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Policies and Procedures for the Resale of MPDUs

 

Resale of an MPDU during the control period

The owner of an MPDU who wishes to sell the MPDU during the applicable control period must either sell the unit to the County, or to another MPDU certificate holder.

To resell your MPDU, first contact the MPDU Office to get the resale price for the unit (as explained below).  Once the resale price has been determined, the County will decide whether or not it wishes to exercise its right-of-first-refusal to purchase the MPDU (as permitted under the MPDU law).  If the County decides to purchase your MPDU, a representative of the County will discuss with you the sales process.  If the County decides not to purchase your unit, it must be resold to another MPDU certificate holder.  This process is explained below.

Establishing the MPDU Resale Price  The resale pricing policy for each MPDU being offered for sale during the applicable control period is described below; this policy applies regardless of when the unit was initially offered for sale by the builder.

The resale price is determined by the initial acquisition price, plus an allowance for the increase in inflation from the date of the initial settlement on the unit through the date of the resale price determination.  The owner also receives credit for allowable improvements.  No credit will be given for permanent financing costs (loan discount points), buy downs, or improvements not included in the list of compensable improvements dated March 20, 1989.  The increase permitted for inflation is based upon the Consumer Price Index for the Washington Metropolitan area (CPI-U).

The following is an example of the resale price calculation for a unit sold within the ten-year MPDU price and occupancy control period.  This example assumes the unit was initially sold in 1998:

Initial Acquisition Price in 1998 $100,000
Increase in the CPI (15% increase since 1998) $15,000
Documented Capital Improvements $3,000
Real Estate Commission* $0
Base Resale Price $118,000
Closing Cost Allowance: (3.5% of Base) $4,130
Maximum Resale Price $122,130

*see conditions below

Selling to Another MPDU Certificate Holder Using a Real Estate Agent  If the the County does not purhcase your MPDU, you must sell it to another MPDU certificate holder.  You may use a licensed real estate agent to help with this process.  However,  the owner must obtain written permission from DHCA prior to signing a listing agreement with a real estate agent, in order to include this expense in the resale pricing.

The real estate agent must contact the MPDU Office to receive instructions on how to market and sell the MPDU.  The real estate agent must market the MPDU only to persons who are on a priority marketingt list established by the MPDU Office.  If there are no interested certificate holders after all the persons on the marketing list have been contacted, then the you can request, in writing, permission to sell your MPDU to persons who do not participate in the MPDU program.  Please be aware, however, that a unit sold to non-participants remains an MPDU and all the rules governing the MPDU program remain in effect.

Resale after the applicable control period has expired for MPDUs that were first purchased BEFORE March 20, 1989

If an MPDU was initially offered by the builder through the MPDU Program before March 20, 1989, the owner may sell the unit on the open market after the applicable control period has expired, without restriction on the resale price and with the entire profit going to the seller. 

Resale after the applicable control period has expired for MPDUs that were first purchased AFTER March 20, 1989

For MPDUs that were initially offered by the builder through the MPDU program after March 20, 1989, the owner may sell the unit on the open market for a fair market price once the applicable control period has expired.  However, the owner must pay one-half of the excess profit into Montgomery County’s Housing Initiative Fund (HIF) in order to provide affordable housing units in the future.  The County also has the right-of-first-refusal to match the proposed fair market sales price.

The following example shows how the County’s portion of the excess profit is calculated.  The example assumes an initial purchase price of $80,000 in 1995, and a current market sales price of $250,000:

Initial Acquisition Price in 1995 $80,000
Increase in CPI (25% increase between 1995 and 2005) $20,000
Documented Capital Improvements $5,000
Real Estate Commission (6% of sales price) $15,000
½ of Transfer Tax & Recording Fee (1.1% of sales price) $2,750
Adjusted Base $122,750

 

Fair Market Sales Price (as shown on sales contract) $250,000
Less:  Adjusted Base (from above) $122,750
Excess Profit (the Difference Between Adjusted Base and the Fair Market Sales Price) $127,250

 

Share of Excess Profit to Owner (50%) $63,625
Share of Excess Profit to County (50%) $63,625

 

Total Proceeds to Seller $186,375
Total Shared Profit to County $63,625

In order to calculate the shared profit that will be due to the County upon sale of the MPDU, the owner must provide the County with a signed copy of the sales contract as soon as possible after it is signed.  In order to receive credit for eligible improvements, the owner must also submit a list of improvements, showing the cost of each item, as well as documentation of the cost (such as receipts or cancelled checks).  Finally, the owner must provide the name, contact information, phone and fax number for the settlement attorney.