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For example, say the following property was constructed in 2001: Ownership breakdown: 72% Homeowner/28% BHC
Home Owner Equity Share -72% (Cost to new Buyer) $216,000 BHC Equity Share (28%): $84,000 Fair Market Value (FMV) of Property: $300,000
In 2018 the same house is now valued at a fair market value (appraised value) of $850,000. The BHC has listed the house and found a registered purchaser for the property. The following breakdowns shows the cost to the buyer and the equity share for the BHC.
Ownership breakdown: 72% Homeowner/28% BHC
Home Owner Equity Share - 72% (Cost to new buyer) $612,000 BHC Equity Share (28%): $238,000 Fair Market Value (FMV) of Property: $850,000
If the BHC decides to continue in the equity share arrangement with the new buyer, then the new buyer is acquiring the home will pay $612,000 and the BHC will retain the equity of $238,000 for a total (Fair Market value of $850,000)
The Board has 15 days to make these decisions.
A sale can be completed only if the Board consents and if it decides not to exercise its ROFR. The equity share arrangement may or may not be extended to the new buyer. (See Article 8 of the sub-lease) BHC sub-lease
The BHC has a ROFR on all bona fide offers to purchase specific to a BHC property. It is at the sole discretion of the BHC to exercise this ROFR and re-acquire a BHC property per the terms and conditions of any bona fide offer presented to the BHC for consideration of consent and deferral of the BHC’s equity share in the transaction.
1. They can sell through the BHC’s Registered Resale List (RRL). For equity share properties the BHC charges a fee of 0.6% of market value for this service of which $500+GST is due upfront and is non-refundable. For price restricted properties the BHC charges a $2193+GST (2013) fee for this service of which $500+GST is due upfront and is non-refundable2. They can sell through a real estate agent or privately, requesting from the BHC approval to purchase the equity share portion, prior to the actual home sale. (Each homeowner is then responsible for the full real estate fee and in every instance where this has occurred the Board requested that the purchaser pay 100% of the sale price of the property).
In all two scenarios, once an offer to purchase has been signed for a BHC property the BHC Board must be provided with a copy of the signed offer and then has fifteen (15) days from receipt of the offer to make the three decisions described above.
1. Identification of Home SaleThe Banff Housing Corporation and the Homeowner make a binding agreement regarding the “Base Market Value” of the home.a) The Homeowner notifies the Banff Housing Corporation that he/she intends to sell.b) The Homeowner and the Banff Housing Corporation each procure an appraisal from a list of approved appraisers at their own expense, and simultaneously provide the appraisal to the other party. All appraisals should have at least one non-Banff Housing Corporation home as a comparable.c) The average of the two appraisals will be accepted as the “Base Market Value” valid for a period of 3 months. d) If the appraisals differ by more than 8%, there will be a 48 hour review period while the homeowner and the Banff Housing Corporation discuss and decide whether either party wishes to obtain a 3rd appraisal. Should either party obtain a third appraisal (at their own cost, unless both parties deem it necessary in which case the costs will be shared equally) the “Base Market Value” is the average of the 3 appraisals. e) Appraisals are kept confidential by all parties except as noted above, unless agreed to by both parties.
NOTE: The percentage difference between appraisals is calculated by: (Highest-Lowest) over Highest x 100
Step 2: Setting of the “Bookends” of the pricing rangeThe upper limit of the “Range” is 6% above the Base Market Value or 3% above the highest appraisal, whichever is lower.
The lower limit of the “Range” is 6% below the Base Market Value or 3% below the lower appraisal, whichever is higher. This lower limit is not a price guarantee of any sort.
Step 3: Clear OutcomesIf a qualified Third Party Purchaser makes an offer for a sale value within the Range, the Banff Housing Corporation will consent to the transaction and will not refuse to defer its equity on the basis of the price.
If a qualified Third Party Purchaser makes an offer for a sale value above the Range, the Banff Housing Corporation may refuse consent to the transaction and refuse deferral of its equity on the basis of the price.
The above process applies specifically to consent based on price. However, equity deferral can also be refused based on public policy. The choice to refuse equity deferral based on public policy can only be made for previously established and published public policy reasons.
UPDATE 2018 stress test: As of the 1st of January 2018, all Canadian buyers borrowing from a federally regulated lenders will be subject to the OSFI Mortgage Stress Test, including insured borrowers (those with a down payments of 20% or more.)Lenders will now have to qualify all conventional mortgages using the Bank of Canada’s 5-year benchmark rate, which is currently set at 4.99%, or at the current contracted rate + 2% if that rate exceeds the benchmark rate. So, if you are currently pre-approved at 3.5%, you will now have to qualify as if your interest rate were 5.5%, which could significantly reduce your buying power.