Orange County NC Website
Browse       Search
<br />Available Strategies <br />This section presents three common strategies .utilized by many local government first-time <br />homebuyer programs to ensure long-term affordability of owner-occupied housing. <br />Full Repayment of the Homebuyer Subsidy <br />Right of First Refusal/Right to Purchase <br />Fair Return/Shared Equity <br />Full Repayment of the Homebuyer Subsidy <br />If the original first-time homebuyer. retains ownership of the property for the full period of <br />affordability, normally twenty years, no resale restrictions apply and the deferred loan is totally <br />forgiven. If the property is sold during the period of affordability, the homebuyer is required to <br />repay the subsidy from the net proceeds of the sale.. The net proceeds have been defined as the <br />sales price minus loan repayments and closing costs. When net proceeds are sufficient to <br />recapture the full investment, the full investment must be repaid to the County. These proceeds <br />are then used to assist another first-time homebuyer purchase a home. If net proceeds are not <br />sufficient to cover the full subsidy, as is the case when property values decrease, the County may <br />accept a lower repayment and forgive the remainder of the loan. If the County does not accept a <br />lower repayment amount, the loan is not forgiven and the property remains subject to the <br />County's deed of trust securing the County loan. <br />This strategy does not guarantee the affordability of the home sold for future low-income, first- <br />time homebuyers. It does, however, allow the subsidy to be reused in the market by another <br />homebuyer. And, it has the goal of making it possible for first-time homebuyers, through the <br />equity in their home acquired with the public subsidy, escape altogether the need for subsidized <br />housing. This is the current strategy used by the County under the HOME and CDBG Programs. <br />Right of First Refusal <br />A right of first refusal or right to purchase is accomplished by means of deed restrictions on the <br />property purchased by the first-time .homebuyer. .Should the first buyer. choose to sell their <br />property within the period of affordability, the County or a designated agent can consider <br />purchasing the property for a price that is affordable to a subsequent buyer and that. results in a <br />fair return to the seller. This is a very costly option since cash would be needed by the County to <br />make the purchase and then locate an eligible buyer to buy the property from the County. State <br />statues governing the acquisition of real property can also pose procedural. problems for units of <br />local government such as counties to own property -even on an interim basis -and then resell it. <br />Therefore, this strategy is most .easily implemented with anon-profit organization operating a <br />first-time homebuyer program. That type of agency is in a much better legal position to obtain <br />property via the right of first refusal, identify potential buyers in a relatively short period of time, <br />and resell it to a new qualifying buyer. The County, however, would still need to provide <br />funding for the home purchases. <br />The right. of first refusal must normally be exercised within a predetermined time period such as <br />thirty (30) days. If the right is not exercised within that time frame, the homeowner is free to sell <br />the unit on the open market and repay any homebuyer subsidies provided from the net proceeds <br />of the sale. The potential for exercising first refusals and keeping the housing stock in the <br />