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13.4 RESTRICTIONS ON RESALE PRICE
Restrictions on the resale price of the property or recapture of equity are permitted. A maximum sales price may be imposed or the sales proceeds due to the borrower may be limited, with any excess funds payable to a governmental body or nonprofit organization for reuse in a community land trust or to preserve long term affordability. When such restrictions apply, the requirements listed below must be met.
x The borrower must be permitted to recover at least the original purchase price,
sales commission, and cost of capital improvements when the borrower sells the property.
x If the program permits the borrower to sell the property at market value but
recaptures part of the equity, the Agency considers a reasonable share of appreciation to be at least 50 percent. The Agency does not object to situations whereby the borrower’s share of appreciation is on a sliding scale beginning at zero, provided that within two years the homeowner would be permitted to retain 50 percent of the appreciation.
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x The borrower must be permitted to recover a reasonable amount of appreciation,
as determined by the lender. Appreciation is measured by the difference between the original purchase price and the actual price at which the property is resold.
x If the program sets a maximum sales price restriction, the borrower must be
permitted to retain 100 percent of the appreciation.
A. Right of First Refusal
One method to ensure that housing remains part of an affordable housing program is to hold a “right of first refusal” or an “option right” that can be exercised when the borrower proposes to sell the home to a purchaser not eligible for the program benefits. Such a provision is permitted if all the requirements listed below are met.
x The rights must be held only by a governmental body or eligible nonprofit
organization and exercised by them, or someone they have identified as an eligible purchaser.
x Any right must be exercised within 45 days after the holder of these rights may
exercise them (for example, the rights are often triggered by a notice of sale from the borrower).
x Any option price must allow the borrowers to recover their investment plus
reasonable shares of appreciation.