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Resale After the Applicable Control Period Has Expired
(for MPDUs that were first purchased AFTER March 20, 1989)

 

Background


For MPDUs that were initially offered by the builder through the MPDU program after March 20, 1989, the owner may sell the MPDU on the open market for a fair market price once the applicable control period has expired. As part of the initial agreement with the MPDU Program, the MPDU owner is required to share one-half of the “Excess Windfall Profit” with Montgomery County. This Excess Windfall Profit is the amount of appreciation in the value of the MPDU that exceeds the owner’s initial purchase price plus:

  • a credit for allowable improvements (see attached Calculation of Improvements Credit Request Form),
  • an allowance for the increase in inflation, based on the difference in the Consumer Price Index (CPI-U) from when the MPDU was purchased and when it was put on the market,
  • the real estate commission (up to 6%) of the sale price of the MPDU, and,
  • one-half of the applicable transfer taxes and one-half of the recordation charges, up to a limit of 1.1% of the sales price.

The payment made to Montgomery County is called the Shared Profit. This money is used to finance and produce new affordable housing in Montgomery County for other low- and moderate-income families. Montgomery County and the Housing Opportunities Commission (HOC) also have the right to buy the MPDU at the proposed fair market sales price, but, at this time, Montgomery County is not purchasing MPDUs and HOC rarely purchases resale MPDUs.
 

Steps to Follow


When an MPDU owners sells an MPDU after the controls have expired, the owner must figure out how much of a Shared Profit is owed to Montgomery County by following these steps: (A one-page summary is available.)

Step 1 - Send Shared Profit Request, including Calculation of Improvements Credit form and attach copy of first page of the sales contract

Send by regular mail to the MPDU office or e-mail, a completed copy of the Shared Profit Calculation Request Form and the Calculation of Improvements Credit Request Form (if the MPDU owner is requesting credits for improvements to the MPDU). Attach a copy of the first page of the signed Sales Contract.

Step 2 - The MPDU Program office sends to the MPDU owner the Shared Profit Calculation, and sends copies to the Real Estate Agent and Settlement Agent listed on the Share Profit Calculation Request Form

Please allow at least 21 days before settlement for this calculation. The letter will also indicate that the MPDU Program will not buy this MPDU.

Step 3 - Settlement Company sends a check for the Shared Profit payment to Montgomery County

The Settlement Company must send a check for the Shared Profit Payment and make the check payable to Montgomery County, Maryland. The check should be sent to:

ATTN SHARED PROFIT CALCULATION
MODERATELY PRICED DWELLING UNIT PROGRAM
DEPARTMENT OF HOUSING AND COMMUNITY AFFAIRS
1401 ROCKVILLE PIKE FL 4
ROCKVILLE MD 20852-1428

If the funds are to be wired, the Settlement Company should send an e-mail for wiring instructions. However, the MPDU office prefers that Shared Profits are paid by check whenever possible.
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Example


The method used to calculate the Shared Profit owed to Montgomery County is set by the Executive Regulations governing the MPDU Program. The following example shows how the Shared Profit is calculated. The example assumes an initial purchase price of $65,000 in 1995, and a current market sales price of $200,000:

Initial acquisition price in 1995 $65,000
Increase in CPI* (56% increase between 1995 and today) $36,530
Documented Capital Improvements $5,000
Real Estate Commission** (6% of sales price) $12,000
½ of Transfer Tax & Recording Fee (1.1% of sales price) $2,200
MPDU Base Price $120,730

Fair Market Sales Price (as shown on sales contract) $200,000
Less MPDU Base Price (from above) -$120,730
Excess Profit (the difference between MPDU Base Price and the Fair Market Sales Price) $79,270

Share of Excess Windfall Profit to Owner (50%) $39,635
Shared Profit owed to Montgomery County (50%) $39,635

Total Proceeds to Seller (available to pay off existing mortgage, real estate commission, home equity loan, etc.): $160,365
Total Shared Profit to Montgomery County (to be used to produce new affordable housing): $39,635

* CPI (Consumer Price Index): a measure of inflation; this number will vary depending on the length of time the MPDU owner owns the MPDU. The number shown above is only an example.

** Credit for a Real Estate commission may only be given if the buyer and seller use licensed, third-party Real Estate Agents.

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