Below Market Rate (BMR) Ownership

Key Documents

• Resale and Refinancing Restriction Agreement: This legal document is recorded on the property and outlines conditions for ownership of the BMR property, ensuring the unit remains affordable.  
• Option to Purchase: Owners grant the Authority the option to purchase the property upon certain events. The Authority may assign this option to eligible purchasers that are selected or approved by The Authority. The Authority can exercise its option to purchase in various situations, including intent to transfer the property, owner occupancy violations, renting violations, certain legal actions like bankruptcy or foreclosure, etc.

Owner Occupancy Requirement: Owners must reside in the BMR unit as their principal residence for at least 10 months per year​​. Renting or leasing the BMR unit is generally not allowed. Exceptions for situations like extended hospitalization or other hardships may be granted by the Authority. Approved rentals must adhere to specific conditions, such as duration and tenant income eligibility, and cannot exceed the owner's monthly housing costs​Renting or leasing is generally not allowed except under specific hardship conditions approved by Marin Housing​​. 

Refinancing Process: Owners must request approval from Marin Housing for refinancing, ensuring the new loan amount is within the allowable limit​​. The required documentation includes

(1) Lender’s Conditional Approval

(2) 1003, Loan Application (first two pages) and 1008

(3) Preliminary Title Report showing escrow number and title company information.

Upon receipt of these documents Marin Housing will issue approval in the form of a Subordination Agreement. Thereafter, the Lender & Title Company will follow up with the MHA to execute and record the Subordination Agreement/s and Request for Copy of the Notice of Default.

Capital Improvements: Owners must request approval from Marin Housing for intended capital improvements, detailing the description and estimated cost​​. Owners should retain all relevant documentation including contracts, invoices, and permits (if required), and then Marin Housing will review and may inspect the property to confirm the value added to the resale price​​.  The Authority will send written confirmation to the Owner of the amount, if any, that will be added to the resale restricted price of the Property for the capital improvements.

Resale Restrictions: Owners must first notify Marin Housing in writing if they wish to sell, lease, or otherwise dispose of the property. Marin Housing will then work with the owner towards the timely select an eligible BMR buyer. 

Inheritance and Other Permitted Transfers: Specific procedures within each agreement applies in the event of an owner's death, including notification to Marin Housing and eligibility assessment of inheriting family members​​. Certain transfers, like to a spouse or domestic partner, are allowed under specific conditions​​. 

Resale Price Calculation: The calculation starts with the original price paid by the owner for acquiring the premises under the program, referred to as the "Base Price." The Base Price is then adjusted based on one of three factors, whichever results in the lowest price: 

1. Median Income Price: Increased by the percentage increase in the median household income for a four-person household in the San Francisco Primary Metropolitan Statistical Area (San Francisco, San Mateo, and Marin Counties) since the purchase. 
2. Index Price: Increased by the percentage increase in the Consumer Price Index for All Urban Consumers for the San Francisco Bay Area. 
3. Fair Market Value: Determined by an appraisal conducted by an appraiser selected and paid for by the owner but approved by Marin Housing​​. 

Adjustments to the Resale Price: The price may be increased for approved capital improvements that materially add to the property's value. The improvement costs need prior written approval from Marin Housing, and the work is to be completed by a licensed contractor​​. The price may be increased for principal amounts of special assessments paid by the owner to a homeowners' association for repairs or litigation costs, subject to Marin Housing's approval​​. The price may be decreased to account for necessary repairs, damages, or costs incurred by Marin Housing for unpaid owner obligations​​. 

Example Calculation

Suppose an owner bought a BMR unit for $300,000 (Base Price). Over the years, the median household income increased by 5%, and the Consumer Price Index increased by 4%. The owner also made approved capital improvements worth $10,000. No damages or Authority advances occurred. 

Here's how the resale price would be calculated: 

1. Median Income Price: $300,000 + (5% of $300,000, or $15,000) = $315,000 
2. Index Price: $300,000 + (4% of $300,000, or $12,000) = $312,000 
3. 3Fair Market Value: Assumed to be $320,000 (for this example) 

The lowest of these is the Index Price at $312,000. Then, the capital improvements are added: $312,000 + $10,000 = $322,000. So, the resale price of the BMR unit, considering the adjustments and improvement, would be $322,000.