Process Guide for Deed-Restricted Transactions

PROCESS GUIDE for DEED-RESTRICTED TRANSACTIONS

This guide has been created by the San Miguel Regional Housing Authority (SMRHA) to assist Sellers, Buyers, Realtors, and Title Companies with the marketing, sale, purchasing, or closing of residential property deed-restricted under San Miguel County and Town of Telluride programs.

Your deed-restricted transaction is necessarily more complex than a free-market transaction. Please follow the steps and suggestions in this guide. The result will be less stressful and more timely for everyone! It is helpful to keep in mind that the purpose of these programs is to provide local employees with affordable shelter, not to provide a major investment asset, e.g., for retirement (as has become increasingly prevalent among free-market residential properties). The financial advantage of deed-restricted housing is that it provides equity instead of the financial drain of rent payments, along with personal control over longevity in the home. Ideally, the deed-restricted purchase is the owner's stepping stone to a free-market property!

This document is available for review and download on www.smrha.org under the Program button. The underlined text indicates that an online link is available. There are numerous suggestions to contact the Local Housing Programs Manager, Shauna Palmer. She is in the SMRHA office and can be reached at 970-728-3034, ext. 6, emailed at shauna@smrha.org or faxed at 970-728-5371.

Seller and Realtor

1. Determine the sales procedures for your deed-restricted property. You will find this information in the version of the guidelines for your property as referenced in the Summary of Qualification Guidelines. Note, however, that the sales procedures for some County properties is dictated in the guidelines that were current when the property was purchased if you closed on or before March 24, 2001. Also note that some of the Town's deed restrictions specify that you can choose which revision to use - the current one or the version current when you closed. The use of one revision over another is the specific decision of the Governments rather than an SMRHA policy. Please contact the Programs Manager for assistance determining which documents outline your sale procedures.

Determine your target market. Generally speaking, the qualifications for your buyer are described in the current revision of the guidelines as summarized in the Summary of Qualification Guidelines. Contact the Programs Manager for assistance determining which documents describe your buyer's qualification criteria.

Send an Intent to Sell or Rent form to the Programs Manager. The sales procedures described in your Deed Restriction specify how far in advance you must notify SMRHA of your intent to sell before you actually list your property. For example, some deed restrictions require 30 days advance notice. Regardless, the process will be much easier if you give the Programs Manager a lot of advance notice!

For price-capped property, obtain a Maximum Sales Price calculation from the Programs Manager. It was the price-appreciation cap on your property which made it affordable for you in the first place - it now helps to keep it affordable for your buyer. The calculation can be provided for you in a timely manner provided you have honored the Intent to Sell noticing requirements! Your Deed Restriction might allow for some of your capital improvement costs (up to a maximum amount) to be included in the calculation of the Maximum Sale Price.
The permitted Capital Improvement costs, which must be adequately documented for the Programs Manager, are:

Permanently attached additions or major alterations to finished permanent storage or living space, or other non-recurring physical improvements that typically add new square footage to the deed-restricted housing unit.
Non-recurring expenses for physical improvements that provide a long-term upgrade or improvement to the deed-restricted housing unit, such as built-in carpentry or hardwood floors.
Fixtures erected or permanently installed to the deed-restricted housing unit.

Landscaping.
Costs associated with the ordinary maintenance and repair of the unit.

List your property on www.smrha.org . Select the Housing button and follow the directions for this easy do-it-yourself marketing. Feel free to also post a flyer in the SMRHA office.

Using the appropriate guidelines, familiarize yourself with the eligibility requirements SMRHA will be applying to certify a buyer as a "Qualified Employee" to purchase your deed-restricted property. Recognize that attempting a sale to an unqualified buyer will add a level of complexity to your transaction process. It would be helpful to have a copy of the applicable deed restriction application available as a handout to your prospective buyer. The table below provides links to those applications:

Affordable Housing Program	Application Title
San Miguel County R-1 Deed Restriction	SMC R-1 Deed Restriction Application
San Miguel County Affordable Housing Covenant	SMC R-1 Deed Restriction Application and Net Worth Calculation Worksheet
Telluride Affordable Housing Guidelines	Telluride Deed Restriction Application for Purchasing or Renting
Town Employee Dwelling Unit	Program Telluride Employee Dwelling Unit Application
Telluride Housing Guidelines Town Developed or Financed Housing Projects	Telluride Deed Restriction Application for Purchasing or Renting

Once you have a buyer, make sure they contact the Program Manager as soon as possible with the applicable completed and notarized Deed Restriction application, including a non-refundable application fee of $10 and all, requested attachments. Any delay in the submittal of any of the attachments will delay the qualification process. There are free notary public services at the SMRHA office and at banks.

Coordinate your closing date with the SMRHA staff and include a contingency clause in the purchase contract for qualification of the buyer by SMRHA. Until staff has had a chance to adequately review the buyer's Deed Restriction application, they will be unable to estimate how long the buyer's qualification process may take. Please stay as flexible as possible in the event an Amend/Extend is required. An offer for a deed restricted property necessarily needs a longer "due diligence" period than for a free-market property. Please understand that having a longer due diligence period will ultimately aid you to ensure that the deal does not fall out of contract. Quicker isn't always better! It will take a lot longer to sell your house if it falls out of contract because the timelines were too short, than to simply allow a longer timeline in the first place.

Buyer and Realtor

In the steps below, you will see that it is not possible to estimate how long your qualification may take until after your submitted Deed Restriction application for purchase has been adequately reviewed. It can take from 2 days, 2 weeks, to 2 months, depending upon the complexity of your application and attachments and whether the SMRHA Board or another government's housing authority needs to be involved. Please plan accordingly!

Make sure that the purchase contract includes a contingency clause for your approval by SMRHA to avoid putting your earnest money at risk if your Deed Restriction application is not approved in time.

As soon as you have an executed purchase contract, you may submit an application to receive up to $10,000 of assistance to help with closing costs. Review and submit the Down Payment & Closing Cost application to Shauna Palmer, if this program will be helpful to you. She is in the SMRHA office and can be reached at 970-728-3034, ext. 6, emailed at shauna@smrha.org or faxed at 970-728-5371. Remember that it takes several weeks to process this application and plan accordingly.

Find out which qualification guidelines and which deed restriction apply to your purchase, and which Deed Restriction application you must submit. Your seller should be able to advise you, but don't hesitate to contact the Programs Manager for assistance. You will find a recap of the qualifications for each property in the Summary of Qualification Guidelines. For your convenience, the table below provides links to the different Deed Restriction applications:

Affordable Housing Program	Application Title
San Miguel County R-1 Deed Restriction	SMC R-1 Deed Restriction Application
San Miguel County Affordable Housing Covenant	SMC R-1 Deed Restriction Application and Net Worth Calculation Worksheet
Telluride Affordable Housing Guidelines	Telluride Deed Restriction Application for Purchasing or Renting
Town Employee Dwelling Unit	Program Telluride Employee Dwelling Unit Application
Telluride Housing Guidelines Town Developed or Financed Housing Projects	Telluride Deed Restriction Application for Purchasing or Renting

Contact the Programs Manager as soon as possible with your completed and notarized Deed Restriction application a non-refundable application fee of $10 and all requested attachments. Any delay in the submittal of any of the attachments will delay the qualification process. There are free notary public services at the SMRHA office and at banks. You can speed up the process by being straightforward about the eligibility parameters for which you may be borderline. Should an exception process be appropriate, your purchase timeframe will be extended significantly and it is better to be aware of this sooner than later.

The attachments for the deed-restriction application include income tax documentation from the last two or three years:
- If you bid or apply for units after April 15, 2006, then 2004 and 2005 income tax returns, including all W2's and all schedules, will be required. If you bid or apply for units prior to April 15, 2005, then 2003 and 2004 income tax documentation will be required.
- If you bid or apply for units after April 15, 2007, then 2005 and 2006 income tax documentation will be required, and so on.
- All self-employed individuals and all business owners will be required to submit business income tax returns for these two years as well.
- In the case that any real estate property has been disposed of during either of the last two previous years, the income tax documentation from the third prior year will also be required.
- RHA can not accept income tax return extensions.

If the income tax documentation is complex (self-employed, LLCs, etc.), an independent CPA will be consulted at the expense of the SMRHA for interpretation. In this case, names of individuals and businesses will be blacked out to protect your privacy.

Coordinate your closing date with the SMRHA staff and include a contingency clause in the purchase contract for qualification of the buyer by SMRHA. Until staff has had a chance to adequately review the buyer's Deed Restriction application, they will be unable to estimate how long the buyer's qualification process may take. Please stay as flexible as possible in the event an Amend/Extend is required. An offer for a deed restricted property necessarily needs a longer "due diligence" period than for a free-market property.

Provide a copy of the purchase contract to the Programs Manager.

For price-capped property, your purchase price may not exceed the Maximum Sale Price as calculated for the Seller by SMRHA staff. Additionally, your Deed Restriction guidelines may prohibit a loan package that creates liens against the property with a total debt of more than the purchase price of the property.

If you are borderline or are clearly not eligible to be certified as a "Qualified Employee," you will not be approved for purchase unless you opt to go through an exception process involving public meetings. This is one reason that it is often difficult for staff to estimate how long your qualification process will take, especially if a completed deed restriction application has not been received! If an exception process is necessary, SMRHA staff will provide you with an exception application form and will schedule your case at the appropriate public meetings (according to County or Town government deadlines) as follows: " For San Miguel County exceptions: recommendation by the SMRHA Board ( meeting schedule), followed by a hearing by the San Miguel County Housing Authority (meeting schedule). " For Town of Telluride exceptions: contact lmcdonald@town.telluride.co.us to find out when the Town of Telluride Housing Authority Subcommittee meetings are scheduled.

Title Company

Please notify the Programs Manager of the closing date and any amendments made to that date. This is so important to the SMRHA staff's ability to provide timely customer service!

Please confirm with the Programs Manager the purchase contract's contingency clause or other deadline for SMRHA approval of the buyer and any amendments made to that deadline. This is so important for the buyer's protection!

Please provide, upon request, a copy of the purchase contract to the Programs Manager.

Please provide a copy your title commitment (and any updates) to the Programs Manager as soon as possible. When referencing the applicable Deed Restriction (as an exception) and related Housing Authority closing documents or real estate transfer fees (as requirements) on the title commitment, please do not hesitate to contact the Programs Manager with any questions you may have.

For price-capped units (usually Town but sometimes County units), the purchase price in the purchase contract must be checked and approved by SMRHA, as well as the total loan amount reflected in the title commitment. Please be aware that there are some Deed Restriction guidelines that prohibit a loan package from creating liens against the property with a total debt of more than the purchase price of the property.

Real estate transfer fees are to be dispersed at closing, in separate checks. They vary depending upon the type of Deed Restriction and the property location:

Location	Total RETA/RETT *	Appropriation of RETA/RETT	Deed Restriction Admin. Fee **	Combined Fees
Aldasoro	3% of sales price	2.25% Aldasoro HOA 0.75% County Transportation Fund payable to San Miguel County	1% of sales price payable to SMRHA	4% of sales price
Lawson Hill PUD including Rio Vistas II, Two Rivers/ Ilium	3% of sales price	0.75% SMC Housing Authority payable to SMRHA 1.25% Lawson Hill POA 1.0% County Transportation Fund payable to San Miguel County	1% of sales price payable to SMRHA	4% of sales price
San Bernardo	0.75% of sales price	0.75% County Transportation Fund payable to San Miguel County	1% of sales price payable to SMRHA	1.75% of sales price
Town DR units (some outside Town limits)	0% of sales price for price-capped with exemtion***	Town's Capital Improvements Fund	1% of sales price	1% of sales price for price-capped with exemtion***
Town EDU properties	3% of sales price	Town's Capital Improvements Fund	N/A	3% of sales price

Notes On Who Pays:

*Negotiable but usually buyer pays part or all.
**Paid by seller, according to all Town and County affordable housing program guidelines (most important if price is capped).
***For price-capped Town DR units, Town policy per LUC is to approve waiver of these fees, but exemption application must be filed with Town (an application typically filed by title company closing agent).

SMRHA staff will prepare the applicable deed-restriction documents that are required for the closing to proceed and will typically deliver them to the closing agent with a cover letter of instructions unique to the transaction. These documents will differ, depending upon not only the type of Deed Restriction but upon the location of the property, whether the buyer is a Qualified Employee or is approved via an exception, if a co-borrower agreement is required, and if the unit is multi-family or single-family.

For County R-1 Deed Restriction properties, you will be obtaining the conventional lender's signature on the Option to Purchase. For County Affordable Housing Covenant properties or Town Affordable Housing Units, SMRHA staff will obtain all signatures on the Option to Purchase.

After closing, please record all documents received from SMRHA when recording the and the Warranty Deed (and, if applicable, the County's Option to Purchase) and return the originals along with a copy of the deed to SMRHA.

If using the new form of deed that no longer directly lists exceptions such as a deed restriction, please provide SMRHA with a final title commitment or policy representing the Title Documents referenced in the deed (showing reference of the applicable Deed Restriction).