Ever wondered why you might see a home with sign in the yard and not be able to find it on the internet? Read on. Status symbols and what they really mean.

This can be a bit confusing if you aren’t part of the local multiple listing service so allow me to clarify these terms.

When we list a home for sale is becomes "active" in the MLS system. That’s the first status and it’s referred to as status "1", aptly named. This is when people who have subscribed to automated email alerts generally receive an email announcement that the home has been listed for sale-often times indicated with an [A].

If you see a "Pending Release" or "Pending Sale Release" it typically means an offer was accepted which contains a contingency (usually on the sale of the buyer’s home). This means that the seller has accepted the offer but can release the buyer from the contract if they get another (usually better) offer. This is typically reported as "SALE PENDING RELEASE" or status "2" in the MLS system-also denoted as [PR].

A release clause may be employed in any contract but it’s typically relegated to sales wherein the buyer must sell a home to complete the transaction. Not wanting to be tied up for a protracted period of time, the seller may add a "release clause" to have an option to cancel the contract. Release clauses are typically upon 72 hour notice but they could be whatever the buyer and seller agree upon; and they are typically reserved for when the buyer has a home to sell but again they could be used in any scenario where the buyer and seller agree.

The way a release works is simple. Say you’ve accepted an offer on the home you are selling for $1,000,000, but the buyer must first sell their home to complete the transaction. The seller might agree to your offer but add a release clause stating that upon notification (some point in the escrow period) you have 72 hours to remove the contingency or the seller can then elect to cancel your contract and accept another offer or move a back-up offer into first position-it’s sort of a warning shot across the buyer’s bow if you will. Now let’s say another buyer brings you an offer for $20,000 more after you’re in contract with buyer #1. The first buyer must after written notice either remove their contingency within 72 hours or risk losing the property. So why would a buyer agree to this? Usually because they have no choice. Most sellers insist on this, but secondly the buyer may have sufficient funds in which to close the transaction either in stock or equity but for whatever reason would rather sell their home first. Faced with the 72 release notice, the buyer can then elect to let the home go to another buyer or cash in stocks or their equity and remove the contingency. This way the buyer is not forced into liquidating stocks or paying interest on an equity line of credit until and if necessary.

Status 3 is Pending Sale continue to show. [PS]

This simply means that the seller wants to continue and have their home shown to prospective buyers, and agents. Typically this means there are contingencies in the accepted offer and until they are removed it usually stays in this pending continue to show state. This status is typically reserved during financing and inspection contingencies.

Status 4 is Pending DO NOT SHOW. [PN]

This typically is used when all contingencies have been removed by the buyer but it too can be employed earlier at the seller’s election. This is usually where a property will drop off of the radar by most internet search engines. That’s why you may see a home with a sign in the yard but not be able to find it any longer in the MLS system via the internet.

Status 5 is SOLD and used for when the home has transferred title to the new owners.[S]

Disclaimer: This information is for entertainment purposes only and includes no legal, accounting or real estate advice nor is this response in tended to be specific to your situation-consult a specialist for your specific situation.

Ever wondered why you might see a home with sign in the yard and not be able to find it on the internet? Read on. Status symbols and what they really mean.

This can be a bit confusing if you aren’t part of the local multiple listing service so allow me to clarify these terms.

When we list a home for sale is becomes "active" in the MLS system. That’s the first status and it’s referred to as status "1", aptly named. This is when people who have subscribed to automated email alerts generally receive an email announcement that the home has been listed for sale-often times indicated with an [A].

If you see a "Pending Release" or "Pending Sale Release" it typically means an offer was accepted which contains a contingency (usually on the sale of the buyer’s home). This means that the seller has accepted the offer but can release the buyer from the contract if they get another (usually better) offer. This is typically reported as "SALE PENDING RELEASE" or status "2" in the MLS system-also denoted as [PR].

A release clause may be employed in any contract but it’s typically relegated to sales wherein the buyer must sell a home to complete the transaction. Not wanting to be tied up for a protracted period of time, the seller may add a "release clause" to have an option to cancel the contract. Release clauses are typically upon 72 hour notice but they could be whatever the buyer and seller agree upon; and they are typically reserved for when the buyer has a home to sell but again they could be used in any scenario where the buyer and seller agree.

The way a release works is simple. Say you’ve accepted an offer on the home you are selling for $1,000,000, but the buyer must first sell their home to complete the transaction. The seller might agree to your offer but add a release clause stating that upon notification (some point in the escrow period) you have 72 hours to remove the contingency or the seller can then elect to cancel your contract and accept another offer or move a back-up offer into first position-it’s sort of a warning shot across the buyer’s bow if you will. Now let’s say another buyer brings you an offer for $20,000 more after you’re in contract with buyer #1. The first buyer must after written notice either remove their contingency within 72 hours or risk losing the property. So why would a buyer agree to this? Usually because they have no choice. Most sellers insist on this, but secondly the buyer may have sufficient funds in which to close the transaction either in stock or equity but for whatever reason would rather sell their home first. Faced with the 72 release notice, the buyer can then elect to let the home go to another buyer or cash in stocks or their equity and remove the contingency. This way the buyer is not forced into liquidating stocks or paying interest on an equity line of credit until and if necessary.

Status 3 is Pending Sale continue to show. [PS]

This simply means that the seller wants to continue and have their home shown to prospective buyers, and agents. Typically this means there are contingencies in the accepted offer and until they are removed it usually stays in this pending continue to show state. This status is typically reserved during financing and inspection contingencies.

Status 4 is Pending DO NOT SHOW. [PN]

This typically is used when all contingencies have been removed by the buyer but it too can be employed earlier at the seller’s election. This is usually where a property will drop off of the radar by most internet search engines. That’s why you may see a home with a sign in the yard but not be able to find it any longer in the MLS system via the internet.

Status 5 is SOLD and used for when the home has transferred title to the new owners.[S]

Disclaimer: This information is for entertainment purposes only and includes no legal, accounting or real estate advice nor is this response in tended to be specific to your situation-consult a specialist for your specific situation.

The short answer is of course yes. Different sellers have different needs and abilities and some may choose a full service model and others limited or no service at all-the choices have been there all along. Yet the arrival of virtual Internet brokers has spawned a new ideology of it’s either "us or them".

The very survival of limited service or virtual Internet brokers relies on two things: The first is they are able to convince everyone that paying a 6% compensation is the only alternative to their "discount" model, and the second is that they must convince their prospects that the minimum service they provide is all that is needed to sell a home; and everything else which a full service agent does is a waste of their time and your money.

These assertions that they need you to believe are false. Frankly; it’s a bit surprising that the Department of Justice has not sought sanctions against this type of misinformation when the average real estate commission across the country closer to 5.1%. One of the most misleading impressions that limited or virtual companies imply is that full service agents and discount agents are mutually exclusive-they aren’t.

The second scenario is one which needs more discussion. The premise that a limited service or on-line virtual broker can sell your home is not as questionable as the issue of for how much? Any homeowner wishing to "sell" their home could market it considerably below market value and so long as they were able to communicate to the public that their home was for sale, they would most certainly be able to sell it. How much money they may leave on the bargaining table and the repercussions during and after the close of escrow may linger long after the check has cashed.

Hiring a real estate agent is akin to a homeowner deciding how to do a remodel. As a homeowner you have the right to be your own general contractor; what you have to ask yourself is a) do you want to take that on (do you have the time and ability) and b) are you qualified-as in knowledgeable. You also have the right to hire the cheapest general contractor you can find. But why complain about more expensive ones when cheaper ones are available. Hire who you want–there are options.

See Part Two–Examining the Real Estate Models

Drew & Christine Morgan Morganhomes.com

Visit our Blog at BeautifulMountainBlog.org

Disclaimer: This information is for entertainment purposes only and includes no legal, accounting or real estate advice nor is this response in tended to be specific to your situation-consult a specialist for your specific situation.

What is a sub-prime loan and why are the folks in trouble? Simply put a sub-prime loan was a loan which offered people to purchase homes for which they were not qualified to purchase. For example, a lender might have offered a new buyer the opportunity to own their own home with no money down. Many of these loans offered various payment options. The traditional payment of principle and Interest fully amortized over 15 or more commonly 30 year periods. At the end of 30 years, you owned the home. One variation was to offer an interest only payment. In this scenario the buyer would pay the interest portion of the monthly payment only—deferring the principle payment until the time of sale. In this scenario, a borrower never actually paid off the principle, but it helped many would-be homeowners become a "homeowner".

Here are three payment options many of these loans provided: principle and interest, interest only or negative amortization. A negatively amortized loan payment is less than a fully amortized payment or an interest only payment since the borrower is only paying a portion of the full inertest due and nothing towards the principle. In the following example we see what these three payment options would do to a homeowner’s payment.

Loan amount            $300,000    Rate 6.5%

Principle & Interest payment    $1,896.20

Interest only            $1,625.00

Negatively Amortized        $1,125.00 (4.5%)

As is evident, it was very tempting to opt for the negatively amortized loan since it dropped the out of pocket monthly mortgage payment $771.00. Of course this meant that the loan actually grew rather than diminished which is why it is called negatively amortized as opposed to fully amortized. The $500.00 difference between the interest only payment at 6.4% of $1,625.00 and the lower effective payment at 4.5% of $1,125.00 was added to the loan balance each month—though the payment stayed the same.

Why would anyone take out a negatively amortized loan? Simple; it made housing more affordable or in some cases more housing affordable. For investors, it freed up much needed monthly cash flow (money used to purchase other investment properties) and made owning investment properties where otherwise rents would not cover their expenses, affordable.

Why in many cases it didn’t work.

Banks made a huge error by aggressively qualifying the borrower at the artificially lower negatively amortized rate. In the above example, a borrower would only have to quality for the 4.5% payment instead of the 6.5% actually charged. Many of these loans were only capped at these lower rates for five years. When these began adjusting to higher interest rates—the actual market rate— homeowners and investors alike found themselves in trouble.

For investors, owning a property where the rents no longer cover their expenses, no longer made sense and they began selling their properties as fast as possible. Since many of these investors took out the similar loans, many began adjusting at about the same time—flooding the market which speculative property sales.

Many homeowners faced with the same interest rate adjustment dilemma found they could no longer afford the monthly payment. In cases where they had put no money down, and opted for the negative payment, they soon found themselves with no equity either—further tempting them into loan default status. Since they had nothing to lose, many simply walked away from their homes.

As one can imagine, with this many homes coming available at the same time, compounded by the overabundance of new construction, inventories rose at a time when buyers wanted out of the market. Fewer buyers, and more inventory equals lower prices, mortgage defaults and short sales where the lender agrees to settle for lees than what is owed.

Back to "Grieving"

Full Service vs. Limited Service or Virtual Agents—Is There Room for Everyone?

The short answer is of course yes. Different sellers have different needs and abilities and some may choose a full service model and others limited or no service at all-the choices have been there all along. Yet the arrival of virtual Internet brokers has spawned a new ideology of it’s either "us or them".

The very survival of limited service or virtual Internet brokers relies on two things: The first is they are able to convince everyone that paying a 6% compensation is the only alternative to their "discount" model, and the second is that they must convince their prospects that the minimum service they provide is all that is needed to sell a home; and everything else which a full service agent does is a waste of time and their money.

These assertions that they need you to believe are false. Frankly; it’s a bit surprising that the Department of Justice has not sought sanctions against this type of misinformation when the average real estate commission across the country is closer to 5.1%. One of the most misleading impressions that limited or virtual companies imply is that full service agents and discount agents are mutually exclusive-they aren’t.

The second scenario is one which needs more discussion. The premise that a limited service or on-line virtual broker can sell your home is not as questionable as the issue of for how much? Any homeowner wishing to "sell" their home could market it considerably below market value and so long as they were able to communicate to the public that their home was for sale, they would most certainly be able to sell it. How much money they may leave on the bargaining table and the repercussions during and after the close of escrow may linger long after the check has cashed.

Hiring a real estate agent is akin to a homeowner deciding how to do a remodel. As a homeowner you have the right to be your own general contractor; what you have to ask yourself is a) do you want to take that on (do you have the time and ability) and b) are you qualified-as in knowledgeable. You also have the right to hire the cheapest general contractor you can find. But why complain about more expensive ones when cheaper ones are available. Hire who you want–there are options.

See Part Two–Examining the Real Estate Models

Drew & Christine Morgan Morganhomes.com

Disclaimer: This information is for entertainment purposes only and includes no legal, accounting or real estate advice nor is this response in tended to be specific to your situation-consult a specialist for your specific situation.

The Writing was on the Wall

Addendum to Part 1 of a 2 part series–"Which End is Up" or Understanding Our Housing Market"

Historically low interest rates, low cost housing availability across the country, investors hungry to reap a return after the dot com crash all set the stage for an overactive interest in housing as an investment.

There are really three distinct factors which played into the current market conditions across the county. The first is the sub-prime market. Essentially, these are loans which are made to folks who otherwise could not qualify for an "A" paper loan-usually that means low credit scores. Anyone with even the foggiest crystal ball could foresee that giving loans to people with bad credit is risky. The second major players were investors. Aggressively seeking any new vehicle to safely invest thousands turned to real estate. The availability of innovative interest only and negatively amortizing loans fueled the investment fire. Investors were able to put little or no money down on a new housing development in Las Vegas and before the project was completed for occupancy could re-sell at a huge profit.

As with any scheme is better to get in early rather than later. Not only did the country as a whole have more sub-prime loans it had more investors with less emotional ties to their homes. Both of these relied on one thing-low interest rates. As the "fixed for five year adjustable loans" came due, for many investors it no longer made sense to hold onto their investment as rents could no longer cover the payments. This created a flood of inventory as investors-all with the same issues (rising interest rates) flooded the market. Since these were investment vehicles which had for the most part already established considerable equity-selling and selling fast was the exit strategy. Of course this meant selling lower than your competition. The third factor was Wall Street’s hunger for new high yield investment securities which neglected to understand the risk these investment vehicles carried.

On the homeowner side, many of the sub-prime loans also began to adjust with the difference being many of these folks could not afford the new higher payment. The few that had neg-am loans had no equity to fall back on since housing prices were falling due to the sell-off of investment properties. This forced those who could to try and sell, further increasing inventories and lowering values; while others simply had no choice but to fall into default–eventually losing their home to the banks.

Now the banks are on no place to hold onto all of those loans they made so they sold them as securities on Wall Street-another set of hungry investors who jumped on the bandwagon and bought up all the sub-prime loans they could get their hand on. With thousand of loans in default, mortgage companies and Wall Street was stung by portfolios which were now worth nothing and did what Wall Street always does-overreact. With the sub-prime rate of default was reaching 15%, the default on Jumbo loans was only leas than 1/2/ of one percent. Throwing the proverbial baby out with bath water, they hastily decided that all mortgage backed securities were bad and no longer bought any Jumbo loans either (those over $417,000 not backed by Fanny Mae or Freddie Mac). With no one to buy these loans this raised the cost of Jumbo rates since mortgage companies were now forced to carry the loans "in-house", or add it to their portfolio–substantially increasing their exposure and risk therefore charging more. In July the overnight rate for Jumbo loans increase over 1% in one day.

Since most of the loans in the Bay Area are Jumbo loans this effectively made the cost of homeownership increase substantially overnight-hence with homes less affordable and at already historically high prices, a pull back began.

Part II of a Two Part series

Part 1 "Which End Is Up" or "Understanding Our Housing Market"

Opportunities in an Emerging Market

There are always opportunities in any market. As in the stock market where you can profit on a given stock whether it is going up or down depending on the position you hold, real estate also has it’s opportunities in a changing market as well.

It has been a seller’s market for years. So where are all the buyers now? Clearly the interest rates have increased making homeownership more expensive, but that can’t account for the current market pull back we’re experiencing. Certainly some buyers are playing a game of wait-and-see with the home values and others the same game with interest rates.

Smart investors usually buy and sell when no one else is. We’ve devoted a lot of time to discussing "When is the Best Time to Sell a Home" for seller’s wishing to try and time the cycles within a given year. For buyers, we feel an opportunity exists for the next year to acquire sound real estate investments. Housing price stabilization in the Bay Area and foreseeable job and economic growth all spell an environment rich for investment. If you are a buyer who never made it into the housing market now’s an opportune time to take advantage of less competition and softer pricing. If you are waiting for interest rates to go down further, that’s a fool’s bet since you can always refinance if they do and you can do nothing about it if they don’t. If you are waiting for home prices to plunge the same trap awaits-when will you know if you are at the bottom of a market?  When you see prices start to go back up.

For sellers wishing to sell and buy a more expensive home, now’s your opportunity too. In the superheated market we endured the past 10 years, purchasing a replacement home contingent upon the sale of your home-even when your knew your home would sell-was almost impossible due to the overwhelming competition of offers with no contingencies. With the current high inventories and less competition many sellers are now forced to entertain offers with contingencies which were unheard of just a year ago.

Was your home worth more earlier in the year? Perhaps, and it will certainly be worth more again in the future; but so will the replacement home you area purchasing. Remember. If home values dip 10% and you’re buying a more expensive home in real dollars you are coming out ahead.

If you are waiting to sell when you think the market is at its peak you already missed it. Do you wait for another appreciation cycle or move on with your life?

As we’ve always said, predicting the market is impossible to do with precision. Use real estate to enhance your life-not dictate it.

Drew & Christine Morgan-MorganHomes.com Belmont Real Estate

Visit our Blog at Beautiful Mountain Blog.org

Which end is up? or Understanding Our Housing Market

Part 1 of a 2 part series

"Reports of my death are greatly exaggerated"– Mark Twain quotation after hearing that his obituary had been published in the

New York

Journal.

The same might be true for the real estate market in the Bay Area. While everyday there’s some piece of news about the Bay Area’s real Estate market, many of it is focused to capture your attention in a sensational way and does little to offer insight and discussion.

Since no two markets are identical it’s difficult to say where this one will end up. But the relentless news stories about the mortgage industry melt-down and sub-prime loan mess has got even the most bullish investors nervous.

Clearly there will be a shake out (which is already occurring). Many areas of the country experienced a run-up in home values which was unsustainable and are now feeling the pull back which invariably happens after a bull market run-it should come as no surprise (read The Writing Was on the Wall for an explanation of what set the stage for the current crises).

The last large down-turn in Bay Area housing prices was in 1989-1994 when Bay Area communities saw huge paper gains in real estate evaporate-fine if you didn’t have to sell, but there was also a recession and many people were forced to sell their homes due to a company relocation or the loss of a job altogether; which is precisely the main difference in this market cycle compared to 1989-we’re not in a recession-in fact more jobs are being created in the Bay Area than are not.

As in the last housing market adjustment, some states faired better than others and some cities faired better as well. One thing we currently know is inventory levels are up and sales down. These two opposing effects will eventually result in a decrease in home values; when inventory levels rise and sales don’t, inventory grows and homes generally sell for less. There are of course radical pundits on both sides of the debate-one side stating emphatically that values will drop 50% and the other side in denial that anything could affect our precious market. As in most cases, the truth will lie somewhere in between.

How will this affect the Bay Area? For the immediate future it boils down to confidence. If homeowners believe that the market may be headed for a protracted decline they will be inclined to sit back and wait out the market. This of course will have a self-fulfilling prophecy effect since more homes will sit on the market longer and sell for less. If however, interest rates go lower, many homeowners-previously pushed out of the market-may return and seek opportunities.

Part II

Opportunities in An Emerging Market

Drew & Christine Morgan MorganHomes.com Belmont Real Estate

Visit our Blog BeautifulMountainblog.org

We’re always looking for a way to improve the services we offer to our clients and the advent of YouTube just made video affordable for us to include in all of our listings at no additional charge. It’s a great way to get more attention for a listing and it appeals to tech savvy audiences as well as anyone surfing the net. Check out the one we did for a listing we have on the market in Belmont.

Video Link here

More about us at MorganHomes.com