By now I was fully plugged in to the Redfin alert system. Every morning I would receive an email providing an update on the condo market in Millbrae and Burlingame: what properties had hit the market, which had dropped their prices, which had sold and at what price. This was incredibly useful, as it let me get a feel for the overall trends in the market, even beyond the (very) narrow area I was focusing on.
On a Tuesday morning, I saw a fascinating property hit the list: a small 1-bedroom condo at 88 South Broadway. I've been aware of this development for years, but hadn't thought that it had any 1-bedrooms. It was on the smallish size, but extremely well priced. A little too well priced. The only way I could imagine explaining the low price was if it was on the first floor facing directly onto El Camino Real. Still, I was sufficiently intrigued to request a tour.
I put in the tour request on that Tuesday. I got in touch with Matt, but we weren't able to schedule a showing before Saturday. When I showed up on Saturday, I found that it was more or less mobbed, with perhaps five or six parties squeezed into this small one-bedroom space, walking around and chatting. Matt was juggling me and another client. I really liked what I saw. The building is almost brand-new, having finished in 2007, and while this unit is less luxurious than most, it was still in great shape and had a really nice-looking kitchen.
So, why the low price? It was on the ground floor, but was at the back of the complex, facing onto South Broadway. Privacy was slightly limited, since a walkway came right outside the window. Matt had also learned from the listing agent that there were some complications with the unit - it was technically a "caretaker's unit," and theoretically intended for occupation by the property manager. Still, in practice, it could be freely bought and sold; the only restriction was that, if you rented it, you couldn't charge more than a certain amount for rent... I think that the limit was something like $1200 a month, pretty reasonable. So that helped explain the low price, but still, the restrictions didn't bother me, and this seemed like a once-in-a-lifetime chance to get into the development.
I'd toured the property Saturday. I started the offer wizard on Saturday night. Redfin agents have the weekends off, which I do not begrudge them, so I didn't hear from Sean until mid-Monday. He got in touch with the listing agent. On Tuesday, I learned that they had already accepted an offer and the property was no longer available. The next day, I saw it pop up as "Pending" in my email inbox.
That was probably the low point of my relationship with Redfin, although I don't know that it's necessarily their fault. For this very well-priced property with a lot of interest, getting in a few days earlier would have given me a shot at buying the property. Now, I don't know what price it ended up selling for, and it's totally possible that a bidding war would have pushed it beyond what I would be willing to pay for a small one-bedroom. Also, I don't know that a traditional agent would have been able to get me in to see it earlier, or been able to communicate my interest any more quickly to the sellers. Still, this was a case where Redfin's model seemed to suffer a little.
A little while later I toured a townhouse that was on the Burlingame side. This was the first townhouse I'd seen, and I have to admit to liking it. It had an integrated two-car garage, three stories, plenty of space, a balcony... lots of the stuff that I associate with traditional residential houses, but still at a (relatively) affordable price and in a great area.
The catch? As I had instantly noted on Google Maps, it was next to the train tracks. I went ahead and toured it since I wasn't sure if this particular unit was next to the tracks or farther back in the complex. Nope - it was front and center. I toured it in the morning during commuting hours, and paid attention as two Caltrains rumbled by. Nope... not happening. Even with the windows closed, it was quite loud, and while the floor didn't exactly shake, you could still feel the movement. I gave a sigh, and let that one go.
Friday, October 8, 2010
Friday, October 1, 2010
Scared Off
Like I said: far too little happened, then far too much.
I'll skip my description of the remaining units at Palm Avenue. I eventually did decide to start an offer on one of them, a short sale. It seemed perfectly situated - top floor, corner unit, views of the hills and the park - and I thought it would be worth the hefty price and HOA fee, despite the fact that it wasn't in great shape. (It wasn't decrepit or anything, but the doors stuck, and was really cluttered.)
I did the Redfin offer wizard thing. This works pretty well. Because this was a short sale, it wouldn't fit into the normal Redfin model - typically they refund up to 50% of their commission, but it's only 15% for short sales. Their web site says that these deals are handled by special affiliated agents, but in my case it was a Redfin team member, Sean Sullivan. He was extremely nice and helpful, like everyone I met at Redfin. He talked me through the process, got the disclosures, and sent them over.
Well.
I'd been cautiously optimistic before, but after reading the disclosures, I was ready to run away screaming. The seller seems to have been barely conscious while filling it out. Not only were many sections indecipherable, but many were just blatantly wrong. I mean, yeah, I can see why a seller might not want to admit certain things, but why on earth would you say "No" to the question "Is this property a condominium?" when, uh, it's a condominium? Are you trying to fool someone, who things that your single-family house happens to be elevated thirty feet in the air and surrounded by other single-family houses?
I chatted with Sean, and we mutually agreed that it wasn't worth pursuing. In addition to the "haphazard" (to use Sean's wonderfully understated phrase) manner in which the seller had filled out the disclosures, the seller's agent's disclosures also listed some serious stuff that I had overlooked, like mold and some encroachment issues. Sean's basic message was, "If you want to move ahead with this, we can, but personally I'd recommend against it." I agreed, and from that moment on felt confident that Redfin was on my side.
I'll skip my description of the remaining units at Palm Avenue. I eventually did decide to start an offer on one of them, a short sale. It seemed perfectly situated - top floor, corner unit, views of the hills and the park - and I thought it would be worth the hefty price and HOA fee, despite the fact that it wasn't in great shape. (It wasn't decrepit or anything, but the doors stuck, and was really cluttered.)
I did the Redfin offer wizard thing. This works pretty well. Because this was a short sale, it wouldn't fit into the normal Redfin model - typically they refund up to 50% of their commission, but it's only 15% for short sales. Their web site says that these deals are handled by special affiliated agents, but in my case it was a Redfin team member, Sean Sullivan. He was extremely nice and helpful, like everyone I met at Redfin. He talked me through the process, got the disclosures, and sent them over.
Well.
I'd been cautiously optimistic before, but after reading the disclosures, I was ready to run away screaming. The seller seems to have been barely conscious while filling it out. Not only were many sections indecipherable, but many were just blatantly wrong. I mean, yeah, I can see why a seller might not want to admit certain things, but why on earth would you say "No" to the question "Is this property a condominium?" when, uh, it's a condominium? Are you trying to fool someone, who things that your single-family house happens to be elevated thirty feet in the air and surrounded by other single-family houses?
I chatted with Sean, and we mutually agreed that it wasn't worth pursuing. In addition to the "haphazard" (to use Sean's wonderfully understated phrase) manner in which the seller had filled out the disclosures, the seller's agent's disclosures also listed some serious stuff that I had overlooked, like mold and some encroachment issues. Sean's basic message was, "If you want to move ahead with this, we can, but personally I'd recommend against it." I agreed, and from that moment on felt confident that Redfin was on my side.
Friday, May 14, 2010
New Condo Tours
So, exactly what have I been up to since my last post back in December? That is, almost six months ago?
Waiting and seeing, mostly. I'd become increasingly interested in Millbrae as my target area, but had also come to realize that there just weren't a lot of options out there in my price range. There are very few older condos in Millbrae, and the newer ones are darn expensive. Since I wasn't in a big rush to move, I decided to wait until the Millbrae Paradise units came on to the market; if they were reasonably priced, as seemed likely, then I would proceed. I was worried that, if I picked something else in the meantime, I'd feel like a dud when Millbrae Paradise came online if it turned out to be a better deal.
So, for the most part, I've been monitoring Redfin and Craigslist - or, rather, reacting to the subscriptions that I have set up on those sites for notices of new listings - but hadn't been actively touring anything. Finally, Millbrae Paradise started touring, so I got back in touch with Redfin and set up a tour; along the way, I also decided to visit Park Broadway, which had always been a marginal choice for me but seemed like a good basis for comparison since it's the newest nearby construction.
I first discovered that, thanks to the vagaries of Redfin's territory division, the area I was interested in (southern Millbrae and northern Burlingame) was divided between two totally different offices. Burlingame is covered by the Peninsula team ("Redwood City to San Mateo", though they do handle points north and south as well), while Millbrae is covered by the San Francisco/Marin team. I didn't just have a new field agent, but a whole new office as well. I just sort of shrugged it off and went with it, though. I was happy to see that, even though it had been more than four months since my last Redfin tour, they still had all my approval stuff on file and I didn't need to give them anything more to keep going.
Millbrae Paradise isn't listed on the MLS, so I submitted a tour request for a Park Broadway loft that was listed, and in the tour notes also requested a tour of Millbrae Paradise. I indicated my flexibility for tour times. This was towards the end of April, so I was kind of pushing to do it soon; in the best case, I figured, I'd check out Millbrae Paradise, it would be totally awesome and affordable, and I could quickly get in an offer and do a double-dip on the federal and state tax credits as a first-time homebuyer of a new construction condo.
First up was Park Broadway. It ended up being much nicer than I had thought. They've dropped the prices of these 1-bedroom loft units substantially, most recently another $50k. I had never bothered to visit because I was weirded out by the fact that they directly face onto El Camino Real at street level. I was pleasantly surprised to note that, at least in the model unit, the noise was practically unnoticeable, and with the demo window treatments, you got a lot of light without feeling like you were sitting next to a highway. It helps that these units are set a bit below street level, behind a railing that separates them from the street and public sidewalk. Plus, they're just huge; even though they are only one bedroom, they are extremely spacious. Despite my reservations, I found myself actually considering grabbing one; it fit within my price range, looked great, and was freaking huge. Ultimately, though, I decided that the siting was just a non-starter for me. If I'm going to pay Bay Area prices for real estate, I want to be able to enjoy Bay Area weather, and it was depressing to think that I'd need to always keep the windows shut and stay indoors when I was home.
Next up came Millbrae Paradise. I'd patiently been waiting a long time for them to finish, and was glad to finally get inside, but they clearly have a lot more left to go; even though the model units are ready, there's a lot of construction happening throughout. After a little initial confusion over exactly where the sales center is (a sign points into an adjacent parking lot, while the actual trailer is farther up the street), I met the very pleasant sales associates. I was turned off by how unforthcoming they were about the prices on the units; apparently this is fairly typical for new construction, but still, I would have really appreciated a straight answer regarding how much something costs. I eventually figured out that even their cheapest 1-bedroom unit (a smallish condo on the second floor) would be going for a cool $100k more than my maximum budget. Yikes! I felt glum - I'd staked too much on a couple of words on their website, which boasted about "Affordable Elegance"; I guess we have different definitions of "affordable." As long as I was finally there, though, I went ahead and did the tour.
The models do look really nice. They are just a little slap-dash - I thought that their cabinets were extremely modern, but it turns out that the contractors just had forgotten to attach the knobs. On the whole, I could really see myself living there, which just made me more bummed that they were outside my range. Even though the rational part of my mind realizes that the quality of finishes and appliances are the least important aspects of a home, far behind the importance of location and solid construction, there's still an undeniable visceral reaction that I experience when I walk into a place that just feels really nice and high-quality.
We finished the tour, went back to the sales trailer, I sat down, we chatted just a little longer, I asked about a particular unit, they again wouldn't tell me the price, but said that they could speak with the manager. I said "No, thanks," and left.
All in all, a bit of a bummer. I spent the next day moping around; I hadn't realized until then just how thoroughly I had convinced myself that I would end up living there.. Still, what was done was done. I decided to make a clean break, put Millbrae Paradise (which, inexplicably, has now changed its name back to Belamor again) out of my mind, and decided where to go from there.
Waiting and seeing, mostly. I'd become increasingly interested in Millbrae as my target area, but had also come to realize that there just weren't a lot of options out there in my price range. There are very few older condos in Millbrae, and the newer ones are darn expensive. Since I wasn't in a big rush to move, I decided to wait until the Millbrae Paradise units came on to the market; if they were reasonably priced, as seemed likely, then I would proceed. I was worried that, if I picked something else in the meantime, I'd feel like a dud when Millbrae Paradise came online if it turned out to be a better deal.
So, for the most part, I've been monitoring Redfin and Craigslist - or, rather, reacting to the subscriptions that I have set up on those sites for notices of new listings - but hadn't been actively touring anything. Finally, Millbrae Paradise started touring, so I got back in touch with Redfin and set up a tour; along the way, I also decided to visit Park Broadway, which had always been a marginal choice for me but seemed like a good basis for comparison since it's the newest nearby construction.
I first discovered that, thanks to the vagaries of Redfin's territory division, the area I was interested in (southern Millbrae and northern Burlingame) was divided between two totally different offices. Burlingame is covered by the Peninsula team ("Redwood City to San Mateo", though they do handle points north and south as well), while Millbrae is covered by the San Francisco/Marin team. I didn't just have a new field agent, but a whole new office as well. I just sort of shrugged it off and went with it, though. I was happy to see that, even though it had been more than four months since my last Redfin tour, they still had all my approval stuff on file and I didn't need to give them anything more to keep going.
Millbrae Paradise isn't listed on the MLS, so I submitted a tour request for a Park Broadway loft that was listed, and in the tour notes also requested a tour of Millbrae Paradise. I indicated my flexibility for tour times. This was towards the end of April, so I was kind of pushing to do it soon; in the best case, I figured, I'd check out Millbrae Paradise, it would be totally awesome and affordable, and I could quickly get in an offer and do a double-dip on the federal and state tax credits as a first-time homebuyer of a new construction condo.
First up was Park Broadway. It ended up being much nicer than I had thought. They've dropped the prices of these 1-bedroom loft units substantially, most recently another $50k. I had never bothered to visit because I was weirded out by the fact that they directly face onto El Camino Real at street level. I was pleasantly surprised to note that, at least in the model unit, the noise was practically unnoticeable, and with the demo window treatments, you got a lot of light without feeling like you were sitting next to a highway. It helps that these units are set a bit below street level, behind a railing that separates them from the street and public sidewalk. Plus, they're just huge; even though they are only one bedroom, they are extremely spacious. Despite my reservations, I found myself actually considering grabbing one; it fit within my price range, looked great, and was freaking huge. Ultimately, though, I decided that the siting was just a non-starter for me. If I'm going to pay Bay Area prices for real estate, I want to be able to enjoy Bay Area weather, and it was depressing to think that I'd need to always keep the windows shut and stay indoors when I was home.
Next up came Millbrae Paradise. I'd patiently been waiting a long time for them to finish, and was glad to finally get inside, but they clearly have a lot more left to go; even though the model units are ready, there's a lot of construction happening throughout. After a little initial confusion over exactly where the sales center is (a sign points into an adjacent parking lot, while the actual trailer is farther up the street), I met the very pleasant sales associates. I was turned off by how unforthcoming they were about the prices on the units; apparently this is fairly typical for new construction, but still, I would have really appreciated a straight answer regarding how much something costs. I eventually figured out that even their cheapest 1-bedroom unit (a smallish condo on the second floor) would be going for a cool $100k more than my maximum budget. Yikes! I felt glum - I'd staked too much on a couple of words on their website, which boasted about "Affordable Elegance"; I guess we have different definitions of "affordable." As long as I was finally there, though, I went ahead and did the tour.
The models do look really nice. They are just a little slap-dash - I thought that their cabinets were extremely modern, but it turns out that the contractors just had forgotten to attach the knobs. On the whole, I could really see myself living there, which just made me more bummed that they were outside my range. Even though the rational part of my mind realizes that the quality of finishes and appliances are the least important aspects of a home, far behind the importance of location and solid construction, there's still an undeniable visceral reaction that I experience when I walk into a place that just feels really nice and high-quality.
We finished the tour, went back to the sales trailer, I sat down, we chatted just a little longer, I asked about a particular unit, they again wouldn't tell me the price, but said that they could speak with the manager. I said "No, thanks," and left.
All in all, a bit of a bummer. I spent the next day moping around; I hadn't realized until then just how thoroughly I had convinced myself that I would end up living there.. Still, what was done was done. I decided to make a clean break, put Millbrae Paradise (which, inexplicably, has now changed its name back to Belamor again) out of my mind, and decided where to go from there.
Tuesday, May 11, 2010
The Pre-Approval Aeneid
Well!
It's been a while, hasn't it? I apologize. For a long time, nothing much was happening on the condo front. Then, too much was happening. I'll try and work through the backlog here, in roughly chronological order, to the best of my recollection.
First topic: financing!
I previously described getting pre-approved for a mortgage. You can get pre-approved from any lender at all; you aren't obligated to get a loan from them, and in fact, many people will get pre-approved from a traditional bank or broker that gives them great service, and then get their final loan from a cheaper source. However, I wanted to go ahead and get pre-approved from the lender I was most likely to close with, so I shopped rates for two weeks, and ended up with San Mateo Credit Union.
Because this is the first time I had gotten pre-approved, I assumed that my experiences were typical. In particular, I was surprised that, contrary to my expectations, they asked for a deposit and would only pre-approve me for a specific amount, one I had to guess myself. Well, it turns out that that isn't the way everyone operates!
A pre-approval is only good for a certain time, in my case 2-3 months. After that, you should renew it. In my case, though, I really didn't want to. Every time you renew a pre-approval, the lender pulls your credit again, which causes your credit score to drop a little more, which makes it harder for you to get a loan. Yeah, I know, crazy, right? As a result, I let my pre-approval lapse a few times, only renewing it when I thought there was a good chance that I would be making an offer soon.
Most recently, that was in early May. I had decided to slightly change the range of properties I was looking at, which required a bump up in my pre-approval limit. I felt comfortable going above it; I had chosen the original amount more or less at random, based on my comfort level at the time and expecting that my lender would automatically adjust it up or down to the "real" limit. Since then, I had just been refreshing the same amount, but now I wanted to hit a specific target; my finances have improved since my first round, and I felt comfortable with a bigger figure.
Since it had been so long since my original submission, the folks at the credit union asked me to start my application over again. Which was fine; because I was asking for more, I wanted to be sure that they saw my most recent paycheck, bank statements, etc. I got to the end of the application, and came to an ugly realization - they were asking me for a $250 deposit, but unlike the last time, this was non-refundable. If I went ahead with a loan, they would apply it to my closing costs, but otherwise, they would just keep it.
Needless to say, I was peeved. This was a pre-approval! I understand that they incur a cost to pull my credit, but even so, if they're going to charge me for it they should just charge for the pull. And really, this should just be part of the cost of them doing business. "Is this customary?" I wondered, and I dusted off my old list of links from summer 2009 when I first went shopping rates.
Well, well, well... turns out that things can change in a year! In 2009, San Mateo Credit Union was hands-down the best lender for my type of loan (conforming mortgage on a condo, 20% down). Both their fees and their rate were lower than anyone else, across the multiple weeks that I monitored things. Now, though, Provident Credit Union had come roaring back. Provident is another regional credit union, although they cover the entire Bay Area and not just the Peninsula. Their fees were now just a little larger than SMCU's, where before they were about $5000 more expensive. And, their rates were .15% less... not huge, but enough to make a difference. I did some quick calculations, and realized that Provident's rates would more than make up for their higher fees in the first year.
I dug a little more. Both Provident and SMCU use the same back-end service for loan application/pre-approval, but Provident doesn't charge a bogus $250 deposit. Score! I happily took my business elsewhere. The process was a breeze, and unlike my initial SMCU experience, they completed the whole thing online and furnished me with an initial pre-approval letter in my browser. Success!
The good times didn't end there, though. I was soon contacted by a loan officer from Provident who asked me to send him my proof of income and assets. I complied - I already had my letter, but would need to do all that stuff if I went ahead with the loan anyways, so why not get it over with? He was great, keeping in touch via email, and went ahead and told me the maximum I qualified for, without me even asking. He even sent me an Excel spreadsheet, personalized for my type of loan, where I could play with different figures to see what my monthly payments would be. That's the sort of thing you can find online, but still, it was a great convenience, a nifty use of technology combined with a personal touch. He also went out of his way to tell me that he could re-generate a loan approval letter for me when I'm ready to make an offer (to avoid tipping my hand in negotiations).
As you can probably tell, I'm now a fan of Provident. I went ahead and became a member, and, assuming that their rates stay at about the same spot relative to their competitors, will most likely take my final mortgage from them. The whole thing is kind of funny - because San Mateo Credit Union tried to get $250 out of me, they'll end up missing out on hundreds of thousands of dollars in interest that they could have collected out of the life of my loan. I suppose a business person could draw some sort of conclusion from that.
It's been a while, hasn't it? I apologize. For a long time, nothing much was happening on the condo front. Then, too much was happening. I'll try and work through the backlog here, in roughly chronological order, to the best of my recollection.
First topic: financing!
I previously described getting pre-approved for a mortgage. You can get pre-approved from any lender at all; you aren't obligated to get a loan from them, and in fact, many people will get pre-approved from a traditional bank or broker that gives them great service, and then get their final loan from a cheaper source. However, I wanted to go ahead and get pre-approved from the lender I was most likely to close with, so I shopped rates for two weeks, and ended up with San Mateo Credit Union.
Because this is the first time I had gotten pre-approved, I assumed that my experiences were typical. In particular, I was surprised that, contrary to my expectations, they asked for a deposit and would only pre-approve me for a specific amount, one I had to guess myself. Well, it turns out that that isn't the way everyone operates!
A pre-approval is only good for a certain time, in my case 2-3 months. After that, you should renew it. In my case, though, I really didn't want to. Every time you renew a pre-approval, the lender pulls your credit again, which causes your credit score to drop a little more, which makes it harder for you to get a loan. Yeah, I know, crazy, right? As a result, I let my pre-approval lapse a few times, only renewing it when I thought there was a good chance that I would be making an offer soon.
Most recently, that was in early May. I had decided to slightly change the range of properties I was looking at, which required a bump up in my pre-approval limit. I felt comfortable going above it; I had chosen the original amount more or less at random, based on my comfort level at the time and expecting that my lender would automatically adjust it up or down to the "real" limit. Since then, I had just been refreshing the same amount, but now I wanted to hit a specific target; my finances have improved since my first round, and I felt comfortable with a bigger figure.
Since it had been so long since my original submission, the folks at the credit union asked me to start my application over again. Which was fine; because I was asking for more, I wanted to be sure that they saw my most recent paycheck, bank statements, etc. I got to the end of the application, and came to an ugly realization - they were asking me for a $250 deposit, but unlike the last time, this was non-refundable. If I went ahead with a loan, they would apply it to my closing costs, but otherwise, they would just keep it.
Needless to say, I was peeved. This was a pre-approval! I understand that they incur a cost to pull my credit, but even so, if they're going to charge me for it they should just charge for the pull. And really, this should just be part of the cost of them doing business. "Is this customary?" I wondered, and I dusted off my old list of links from summer 2009 when I first went shopping rates.
Well, well, well... turns out that things can change in a year! In 2009, San Mateo Credit Union was hands-down the best lender for my type of loan (conforming mortgage on a condo, 20% down). Both their fees and their rate were lower than anyone else, across the multiple weeks that I monitored things. Now, though, Provident Credit Union had come roaring back. Provident is another regional credit union, although they cover the entire Bay Area and not just the Peninsula. Their fees were now just a little larger than SMCU's, where before they were about $5000 more expensive. And, their rates were .15% less... not huge, but enough to make a difference. I did some quick calculations, and realized that Provident's rates would more than make up for their higher fees in the first year.
I dug a little more. Both Provident and SMCU use the same back-end service for loan application/pre-approval, but Provident doesn't charge a bogus $250 deposit. Score! I happily took my business elsewhere. The process was a breeze, and unlike my initial SMCU experience, they completed the whole thing online and furnished me with an initial pre-approval letter in my browser. Success!
The good times didn't end there, though. I was soon contacted by a loan officer from Provident who asked me to send him my proof of income and assets. I complied - I already had my letter, but would need to do all that stuff if I went ahead with the loan anyways, so why not get it over with? He was great, keeping in touch via email, and went ahead and told me the maximum I qualified for, without me even asking. He even sent me an Excel spreadsheet, personalized for my type of loan, where I could play with different figures to see what my monthly payments would be. That's the sort of thing you can find online, but still, it was a great convenience, a nifty use of technology combined with a personal touch. He also went out of his way to tell me that he could re-generate a loan approval letter for me when I'm ready to make an offer (to avoid tipping my hand in negotiations).
As you can probably tell, I'm now a fan of Provident. I went ahead and became a member, and, assuming that their rates stay at about the same spot relative to their competitors, will most likely take my final mortgage from them. The whole thing is kind of funny - because San Mateo Credit Union tried to get $250 out of me, they'll end up missing out on hundreds of thousands of dollars in interest that they could have collected out of the life of my loan. I suppose a business person could draw some sort of conclusion from that.
Saturday, December 26, 2009
A Brief Tour with Redfin
I went out on a brief date with Redfin a few weeks ago. It turned out pretty well. I've been using their site for a while to scope out neighborhoods, look up recent sales and comparables, and generally geek out on real estate data. After attending their seminar in Palo Alto this fall, I decided to give them a try as a straight-up realtor.
The process is very simple. When you find a property that you're interested in on their web site, you click a button to request a tour. They have some ground rules, most importantly that they do not deal with short sales. Short sales are listed on Redfin, but you'll need to work with another agent or on your own if you want to pursue them. And, since Redfin focuses on MLS properties, you can't directly request a tour of FSBOs or most new construction. (However, as long as such places offer a commission or referral fee, you can still call Redfin directly to set up a tour.) This goes into what is essentially a shopping cart. You can continue browsing and add other properties to your tour list, then "check out". At checkout, you can request preferred time periods (like "Saturday afternoon" or "Monday morning") and add extra comments.
They tell you that someone will contact you within 4 hours to set up your tour; or, if it's late enough in the day, by noon on the following day. In my case, I got a call a bit before noon; the person apologized and said that their computer system was down so they couldn't schedule, but they would get in contact with me by the end of the day. And they did... I got a call from the field agent to set it up.
I'm probably kind of unusual, even among Redfin users, in that I have settled on an extremely narrow idea of what I want. I'm guessing that the majority of buyers will take advantage of the full 5 properties that they allow you to tour in a single day. For me, though, there was just one property that had recently come onto the market that I thought I might buy, so I just signed up for that one, despite several opportunities to add more.
The actual touring process works differently with Redfin. For liability reasons, the agents don't drive you around, so the two of you will drive separately to the places you're interested in. (During the seminar, the presenter got several questions/requests about this, and eventually did allow that, if you had been out with one of their agents several times and demonstrated that you are not a serial killer, an individual agent might decide to ride with you.) You'll show up, the agent lets you in, you can take your time checking things out, and the agent helps point things out for you.
My tour went really smoothly. Since I just had the one place I wanted to visit, I took Caltrain up and then walked over. There was a light drizzle that day, but it was still a pleasant walk. I like to approach a building this way, and spend some time before or after on the street, getting a feel for the neighborhood, noise level, etc.
I'd arrived at the building about 10 minutes early, so I kept on walking for a while, then circled back. The agent had arrived about 5 minutes before our scheduled start; we shook hands, introduced ourselves, he used advanced lockpicking skills to obtain the key from the lockbox, and then we headed in.
The unit itself was really nice. I'm not totally sold on it - there are no dealbreakers there, but enough weird things that I don't feel compelled to jump on it, especially at the price it is currently listed at - but I could certainly see myself living there. There's lots of light in the unit, the rooms have been recently updated to look quite pleasant, and of course I love the location.
I chatted a bit with the agent while walking around, some shop talk about the market as a whole, and some specific things about this particular unit. There were a couple of things that slightly irritated me - it bugs me when someone reads facts off the MLS sheet, and he did say "Now is a great time to buy," - but he was a really pleasant guy, helpful and not at all pushy, so I was really happy with how that experience went.
After I'd spent some time inside, we toured the common areas, which were very small in this particular complex, then he gave a very brief spiel about the Redfin process, and we parted ways.
Afterwards, I got a nice follow-up email from the field agent who answered a question that I'd forgotten I'd asked (whether the heat was electric or gas) and told me to contact him if I had any other questions.
I've been very happy with the experience. It definitely fits my personality and the way I've been approaching the process, where Redfin is available as a resource instead of driving the situation. That said, they have pleasant, friendly people, which cuts against the stereotype of Redfin as an impersonal organization. I'll almost certainly use them again in the future.
The process is very simple. When you find a property that you're interested in on their web site, you click a button to request a tour. They have some ground rules, most importantly that they do not deal with short sales. Short sales are listed on Redfin, but you'll need to work with another agent or on your own if you want to pursue them. And, since Redfin focuses on MLS properties, you can't directly request a tour of FSBOs or most new construction. (However, as long as such places offer a commission or referral fee, you can still call Redfin directly to set up a tour.) This goes into what is essentially a shopping cart. You can continue browsing and add other properties to your tour list, then "check out". At checkout, you can request preferred time periods (like "Saturday afternoon" or "Monday morning") and add extra comments.
They tell you that someone will contact you within 4 hours to set up your tour; or, if it's late enough in the day, by noon on the following day. In my case, I got a call a bit before noon; the person apologized and said that their computer system was down so they couldn't schedule, but they would get in contact with me by the end of the day. And they did... I got a call from the field agent to set it up.
I'm probably kind of unusual, even among Redfin users, in that I have settled on an extremely narrow idea of what I want. I'm guessing that the majority of buyers will take advantage of the full 5 properties that they allow you to tour in a single day. For me, though, there was just one property that had recently come onto the market that I thought I might buy, so I just signed up for that one, despite several opportunities to add more.
The actual touring process works differently with Redfin. For liability reasons, the agents don't drive you around, so the two of you will drive separately to the places you're interested in. (During the seminar, the presenter got several questions/requests about this, and eventually did allow that, if you had been out with one of their agents several times and demonstrated that you are not a serial killer, an individual agent might decide to ride with you.) You'll show up, the agent lets you in, you can take your time checking things out, and the agent helps point things out for you.
My tour went really smoothly. Since I just had the one place I wanted to visit, I took Caltrain up and then walked over. There was a light drizzle that day, but it was still a pleasant walk. I like to approach a building this way, and spend some time before or after on the street, getting a feel for the neighborhood, noise level, etc.
I'd arrived at the building about 10 minutes early, so I kept on walking for a while, then circled back. The agent had arrived about 5 minutes before our scheduled start; we shook hands, introduced ourselves, he used advanced lockpicking skills to obtain the key from the lockbox, and then we headed in.
The unit itself was really nice. I'm not totally sold on it - there are no dealbreakers there, but enough weird things that I don't feel compelled to jump on it, especially at the price it is currently listed at - but I could certainly see myself living there. There's lots of light in the unit, the rooms have been recently updated to look quite pleasant, and of course I love the location.
I chatted a bit with the agent while walking around, some shop talk about the market as a whole, and some specific things about this particular unit. There were a couple of things that slightly irritated me - it bugs me when someone reads facts off the MLS sheet, and he did say "Now is a great time to buy," - but he was a really pleasant guy, helpful and not at all pushy, so I was really happy with how that experience went.
After I'd spent some time inside, we toured the common areas, which were very small in this particular complex, then he gave a very brief spiel about the Redfin process, and we parted ways.
Afterwards, I got a nice follow-up email from the field agent who answered a question that I'd forgotten I'd asked (whether the heat was electric or gas) and told me to contact him if I had any other questions.
I've been very happy with the experience. It definitely fits my personality and the way I've been approaching the process, where Redfin is available as a resource instead of driving the situation. That said, they have pleasant, friendly people, which cuts against the stereotype of Redfin as an impersonal organization. I'll almost certainly use them again in the future.
Friday, November 20, 2009
Redfin Seminar
This is marginally related to my condo hunt, so I figured I'd report it here.
As I mentioned in my previous post, I'm increasingly intrigued by Redfin. I've been lurking/using their site for about a month now, and have been quite impressed. Their major goal is Freakish Depth: giving you access to all the information possible about every single market and property. It's the ultimate site for real estate nerds, and features a huge variety of data that they have parsed into helpful charts, trend analyses, and other great stuff.
It seems like it'd be worthwhile to at least evaluate using them. Their main sales pitch is on the commission rebate: you get to keep half of whatever commission they earn. So, if you buy a $500,000 house, and the buyer's agent gets a 3% commission, then you will get $7500, either applied to your down payment or handed to you as a check. Personally, I'm less excited about this aspect - don't get me wrong, money is great, but in a hypothetical choice between one agent who could negotiate a 10% lower price and another agent who gives me a 1.5% kickback, I'd take the former in a heartbeat.
No; the main reason why I'm drawn to them is that they just seem to operate in a way much more comfortable to me. They're a discount brokerage, which means that you end up being responsible for most of your search, but that's the way I LIKE doing things. I mean, I don't go to a department store where I work with a personal shopper who helps me pick out products; I go online, I do research, I find products I like, analyze them, over-analyze them, decide what I want, then look for the best deal I can get on it. I enjoy the process of hunting and evaluating, and frankly it's something that I feel more comfortable doing on my own than under another's shadow. Obviously, I haven't tried it yet, but the Redfin model sounds perfect: you use an awesome website to find homes you like, you schedule home tours until you find one you like, then you tell them to write an offer for you. They take over, run the negotiations, and then see you through closing. Ah... that sounds so wonderfully simple.
Anyways. While browsing their (Awesome! I love it!) site, I noticed that they were hosting a seminar in Palo Alto. Now, for years I've seen those notices in real-estate newspaper sections for "First-time homebuyers seminar" or whatever. They're almost always hosted by real estate companies, and I'm never tempted to go - it seems like a transparent ploy for new contacts. This was... well, it sounded different. They would discuss market trends, explain how Redfin works, and answer questions people had. Okay, so that doesn't sound too much different, but I was sufficiently intrigued to sign up for it. Basically, I was already interested in them, and this seemed like a good, low-key first point of contact.
Plus, they announced that they would be serving pizza and beer. How could I turn that down?
It proved to be quite a crowd. The last I checked, there were over 150 people registered for it. I'm not sure exactly how many turned up, but it was probably close to that - we filled a good-sized hotel conference room. There was pizza and beer, as promised. The pizza was good - fancier than I'm used to, and trickily divided into unusually small portions so that one would need to take six pieces in order to reach the standard two-slice portion size. The beer was high-quality. One of the (many, many) things I love about the Bay Area is regularly good beer. Even at free events like this, people would be ashamed to offer Budweiser and Miller Lite, so you can count on decent options.
I had been curious about exactly who would be present from Redfin; I'd seen the various local agents on their website, but the announces host wasn't any of them. It turned out that Catherine Jardine (that name may be misspelled) was previously an agent in the area - I guess maybe she's part of the corporate structure now? Or something? Anyways, she ran the seminar, and spoke more than anyone else. The tone was relaxed, casual, confident, and informative.
The first part of the evening focused on general market trends. Many of the graphs that she showed (Case-Schiller, inventory levels, etc.) were things that I had already seen on their site or elsewhere, but it was incredibly helpful to have someone explain their significance. One of the weird things about our current situation is that, while there's a general perception that we're in a buyer's market because prices are down and foreclosures are rising, we're actually technically in a seller's market because of the incredibly low inventory levels. Six months is the standard dividing line: more than that indicates a buyer's market, lower indicates a seller's market. A year ago, Santa Clara county had about 14 months of inventory. Today, it has about 3 months. San Mateo county is even lower, and parts of San Francisco and Marin have less than one months' worth of homes for sale. The consequence of all this is that it's really hard for buyers to find homes that they want, because there just aren't that many options on the market. When something good does come on the market, you'll be competing with many other buyers for that very limited resource.
This may partly be marketing, but it did feel like Redfin was genuinely trying to give people the straight story, without spin or pressure. Throughout the whole night, nobody said, "Now is a great time to buy!" They just told it straight. Many people would be better off as renters than as owners. For people who do want to buy, nobody really knows if prices will go up or down. They even had a slide that listed four bullet points listing why prices will fall another 20%, and another four bullet points listing why prices will rise 20%. (The former: high unemployment rate, shadow inventory of foreclosed homes, a few others. The latter: it's now cheaper to own than to rent in some regions [like San Jose], interest rates are low, etc.) They included a few great quotes, including one I hadn't heard before from Mark Twain: "I have never recognized an opportunity until it ceased to be one." Nobody can predict the future, and anyone who claims to is selling you something.
Another thing they pointed out was the sales-to-list price ratio - that is, the values at which homes are actually selling when compared to their listed price. They showed the values for major cities - San Jose, Redwood City, Palo Alto, San Mateo, as well as wealthy enclaves like Woodside and Atherton. Virtually all of them were within a few percentage points of 100% - some had average prices of as low as 97% of list price, others were bid up to as high as 102% of list price. So, again, while the story we've been hearing is that it's a buyer's market out there, the reality is that buyers don't have a whole lot of leverage over the limited properties that are out there, and as a result homes are selling for approximately what their sellers list them for.
Now, a crucial point here is that this chart was comparing sales price to the FINAL listing price, not the original price. So, if a home was originally listed at $750,000, then was reduced to $700,000, and finally sold at $707,000, then it would show as a 101% price ratio. Still, as they pointed out, we shouldn't get overly excited about price reductions. If a home is listed at $750k, and the owner gets an offer for $700k, then the owner most likely won't sell for that amount. Instead, if they don't get any better offers, they will drop the list price to $700k, in order to attract more offers and create competition. So, once again, the onus is on the buyers. You should be aware of what homes are selling for in your targeted areas, but if a home is listed for much higher than what you think it's worth, you probably won't have luck with a low bid. Instead, you should wait for the price to fall in line with the market, and then be prepared for some competition.
Some of the people at the seminar were surprisingly emotional about this. Throughout the evening there were some passionate questions about why prices weren't falling more quickly when we are reading about foreclosures (reason: the banks are keeping the inventory off the market), or whether the last decade of the housing market has been an "aberration" (in Catherine's opinion, no - prices went up, and then went down, and that was the reality, not an aberration - property is worth whatever a buyer and a seller agree on). I recognized the same tendencies within myself: as a buyer, I'm frustrated by high prices, and tend to emotionally feel like I'm being thwarted by the unrealistic expectations of sellers, rather than recognizing the particular role that they're playing within a competitive marketplace.
After an intermission, we moved into the second session of the evening, which focused on the Redfin process: basically, how buying with Redfin works. I was already pretty familiar with the concept from their website: you do research on your own, using the tools that they provide, and also some other sites that they recommended here. I was already familiar with many of them, such as Zillow, Trulia, and WalkScore. One of the best take-aways from the evening was a reference to Property Shark, which looks extremely useful, and can provide some pieces of data that even Redfin doesn't have (like permit applications, zoning, etc.).
Once you find some properties you like, you can use the website to request a home tour. This process has changed - in the early days, Redfin would charge for each home tour; now, there's no longer a charge, and you're not even obligated to buy with Redfin if you decide to pursue a home. All you need to start touring is to send them a copy of your drivers' license. By your third tour, you should also provide a pre-approval letter.
I've been curious for a while about how this would work. Pre-approval letters are constantly talked about, but as I've mentioned before, I find that the reality is a little different. One thing I've been unsure of is just how important it is to keep the letter up-to-date. Mine was valid for 60 days and has since expired; I could renew it, but am reluctant to take an extra hit to my credit score. First of all, they re-iterated that buyers in the Bay Area won't even consider an offer without a pre-approval letter. They used to suggest that buyers get pre-approval letters of various amounts; now, they ask that you just get one letter, but have a relationship with your lender where they will provide you a customized letter when you're ready to make your offer. As for the dates, they said that in this market, most agents are leery of letters that are older than 30 days, even if they haven't expired yet - they'll wonder about how good your relationship with the lender is. So that was a bit of a bummer. I'm fairly sure that I'll stick with San Mateo Credit Union for my eventual loan, but think now that I might want to get pre-approved through someone else in the meantime who won't do a hard pull of my credit report.
One other thing that I'd been curious about was how and if Redfin works with new construction that isn't listed in the MLS and therefore isn't listed on their site. I asked them, and learned that you can use Redfin as long as the builder pays a commission. Apparently, most builders in the Bay Area do offer this. The lead agent further explained that the builder usually offers a "referral fee" - officially, the builder's agent is also your agent and will represent you. In order for Redfin to get the referral fee (and, hence, you to get your kickback), the agent needs to go with you the first time you visit the property. The best way to do this apparently is to schedule a tour in a nearby area, get in touch with a Redfin agent that way, and then set up the tour of the new construction property. I was satisfied with their answer, and glad to have relatively clear explanations - this is something that I have been unsure about for a while.
Once you decide to pursue a property, you can submit the offer - tada! - online! That seems weird and cool to me. As Catherine explained, clicking "Submit an Offer" is roughly analogous to "winking" at someone on a site like eHarmony: it means you're interested, it doesn't mean you're married. You fill out some information about your offer (your preferred agent, what you're willing to pay, what you want to use as an opening price, etc.). It then goes into their system. The lead agent will call you to finalize the offer: you'll discuss pricing and strategy and ultimately agree on whether and how to pursue the deal. He (or she, but on the Peninsula it's a he) then handles negotiations with the seller, contacting you as necessary if anything comes up. Once (and if) both sides agree on a deal, it is handed off to an associate agent who sees you through escrow and closing.
The whole system is fairly specialized and assembly-line-ish and impersonal; I approve. Unlike a traditional real estate relationship, where a single person is your point of contact for every step of the process, here you will work with various field agents while touring homes; the lead agent for crafting and negotiating the deal; another set of associate agents for inspections, walk-throughs, escrows, and closing. What I like best about this is the idea that people can specialize in what they do best. It makes sense that someone who's great at negotiating should focus on that, so they can provide the best value to the most people.
They also spent some time talking about the hot topics of the year: short sales, foreclosures, auctions, and REOs. Redfin refuses to work with short sales, and after this night I could see why. I was shocked to learn that, nationally, fewer than 1% (one percent!) of all short sales result in an actual sale. Most real estate agencies will take short sales and put a low price on them because it's a great way to bring people into the office and get new clients; however, the banks don't have to accept the low price, and most will reject them, but may wait for months and months to do so. Even if a short sale is finally approved six months later, you may no longer want the home, and cut it off from your end.
That said, buyers remain convinced that short sales are an amazing deal, not recognizing that if YOU think it's a great deal, 50 other people will be thinking the exact same thing. Demand for short sales has grown so high that Redfin has finally (sort of) given in - they still won't directly work with short sales, but you can now search for them on their site, and they'll refer you to other non-Redfin agents who will work on those properties.
Foreclosure auctions are generally off-limits to people like us. They're held on the courthouse steps, and usually dominated by speculators and investors who will buy dozens or hundreds of homes at once, sight unseen, and don't really care about the condition of the homes. You're not likely to be very successful.
REOs are slightly brighter, but still not great. REOs are more traditional transactions, with the bank as a seller; they are more frustrating that regular sales, because the banks are usually dealing with incredibly high volumes, the process is very impersonal (I thought it was a little funny to hear this complaint from Redfin, but maybe that's just me), and the banks are usually extremely poor at communicating what's happening with the process. REOs are often priced low to attract a large number of offers, then bid up to the maximum that the bank can earn. If 50 people bid for one property, then 1 person gets it and 49 people lose it. Those 49 people will then move on to the next property and bid on it, so if you're chasing REOs, you'll probably be competing against the same buyers over and over again. This can, of course, be frustrating.
So, what's my take-away? All in all, I'm glad that I went. Looking back over it, I think the thing I appreciated the most was how much intellectual respect Redfin showed the attendees. Everyone in that room was, to a greater or lesser extent, a real estate nerd, and someone who wants to educate themself. As a result, we didn't waste any time at all covering basics like what a down payment is, what points are, what disclosures are, and so on. What remained, therefore, was the higher-level, more useful and more interesting information that was relevant to us as interested consumers in a particular market. I had a good time, learned some useful stuff, got a more realistic understanding of my role as a buyer, and further warmed towards working with Redfin as a company. I think I may try touring with them in the next month or so to see how that goes and at least get plugged into their buyer system - at a minimum, it'll be good to evaluate what other resources are out there to assist me as a buyer.
As I mentioned in my previous post, I'm increasingly intrigued by Redfin. I've been lurking/using their site for about a month now, and have been quite impressed. Their major goal is Freakish Depth: giving you access to all the information possible about every single market and property. It's the ultimate site for real estate nerds, and features a huge variety of data that they have parsed into helpful charts, trend analyses, and other great stuff.
It seems like it'd be worthwhile to at least evaluate using them. Their main sales pitch is on the commission rebate: you get to keep half of whatever commission they earn. So, if you buy a $500,000 house, and the buyer's agent gets a 3% commission, then you will get $7500, either applied to your down payment or handed to you as a check. Personally, I'm less excited about this aspect - don't get me wrong, money is great, but in a hypothetical choice between one agent who could negotiate a 10% lower price and another agent who gives me a 1.5% kickback, I'd take the former in a heartbeat.
No; the main reason why I'm drawn to them is that they just seem to operate in a way much more comfortable to me. They're a discount brokerage, which means that you end up being responsible for most of your search, but that's the way I LIKE doing things. I mean, I don't go to a department store where I work with a personal shopper who helps me pick out products; I go online, I do research, I find products I like, analyze them, over-analyze them, decide what I want, then look for the best deal I can get on it. I enjoy the process of hunting and evaluating, and frankly it's something that I feel more comfortable doing on my own than under another's shadow. Obviously, I haven't tried it yet, but the Redfin model sounds perfect: you use an awesome website to find homes you like, you schedule home tours until you find one you like, then you tell them to write an offer for you. They take over, run the negotiations, and then see you through closing. Ah... that sounds so wonderfully simple.
Anyways. While browsing their (Awesome! I love it!) site, I noticed that they were hosting a seminar in Palo Alto. Now, for years I've seen those notices in real-estate newspaper sections for "First-time homebuyers seminar" or whatever. They're almost always hosted by real estate companies, and I'm never tempted to go - it seems like a transparent ploy for new contacts. This was... well, it sounded different. They would discuss market trends, explain how Redfin works, and answer questions people had. Okay, so that doesn't sound too much different, but I was sufficiently intrigued to sign up for it. Basically, I was already interested in them, and this seemed like a good, low-key first point of contact.
Plus, they announced that they would be serving pizza and beer. How could I turn that down?
It proved to be quite a crowd. The last I checked, there were over 150 people registered for it. I'm not sure exactly how many turned up, but it was probably close to that - we filled a good-sized hotel conference room. There was pizza and beer, as promised. The pizza was good - fancier than I'm used to, and trickily divided into unusually small portions so that one would need to take six pieces in order to reach the standard two-slice portion size. The beer was high-quality. One of the (many, many) things I love about the Bay Area is regularly good beer. Even at free events like this, people would be ashamed to offer Budweiser and Miller Lite, so you can count on decent options.
I had been curious about exactly who would be present from Redfin; I'd seen the various local agents on their website, but the announces host wasn't any of them. It turned out that Catherine Jardine (that name may be misspelled) was previously an agent in the area - I guess maybe she's part of the corporate structure now? Or something? Anyways, she ran the seminar, and spoke more than anyone else. The tone was relaxed, casual, confident, and informative.
The first part of the evening focused on general market trends. Many of the graphs that she showed (Case-Schiller, inventory levels, etc.) were things that I had already seen on their site or elsewhere, but it was incredibly helpful to have someone explain their significance. One of the weird things about our current situation is that, while there's a general perception that we're in a buyer's market because prices are down and foreclosures are rising, we're actually technically in a seller's market because of the incredibly low inventory levels. Six months is the standard dividing line: more than that indicates a buyer's market, lower indicates a seller's market. A year ago, Santa Clara county had about 14 months of inventory. Today, it has about 3 months. San Mateo county is even lower, and parts of San Francisco and Marin have less than one months' worth of homes for sale. The consequence of all this is that it's really hard for buyers to find homes that they want, because there just aren't that many options on the market. When something good does come on the market, you'll be competing with many other buyers for that very limited resource.
This may partly be marketing, but it did feel like Redfin was genuinely trying to give people the straight story, without spin or pressure. Throughout the whole night, nobody said, "Now is a great time to buy!" They just told it straight. Many people would be better off as renters than as owners. For people who do want to buy, nobody really knows if prices will go up or down. They even had a slide that listed four bullet points listing why prices will fall another 20%, and another four bullet points listing why prices will rise 20%. (The former: high unemployment rate, shadow inventory of foreclosed homes, a few others. The latter: it's now cheaper to own than to rent in some regions [like San Jose], interest rates are low, etc.) They included a few great quotes, including one I hadn't heard before from Mark Twain: "I have never recognized an opportunity until it ceased to be one." Nobody can predict the future, and anyone who claims to is selling you something.
Another thing they pointed out was the sales-to-list price ratio - that is, the values at which homes are actually selling when compared to their listed price. They showed the values for major cities - San Jose, Redwood City, Palo Alto, San Mateo, as well as wealthy enclaves like Woodside and Atherton. Virtually all of them were within a few percentage points of 100% - some had average prices of as low as 97% of list price, others were bid up to as high as 102% of list price. So, again, while the story we've been hearing is that it's a buyer's market out there, the reality is that buyers don't have a whole lot of leverage over the limited properties that are out there, and as a result homes are selling for approximately what their sellers list them for.
Now, a crucial point here is that this chart was comparing sales price to the FINAL listing price, not the original price. So, if a home was originally listed at $750,000, then was reduced to $700,000, and finally sold at $707,000, then it would show as a 101% price ratio. Still, as they pointed out, we shouldn't get overly excited about price reductions. If a home is listed at $750k, and the owner gets an offer for $700k, then the owner most likely won't sell for that amount. Instead, if they don't get any better offers, they will drop the list price to $700k, in order to attract more offers and create competition. So, once again, the onus is on the buyers. You should be aware of what homes are selling for in your targeted areas, but if a home is listed for much higher than what you think it's worth, you probably won't have luck with a low bid. Instead, you should wait for the price to fall in line with the market, and then be prepared for some competition.
Some of the people at the seminar were surprisingly emotional about this. Throughout the evening there were some passionate questions about why prices weren't falling more quickly when we are reading about foreclosures (reason: the banks are keeping the inventory off the market), or whether the last decade of the housing market has been an "aberration" (in Catherine's opinion, no - prices went up, and then went down, and that was the reality, not an aberration - property is worth whatever a buyer and a seller agree on). I recognized the same tendencies within myself: as a buyer, I'm frustrated by high prices, and tend to emotionally feel like I'm being thwarted by the unrealistic expectations of sellers, rather than recognizing the particular role that they're playing within a competitive marketplace.
After an intermission, we moved into the second session of the evening, which focused on the Redfin process: basically, how buying with Redfin works. I was already pretty familiar with the concept from their website: you do research on your own, using the tools that they provide, and also some other sites that they recommended here. I was already familiar with many of them, such as Zillow, Trulia, and WalkScore. One of the best take-aways from the evening was a reference to Property Shark, which looks extremely useful, and can provide some pieces of data that even Redfin doesn't have (like permit applications, zoning, etc.).
Once you find some properties you like, you can use the website to request a home tour. This process has changed - in the early days, Redfin would charge for each home tour; now, there's no longer a charge, and you're not even obligated to buy with Redfin if you decide to pursue a home. All you need to start touring is to send them a copy of your drivers' license. By your third tour, you should also provide a pre-approval letter.
I've been curious for a while about how this would work. Pre-approval letters are constantly talked about, but as I've mentioned before, I find that the reality is a little different. One thing I've been unsure of is just how important it is to keep the letter up-to-date. Mine was valid for 60 days and has since expired; I could renew it, but am reluctant to take an extra hit to my credit score. First of all, they re-iterated that buyers in the Bay Area won't even consider an offer without a pre-approval letter. They used to suggest that buyers get pre-approval letters of various amounts; now, they ask that you just get one letter, but have a relationship with your lender where they will provide you a customized letter when you're ready to make your offer. As for the dates, they said that in this market, most agents are leery of letters that are older than 30 days, even if they haven't expired yet - they'll wonder about how good your relationship with the lender is. So that was a bit of a bummer. I'm fairly sure that I'll stick with San Mateo Credit Union for my eventual loan, but think now that I might want to get pre-approved through someone else in the meantime who won't do a hard pull of my credit report.
One other thing that I'd been curious about was how and if Redfin works with new construction that isn't listed in the MLS and therefore isn't listed on their site. I asked them, and learned that you can use Redfin as long as the builder pays a commission. Apparently, most builders in the Bay Area do offer this. The lead agent further explained that the builder usually offers a "referral fee" - officially, the builder's agent is also your agent and will represent you. In order for Redfin to get the referral fee (and, hence, you to get your kickback), the agent needs to go with you the first time you visit the property. The best way to do this apparently is to schedule a tour in a nearby area, get in touch with a Redfin agent that way, and then set up the tour of the new construction property. I was satisfied with their answer, and glad to have relatively clear explanations - this is something that I have been unsure about for a while.
Once you decide to pursue a property, you can submit the offer - tada! - online! That seems weird and cool to me. As Catherine explained, clicking "Submit an Offer" is roughly analogous to "winking" at someone on a site like eHarmony: it means you're interested, it doesn't mean you're married. You fill out some information about your offer (your preferred agent, what you're willing to pay, what you want to use as an opening price, etc.). It then goes into their system. The lead agent will call you to finalize the offer: you'll discuss pricing and strategy and ultimately agree on whether and how to pursue the deal. He (or she, but on the Peninsula it's a he) then handles negotiations with the seller, contacting you as necessary if anything comes up. Once (and if) both sides agree on a deal, it is handed off to an associate agent who sees you through escrow and closing.
The whole system is fairly specialized and assembly-line-ish and impersonal; I approve. Unlike a traditional real estate relationship, where a single person is your point of contact for every step of the process, here you will work with various field agents while touring homes; the lead agent for crafting and negotiating the deal; another set of associate agents for inspections, walk-throughs, escrows, and closing. What I like best about this is the idea that people can specialize in what they do best. It makes sense that someone who's great at negotiating should focus on that, so they can provide the best value to the most people.
They also spent some time talking about the hot topics of the year: short sales, foreclosures, auctions, and REOs. Redfin refuses to work with short sales, and after this night I could see why. I was shocked to learn that, nationally, fewer than 1% (one percent!) of all short sales result in an actual sale. Most real estate agencies will take short sales and put a low price on them because it's a great way to bring people into the office and get new clients; however, the banks don't have to accept the low price, and most will reject them, but may wait for months and months to do so. Even if a short sale is finally approved six months later, you may no longer want the home, and cut it off from your end.
That said, buyers remain convinced that short sales are an amazing deal, not recognizing that if YOU think it's a great deal, 50 other people will be thinking the exact same thing. Demand for short sales has grown so high that Redfin has finally (sort of) given in - they still won't directly work with short sales, but you can now search for them on their site, and they'll refer you to other non-Redfin agents who will work on those properties.
Foreclosure auctions are generally off-limits to people like us. They're held on the courthouse steps, and usually dominated by speculators and investors who will buy dozens or hundreds of homes at once, sight unseen, and don't really care about the condition of the homes. You're not likely to be very successful.
REOs are slightly brighter, but still not great. REOs are more traditional transactions, with the bank as a seller; they are more frustrating that regular sales, because the banks are usually dealing with incredibly high volumes, the process is very impersonal (I thought it was a little funny to hear this complaint from Redfin, but maybe that's just me), and the banks are usually extremely poor at communicating what's happening with the process. REOs are often priced low to attract a large number of offers, then bid up to the maximum that the bank can earn. If 50 people bid for one property, then 1 person gets it and 49 people lose it. Those 49 people will then move on to the next property and bid on it, so if you're chasing REOs, you'll probably be competing against the same buyers over and over again. This can, of course, be frustrating.
So, what's my take-away? All in all, I'm glad that I went. Looking back over it, I think the thing I appreciated the most was how much intellectual respect Redfin showed the attendees. Everyone in that room was, to a greater or lesser extent, a real estate nerd, and someone who wants to educate themself. As a result, we didn't waste any time at all covering basics like what a down payment is, what points are, what disclosures are, and so on. What remained, therefore, was the higher-level, more useful and more interesting information that was relevant to us as interested consumers in a particular market. I had a good time, learned some useful stuff, got a more realistic understanding of my role as a buyer, and further warmed towards working with Redfin as a company. I think I may try touring with them in the next month or so to see how that goes and at least get plugged into their buyer system - at a minimum, it'll be good to evaluate what other resources are out there to assist me as a buyer.
Saturday, November 14, 2009
Kicking the Tires
Sorry for the delay between posts - things have been quiet, but they are moving forward.
I've been collecting real estate agent recommendations for a while. Early in November I interviewed one particular agent and we started looking at homes. The process has been extremely fun, extremely interesting, and extremely frustrating, all mixed together.
First of all, the agent: one of the things I liked was that he was a first-hand recommendation, from someone who had recently bought a home through him. Most of my other names were from people who knew agents, or who had friends who had used agents. Second, the agent is really friendly, with a great personality. We met in his office and chatted a bit - what I was looking for, my timeline, my finances, but also talking about mutual friends, music, and so on. So that was nice... I'm mainly looking for an agent, not for a friend, but if you're going to spend a lot of time with someone it really helps to get along with them.
My time frame is still extremely fluid; under my original plan, I still have about 4-5 months left to go, and I would be totally fine with extending that further. Really, I'm talking with agents now because of my original schedule more than any specific burning desires; mainly, I want to be set up so that if something great comes along, I can jump right on top of it, and not need to waste time lining up an agent first.
So, when I had first reached out to the agent, my message (email, yay!) was along the lines of, "I'm looking for buying X in Y area. This might be really premature, but I'm looking for a buyer's agent, and am wondering if you'd be interested in representing me." He enthusiastically responded, and we set up a time to meet.
He managed to surprise me in our very first meeting by showing me an available property that I hadn't been aware of. I've been running RSS feeds on Craigslist and Zillow for many months now in my target area, and had managed to convince myself that I was seeing everything that was for sale - not much, especially in my price range. But the very first property he pulled off was something that looked like a perfect location, and while it was above my limit, at least the far-left digit in the price was correct. He had also prepared about a dozen other properties from a wide range of geography, price, age and style. I read through them all, and later told him that the first was the only one I was really interested in, but that I'd like to look at a few others if he had time, just so I could get a feel for what was available in the area. I think I've mentioned before that I haven't been doing open houses, so I really don't have a whole lot of experience when it comes to looking at properties.
The very first place we visited was the one I was interested in. It was cool, and also depressing. As I was walking around outside, I realized that the street it was on was quite a bit busier than I had expected. It's a few blocks away from El Camino Real, and when looking at it on Google Maps I had thought, "Oh, all the through-traffic will be on El Camino, so this should be quieter." That wasn't the case, though... I'm not totally sure why it's as busy as it is, but a nearby grocery store may have something to do with it, and some people may just be trying to avoid El Camino. The unit was on the first floor (although the first floor is above the garage, so it's raised a little) and faces the street, which is a shame - I don't think I'd be able to enjoy sitting out on the porch with a book. On the inside, it was a better, though still a mixed story. The agent did a great job at describing what I was seeing and pointing things out - a wet bar, electric burners (boo!), real hardwood floors, badly hung window, cracked molding, un-level floor. Honestly, it was a bit overwhelming, though pretty enjoyable. As people who know me can attest, I take a while to process new information, so a lot of time was spent just absorbing my surroundings.
From there we went and visited the other three places I had selected. One was a HUGE three-bedroom condo that was built in the 60's. It had things that I've never seen before, like an electric range that slides out of the wall, and four-pronged electrical sockets. We saw a great but expensive condo in Burlingame. And then we looked at a new condo development in South San Francisco, which was quite interesting. All along I've been saying that I don't care about luxury amenities, that all I want is location and value, but I have to admit that I responded strongly to the all-new construction there. (It wasn't crazy or anything, but did have really pretty wood, nice big windows, marble countertops, and so on.) After the new condo, we stopped at one more place that the agent thought I should see, a nice, older, good-sized condo on a quieter residential street.
After the tour, I could definitely appreciate the benefits of working with an agent. Other than the new construction, at each place he could use his Supra lockbox thing and let us in with the key. It's extremely convenient to have that kind of access, to not need to worry about scheduling around an open house or dealing with other people who are there. And, again, I might not have found out about that first property if it wasn't for him.
At the same time, though, I am now realizing what all the books say: "YOU are in charge of your home search." Which makes sense; I'm the one who's spending the money, and I'm the one who knows what I want and what I don't want. I really liked the agent, but I needed to remind myself not to get frustrated when he encouraged me to look at places that I wasn't interested in, or when he checked to see whether I could go above my maximum price. He's doing his job, which is to find me a place and make sure the transaction goes through. I need to focus on my job, which is finding the place that I want at a great price.
So, we'll see where we go from here. Weirdly enough for this late in the game, I'm actually starting to look at Redfin - at a minimum, their web site has gotten crazy good and vaulted above Zillow as my go-to spot (though there is still an annoying registration process - thank you, BugMeNot!). I realized after the fact that Redfin listed the property that I had missed from Craigslist and Zillow - since they're plugged into MLS, they have access to the same data that "real" agents do. And, given that I've spent close to a year tracking prices and thinking through what I want, I have an increasingly loud and cocky voice in my head saying, "You should just go for it! You know what you want, you have the Internet, you have all the time in the world... do it on your own!" I do like the self-driven aspect of Redfin, which aligns nicely with how I approach everything else in my life.
Anyways, that's where things are for now. As always, moving forward, but very slowly. Huzzah!
I've been collecting real estate agent recommendations for a while. Early in November I interviewed one particular agent and we started looking at homes. The process has been extremely fun, extremely interesting, and extremely frustrating, all mixed together.
First of all, the agent: one of the things I liked was that he was a first-hand recommendation, from someone who had recently bought a home through him. Most of my other names were from people who knew agents, or who had friends who had used agents. Second, the agent is really friendly, with a great personality. We met in his office and chatted a bit - what I was looking for, my timeline, my finances, but also talking about mutual friends, music, and so on. So that was nice... I'm mainly looking for an agent, not for a friend, but if you're going to spend a lot of time with someone it really helps to get along with them.
My time frame is still extremely fluid; under my original plan, I still have about 4-5 months left to go, and I would be totally fine with extending that further. Really, I'm talking with agents now because of my original schedule more than any specific burning desires; mainly, I want to be set up so that if something great comes along, I can jump right on top of it, and not need to waste time lining up an agent first.
So, when I had first reached out to the agent, my message (email, yay!) was along the lines of, "I'm looking for buying X in Y area. This might be really premature, but I'm looking for a buyer's agent, and am wondering if you'd be interested in representing me." He enthusiastically responded, and we set up a time to meet.
He managed to surprise me in our very first meeting by showing me an available property that I hadn't been aware of. I've been running RSS feeds on Craigslist and Zillow for many months now in my target area, and had managed to convince myself that I was seeing everything that was for sale - not much, especially in my price range. But the very first property he pulled off was something that looked like a perfect location, and while it was above my limit, at least the far-left digit in the price was correct. He had also prepared about a dozen other properties from a wide range of geography, price, age and style. I read through them all, and later told him that the first was the only one I was really interested in, but that I'd like to look at a few others if he had time, just so I could get a feel for what was available in the area. I think I've mentioned before that I haven't been doing open houses, so I really don't have a whole lot of experience when it comes to looking at properties.
The very first place we visited was the one I was interested in. It was cool, and also depressing. As I was walking around outside, I realized that the street it was on was quite a bit busier than I had expected. It's a few blocks away from El Camino Real, and when looking at it on Google Maps I had thought, "Oh, all the through-traffic will be on El Camino, so this should be quieter." That wasn't the case, though... I'm not totally sure why it's as busy as it is, but a nearby grocery store may have something to do with it, and some people may just be trying to avoid El Camino. The unit was on the first floor (although the first floor is above the garage, so it's raised a little) and faces the street, which is a shame - I don't think I'd be able to enjoy sitting out on the porch with a book. On the inside, it was a better, though still a mixed story. The agent did a great job at describing what I was seeing and pointing things out - a wet bar, electric burners (boo!), real hardwood floors, badly hung window, cracked molding, un-level floor. Honestly, it was a bit overwhelming, though pretty enjoyable. As people who know me can attest, I take a while to process new information, so a lot of time was spent just absorbing my surroundings.
From there we went and visited the other three places I had selected. One was a HUGE three-bedroom condo that was built in the 60's. It had things that I've never seen before, like an electric range that slides out of the wall, and four-pronged electrical sockets. We saw a great but expensive condo in Burlingame. And then we looked at a new condo development in South San Francisco, which was quite interesting. All along I've been saying that I don't care about luxury amenities, that all I want is location and value, but I have to admit that I responded strongly to the all-new construction there. (It wasn't crazy or anything, but did have really pretty wood, nice big windows, marble countertops, and so on.) After the new condo, we stopped at one more place that the agent thought I should see, a nice, older, good-sized condo on a quieter residential street.
After the tour, I could definitely appreciate the benefits of working with an agent. Other than the new construction, at each place he could use his Supra lockbox thing and let us in with the key. It's extremely convenient to have that kind of access, to not need to worry about scheduling around an open house or dealing with other people who are there. And, again, I might not have found out about that first property if it wasn't for him.
At the same time, though, I am now realizing what all the books say: "YOU are in charge of your home search." Which makes sense; I'm the one who's spending the money, and I'm the one who knows what I want and what I don't want. I really liked the agent, but I needed to remind myself not to get frustrated when he encouraged me to look at places that I wasn't interested in, or when he checked to see whether I could go above my maximum price. He's doing his job, which is to find me a place and make sure the transaction goes through. I need to focus on my job, which is finding the place that I want at a great price.
So, we'll see where we go from here. Weirdly enough for this late in the game, I'm actually starting to look at Redfin - at a minimum, their web site has gotten crazy good and vaulted above Zillow as my go-to spot (though there is still an annoying registration process - thank you, BugMeNot!). I realized after the fact that Redfin listed the property that I had missed from Craigslist and Zillow - since they're plugged into MLS, they have access to the same data that "real" agents do. And, given that I've spent close to a year tracking prices and thinking through what I want, I have an increasingly loud and cocky voice in my head saying, "You should just go for it! You know what you want, you have the Internet, you have all the time in the world... do it on your own!" I do like the self-driven aspect of Redfin, which aligns nicely with how I approach everything else in my life.
Anyways, that's where things are for now. As always, moving forward, but very slowly. Huzzah!
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