Housing Easement Opportunity
Info for Prospective Buyers
Housing Easement Summary
With an overall goal of maintaining housing for residents of the Methow Valley, the Methow Housing Trust’s Housing Easement program was launched to provide an additional tool to create and conserve housing. The primary goal of the program is to facilitate the creation of a housing product for moderate income households. This could be current MHT homeowners and applicants or others who may not be eligible for MHT’s Ground Lease program, whose income may be insufficient to afford a house on the open market.
How it Works
There are two main points of the Housing Easement program; deed restrictions and community retained equity.
Deed Restrictions
Deed Restrictions are the tool that ensures the house will be used in the way that meets the program’s needs. Certain requirements will be written into the deed of the home:
The house must always be occupied by a full-time resident of the Methow Valley.
Nightly or short-term rentals will not be allowed
The house cannot be rented for a profit
Upon resale, MHT retains the right of first opportunity
Community Retained Equity
To increase the affordability of the house MHT is implementing a program of Community Retained Equity, which means that while the homeowner fully owns the home and the land, a part of the equity of the home is retained by MHT (on behalf of the Community). This means that the purchase price for the home is significantly lower, and it provides a mechanism for MHT to enforce the restrictions on the deed and ensure the house is reserved for locals.
The portion of the equity of the house held by the community is very similar to the way a bank holds equity in a house when you have a mortgage. You still own the house and the land, and can use it in the way you like, with limited restrictions. Unlike a mortgage, however, the community retained equity does not need to be repaid, and it helps ensure continued housing availability for Methow Valley residents.
Key points to understand about Community Retained Equity
The homeowner owns the home and the land, just like with conventional open market homeownership
Part of the value of the home (equity) is held by MHT – this lowers the purchase price of the home considerably
The resale value of the home is based on the appraised value of the home at the time of resale, and the homeowner gets the benefit of any increase in value of their portion of the equity in the home
Eligibility
Requirements to be eligible to purchase the house
Must be a full-time resident of the Methow Valley
Cannot own any other residential property at the time of purchase
There is no income or asset requirement, as with our Ground Lease homes
Resale
When a homeowner decides to sell their House there are a few important points to understand
Methow Housing Trust retains the right of first opportunity, which means that MHT has the right to either buy the house or designate a buyer before it goes on the open market.
The sale price will be the fair market value of the home at the time of sale, as determined by a licensed home appraiser.
If MHT either buys the house or assigns a buyer, a realtor may not be needed, which will save the seller realtor fees.
Differences between Housing Easement homeownership and MHT Ground Lease homeownership
Frequently Asked Questions
Q: Would I need permission from MHT to do construction on the home?
A: No. As homeowner, you could carry out construction projects such as remodeling the kitchen, building an addition, or putting solar panels on the roof without even notifying MHT.
Q: If I complete projects that increase the value of the house, do I only get a portion of the added value when I sell the house?
A: No. The increase in retained equity at the time of sale will be calculated based upon the appreciation of the home (appraised value at resale) OR based upon the rate of the Methow Valley market generally (based upon median sold home price), whichever is LOWER. This means that the homeowner would receive any potential benefits of work that adds value to the house.
Q: Can I buy out MHT’s shared equity?
A: No, shared equity is necessary to give MHT the authority to enforce the restrictions on the deed and keep the house affordably priced upon resale.
Q: What happens when I want to sell the house?
A: MHT will retain the right of first opportunity, which means that MHT has the ability to designate a buyer before it goes on the open market.
Q: What happens if the house needs a major repair after I buy it?
A: After purchase, the house will be yours, just like any other conventional homeownership, which means that you will be responsible for any repairs. The house is sold as-is with no warranty.
Q: Do I need a realtor?
A: A realtor is not required for the purchase of the home. You can choose to consult a realtor if you like, but any costs would be your responsibility.
Q: What sort of relationship will I have with MHT after I buy the home?
A: After purchasing the home, you would be required to verify occupancy and insurance coverage each year. Other than that, there is no ongoing relationship with MHT until you choose to sell the house.
Timeline For This Housing Easement Opportunity
Open Houses Wednesday November 20th, 4-6pm
Deadline to be put on the Housing Easement Waitlist Monday, November 25th
Purchase and Sale agreement and deposit Week of December 2nd
How to participate
1. Email outreach@methowhousingtrust.org to let us know that you are interested.
2. Start examining your financial readiness to buy a house at this time*.
3. Come to the open houses on Wednesday November 20th, 4-6pm to see the properties in person and ask questions
4. Email outreach@methowhousingtrust.org by be put onto the Housing Easement Waitlist.
5. If you are chosen from the waitlist**, you will need to contact a lender to get pre-approved for a mortgage. We have a short list of lenders who have approved lending for this particular housing product.
6. Sign a Purchase and Sale Agreement and put down a $1,000 deposit.
*You can use the debt to income below calculator to get an idea of where you stand, financially.
**Priority will be based on when you entered the MHT general waitpool. We will notify everyone who is on the waitlist of their position. If the first person drops out or otherwise isn't able to buy the house, we will move to the next person.
815 Castle Ave, Winthrop - $350,000
Appraised value $525,000
Community retained equity $175,000
Purchase price $350,000
Estimated Monthly Costs for $350,000 loan amount*
Principal and interest (6.4% interest rate) $2,189
Property Taxes $311
Homeowners Insurance $150
Total Estimated Housing Payment $2,650
*$350,000 loan amount assumes no down payment. Your lender may require some amount of down payment, or you may choose to put more money down to decrease your loan amount.
These estimates are rough guesses, and your actual costs may vary depending on multiple factors.
46 Hill Drive, Twisp - $313,333
Appraised value $470,000
Community retained equity $156,667
Purchase price $313,333
Estimated Monthly Costs for $313,333 loan amount*
Principal and interest (6.4% interest rate) $1,960
Property Taxes $396
Homeowners Insurance $150
Total Estimated Housing Payment $2,506
*$313,333 loan amount assumes no down payment. Your lender may require some amount of down payment, or you may choose to put more money down to decrease your loan amount.
These estimates are rough guesses, and your actual costs may vary depending on multiple factors.
Debt to Income Calculator
Use the debt to income calculator to get a general idea of where you stand financially. In general, the lending rule of thumb is that monthly housing costs are a maximum of 35% of a household's gross monthly income. Total debt payments (including housing, auto payments, credit cards, student loans, and other revolving debt payments) should be below 45% of a household's gross monthly income.
Ultimately, it’s the lender that will determine your ability to obtain a mortgage. Please reach out to MHT with questions.
*After opening the calculator, click “Use Template”