ACC Equity Limitations

It is a value of our community to protect our investment, yet retain the idea of moderately-priced housing in Ashland. Placing equity limits on our homes is saying that it is important to us that Ashland remains a place where middle-income families can continue t foobar o live and work. It is also a value of our community that people not gain the monetary value of a unit that was not paid in their purchase price. In this way, we hope to discourage those who may be seeking primarily a speculative investment rather than a long-term home.

EQUITY LIMIT PERCENT

The Equity Limit Percent for each home shall be set at the time of the take-out mortgages. This would be maintained in perpetuity by means of a deed restriction or other similar legal instrument. It shall be calculated before any adjustments for Original Member Participation.

At the time of the take-out mortgage, the Appraisal shall be compared to the Cost. If the Cost is greater than 90% of the Appraisal, there shall be no equity limits, and ignore the rest of this procedure.

Example:

Cost 200K, Appraisal 250K, Cost/Appraisal = 80%, continue

Example:

Cost 200K, Appraisal 220K, Cost/Appraisal = 90.9%, stop

The appraisal shall be done by individual unit. This may result in different percentages of equity limitation for different units.

PRICE MODIFICATION FOR WORK CONTRIBUTION DURING DEVELOPMENT

The Equity Limit Percent shall be modified for each home based on the length of participation of members in the development phase of BGV. The amount of modification shall be a percent of $10,000 which would be the amount of price modification for someone that had been a member throughout the entire development phase. The length of the project shall be the number of months from February 1, 2003 until move-in. The length of each member’s participation shall be the number of months that household paid dues as an Associate or Equity member prior to move-in. The following members who were participating in ACC prior to the institution of Associate membership policies (1/1/04), are considered to have the following “start dates”: Theresa Jensen 2/1/2003, Tonya Graham 6/1/03.

This modification recognizes that part of the cost savings comes from the work expended by members prior to move-in. Each member is allowed reasonable compensation for the amount that their contribution reduced their own home price, and this contribution will be part of the Equity Limit Percent so that it is allowed to grow at the market rate. No compensation is offered for dues paid to the Membership account, nor are dues included in the purchase price.

If the purchase price will not exceed the limit set by the City of Ashland, the amount of the contribution will be added to the cost to set the total purchase price which the member will pay to the LLC at the original sale and the same amount will be credited back to the member in the original sale escrow. This may allow for financial benefits to the household based on the equity to loan ratio. If adding the work contribution to the cost will cause the price to exceed the limit set by the City, then it shall be used only as part of the calculations for the purpose of resale.

The Development Work Contribution shall be calculated as:

(member months/project months) x $10,000

The Equity Limit Percent shall be calculated as:

(Cost + Development Work Contribution) / (Appraisal)

Example:

Cost 200K, Appraisal 250K, member of 27 months during a 36 month project

Development Work Contribution = (27/36) x 10K = 7.5K

Equity Limit Percent = (200K + 7.5K) / (250K) = 83%

Example:

Cost 200K, Appraisal 250K, member of 0 months during a 36 month project

Development Work Contribution = (0/36) x 10K = 0

Equity Limit Percent = (200K + 0) / (250K) = 80%

MAXIMUM SALE PRICE

The deed restriction or other similar legal instrument shall ensure that the Maximum Sale Price for all sales after the original take-out mortgage shall not exceed the Appraisal at Sale times the Equity Limit Percent, subject to the adjustment for capital improvements and the no loss provision below.

ADJUSTMENT FOR CAPITAL IMPROVEMENTS

The intent of this adjustment is to allow homeowners to preserve equity growth in any capital improvements added to the home, while avoiding “double crediting” homeowners for the effects a capital improvement has on increasing the home’s resale value. To qualify, a capital improvement must be as defined by the IRS as qualifying for an increase in basis of the home sold.

The Maximum Sale Price shall be adjusted as:

[ (Appraisal at Sale – Capital Improvements) x Equity Limit Percent ] + Capital Improvements

Example:

Equity Limit Percent 80%, Appraisal at Sale 350K, Capital Improvements 30K

Maximum Sale Price = [(350K – 30K) x 80%] + 30K = 286K

NO LOSS PROVISION

No homeowner shall be required because of the deed restriction or other similar legal instrument to sell their home below the amount they paid for it. The intent is to provide homeowners with partial protection if the Ashland housing market loses value. The no loss provision ensures that the Maximum Sale Price is always at least the Cost. Obviously, if the proposed sale price is below the Cost, the no loss provision is not applicable. If any unit sale triggers the NO LOSS provision, then the Equity Limit restriction is removed from all future sales of that unit.

Example:

Cost 200K, Appraisal at Sale 235K, Equity Limit Percent 80%, Capital Improvements 10K

Maximum Sale Price = [(235K – 10K) x 80%] + 10K = 190K,

but cannot be less than the Cost, so Maximum Sale Price = 200K

REPOSSESSIONS

In the event a mortgage holder (bank or other entity) repossesses a unit, these equity limit provisions do not apply.

APPRAISALS

The homes will have an independent appraisal at time of take-out mortgages to determine their true market value by comparison to comparable home sales in Ashland (Appraisal). The cost for these independent appraisals will be paid by the LLC, and therefore will be incorporated into the Cost as part of the take-out mortgage. At time of sale to a new owner when the Equity Limit will apply, new appraisals will be done using a similar appraisal method or similar modifiers (Appraisal at Sale). The Buyer, Seller and the HOA will all be parties to the appraisal process at this time. A first appraisal will be ordered and paid for by the Buyer. If the other parties are not content with the first appraisal, either one of them may order another appraisal. If agreement on the market value cannot be reached by the three parties after the second appraisal, any party may order a third appraisal. At that time, all parties must accept the median of the three appraisals. If the HOA incurs any costs during this process, they will be paid by the Buyer.