Resale of the Home
When a Land Trust homeowner wants to sell his or her home, there are several options. The home can be sold to an income-qualified buyer, it can be sold to the Land Trust, or it can be given to the homeowner's children or heirs. No matter which course of action is taken, the Land Trust staff will help you through the process of selling your home. Since Land Trust homes are not bought and sold on the open market, a formula is used to determine the sale price to the next buyer. This resale formula guarantees the homeowner all of their equity (the portion of the mortgage that has been paid off) plus 1.5% percent compounded annually on the original purchase price of the home. Essentially, in exchange for buying the home at an affordable price, the homeowner must also sell the home at an affordable price. In this way, the affordability is preserved for the next lower-income family who buys the home.
How does the Red Brick Community Land Trust Resale Formula work?
| Example | Community Land Trust (House Only) | Open Market (House + Land) |
| When you buy, the value of the total property is: | $125,000 | $125,000 |
| Value of House | $65,000 | $65,000 |
| Value of Land | $60,000 | $60,000 |
| You Pay: | $65,000 | $125,000 |
| Your Total Monthly Payment Is: Amount based on 6.5%, 30-year mortgage including taxes, insurance, Ground Lease Fee ($25) and Homeowners Association Fee ($15). | $601 | $932 |
| 10 Years Later, The Sales Price of Your Property Is: | $72,140 | $203,612 |
| Your Property Went Up In Value: | $7,140 | $78,612 |
By not purchasing the land below the house, your mortgage payment is $331 less (932- 601=331) than the open market example. The Red Brick Sales Price increase (1.5% per year) gives you approximately one-third of the appreciation of the open market (4-5% per year) in order to maintain the future affordability of the home.
Download the Resale Formula (Word) and save to your computer desktop.