’s on the market (competition) • Run a CMA on active listings • Select a few comparables: • Are they similarly priced? • What’s the price range? • Drive by to confirm details, attend open house Review Pending Sales • Ask your agent to pull comparable pending sales, photos • Establish a final range for homes sold in the last month • Use this as a final gut check for your offer price Ask Your Agent • How much depreciation has taken place since the sale of your comps?

Finally, Compare Results • Establish a final range • Consult your agent for specifics • Adjust the range for unique attributes • Submit an offer Do I make an offer now, or wait? General Rule of Thumb (this ain’t gospel) • Does it meet the criteria of most of the seven tells? • How far below list price are you? • 0%-6% : Green Light • 7%-12% : Use Discretion • 13%-15% : Stop and Evaluate • Weigh the Pro’s and Con’s • The price could reduce on it’s own (no offers) • There’s a higher chance of success (days on market) • Interest rates could change (up or down) • Another party could make an offer (you lose the home) • You could jeopardize future negotiations by low balling Quick & Dirty CMA Using Listing Details 1. Find the home you want 2. Click on “View Details” 3. Scroll down to find: • Google street view • Property history • Median house values • Value estimates • Similar listings & sales • Community information

Want to know more about CMAs? Link: http://www.redfin.com/buy-a-home/comparative-market-analysis?src=printable-listing-text Favorite Real Estate Links

• Property Information • PropertyShark: data, title history, permits, neighborhood data; navigation is clunky

• Neighborhood Information • WalkScore: Proximity to points of interest • Terabitz: Custom neighborhood dashboard, pages load slowly and U/I is awkward. • Heat Maps: Median prices across a county Favorite Real Estate Links

• Listing Search • 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, slow to load & the zoom can be funky • Brokerage site of listing agents: more photos of the listing • RealtyTrac: Foreclosure market detail, subscription required for full reports Favorite Real Estate Links • Pricing Data & Tools • 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 Favorite Real Estate Links • Mortgage Calculators & Loan Information • Bankrate: Many ads, but is great for comparing local lenders • '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 Favorite Real Estate Links • Loans for First-Time Home-Buyers • Federal Housing Administration (FHA) • 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 Favorite Real Estate Links

• 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 (ASHI): Good consumer FAQ & virtual home inspection