Affordable Housing Agreement & Foreclosure
I am looking into purchasing a property at auction that has an "Affordable Housing Agreement" attached to the Deed.
I have been given conflicting advice from local housing officials as to whether the Affordable Housing Agreement would be wiped out in a foreclosure. Has anyone had a similar situation or know if the Affordable Housing restriction would be extinguished .
Thanks,
Tom
A foreclosure action will terminate the agreement/covenants
[addsig]
Irrespective of John's experience and conclusion, I have had different experiences.... with Mount Laurel Housing...
Make sure that you carefully read the Deed... for the Deed predates any mortgage.
Funny story. A couple of wannabe speculators bid on and won a property at a local Sheriff's Sale at what they felt was
a bargain basement price... about $150,000 for a property they felt could be worth $400,000 with some top of the line appointments. They poured tens of thousands into the property including granite countertops, premium applicances, etc.... and soonafter placed the property on the market hoping to make about $100,000 profit.
The property was under contract in a matter of days... their profits within reach, the Speculators were elated!
Once the Purchaser's closing attorney read the title report, he contacted the Sellers. The Sellers lost their smiles and ran to an attorney who confirmed the bad news...
Long story short: There was an irrevocable affordable housing deed restriction which prevented the property from being sold at market value (for a number of years)... it could only be sold at a predetermined, prorated sales price...
The foreclosing mortgagee's upset price DID NOT exceed the maximum allowable sales price and therefor did not trigger the deed restriction.
The moral of the story is that it's important to do your homework.
Good Question, Tom.
TheShortSalePro,
Is correct when it comes to an irrevocable affordable housing deeds.
Always remember the devil is in the details!
One must always do a preliminary title search to insure a bargain is a bargain!
Normally a foreclosure sale will void any mortgage deed agreements or covenants as is related to a mortgage type lien unless an irrevocable document has been filed upon the subject property.
Most AHD's has the following statement.
The Regulatory Agreement shall cease to apply in the event of a foreclosure, transfer of title by deed in lieu of foreclosure or similar event, unless the allocating Agency determines that such foreclosure, transfer of title by deed-in-lieu of foreclosure or similar event has occurred pursuant to an arrangement between the owner of the Affordable Housing Project and any lenders or any other party, a purpose of which is to terminate the occupancy restrictions set forth in the Regulatory Agreement.
I would suggest going to http://www.hud.gov/offices/cpd/affordablehousing/library/homefires/volumes/vol5no2.cfm
For more details on this issue.
Thanks TheShortSalePro you made me issue depth to this subject.
Otsbork, I apologies for not providing the depth that I should have provided in my first reply as this is simply not a black and white issue.
[addsig]
Thank you for the great info. The restriction is on the Deed and,as per the Mt. laurel Housing issue, is a 25 year restriction.
My confusion stemmed from another investor, who does this full-time, having purchased a similar unit in the same complex with the same Deed restriction. Haven't spoken to him, but I can only assume he missed it on the Deed.
Again, thanks for the replies.
Tom