Denver, Colo.-area mom and homeseller Cynthia Lopez is battling the city government over an unusual real estate transaction hiccup: even though she had a buyer and a contract to sell her 1,200 square-foot home for $265,000 — $150,000 more than she paid for it in 2012 — her deal can’t close as agreed upon, because her home is part of an affordable housing program that only allows for a maximum appreciation of five percent per year, according to a report by local news outlet Fox 31.
That would mean Lopez’s home would only be able to sell for $186,000, or $79,000 less than market value.
Out of the 5,000 homes in the planned community of Green Valley Ranch, where Lopez lives with her two-year-old daughter, 642 were set aside for low-income households that make only 30-80 percent of the Area Median Income, which is currently $56,100 for a one-person household. However, Lopez says she only found out her home was one of those in the program when her deal was set to close.
“Nobody told me,” Lopez said in an interview with Fox 31. “I didn’t sign any contracts. I didn’t sign any documentation that is required by the city to be in the affordable housing program. My income didn’t qualify. It was not in my title, it was not in my deed.”
Lopez has hired real estate attorney Robert McGough to file an appeal on her behalf and to represent her in front of a city administrative officer later this year.
McGough told Inman the first hearing is set to take place on Dec. 5 in front of the director of the housing commission in Denver. If that appeal is denied, he said they will appeal to the head of the office of economic development (OED). Lastly, if the appeal to the OED is denied, then they’ll resort to litigation in the courts.
McGough says although he hasn’t heard of this happening prior to this year, there are some steps real estate agents can take to make sure their buyers don’t end up in the same situation as Ms. Lopez.
First, he says agents need to take a close look at MLS listing descriptions. According to McGough, affordable housing covenants require the owner and listing agent to say a home is part of an affordable housing program and is subject to affordable housing restrictions in the MLS listing, and in any other advertisements for the property.
He also says buyers’ agents should examine the title commitment from the title company, which should include a declaration that the home is set aside for affordable housing.
However, McGough says neither the MLS listing description, advertising materials, nor the title commitment indicated that Lopez’s home was part of the affordable housing program.
In the best case scenario, McGough says agents should advise buyers to have a lawyer and a CPA on hand to review the commitments and covenants, which he says can be hard to understand.