Very simply, you buy the house but you don’t buy the land. You rent the land from Madison Area Community Land Trust under a 98-year (renewable) ground lease, which provides long-term protection to the homeowner. This makes the home less expensive to purchase, because you don’t have to finance the cost of the land. And in exchange for getting a good deal on your land trust home, we ask that you pass along the deal to the next homeowner, so that the home continues to be affordable for generations to come.
A land trust home is a good deal – not just for the first buyer but for each successive buyer also. The buyer of a land trust home promises to “pass along the good deal” to the next homeowner. They do this by sharing the increase in the home’s value with the next buyer through the Resale Formula below.
The resale formula outlines how we calculate the maximum price at which a MACLT homeowner can resell their home. Essentially, in exchange for buying a home at an affordable price, the homeowner agrees to sell the home at an affordable price. The resale formula is a way to provide our homeowners a way to capture a portion of a home’s appreciated value, while ensuring the home remains affordable for future buyers. Therefore, when you sell your land trust home, you get (a) 100% of the equity you have gained by paying down your mortgage, plus (b) 25% of the increase in the market value of your home. *(See note below)
- EXAMPLE: You buy a home from the land trust for $100,000. At that time, the house had an appraised value (i.e. market value) of $115,000. Ten years later, you want to sell the home, and now it has an appraised value of $155,000. Plugging these numbers into the resale formula, this house could be resold for (a) original purchase price ($100,000) plus (b) 25% of the increase in appraised value ($40,000 x 0.25 = $10,000) for a total resale price of $110,000.
*NOTE: The resale formula sets a maximum sale price, and does not guarantee a certain sale price. While many MACLT homes have sold at the price calculated using the resale formula, the actual sale price may vary depending on housing market conditions.
We sell our homes to homebuyers with household incomes that do not exceed certain limits set by the federal government. Specifically, your family income may not be above 80% of the area median income for Dane County, and these income limits change every year based on HUD guidelines. For more information, go to our Home Buyer Guide and view “Step 2: Do You Qualify”.
The monthly Ground Lease fee is $75 for single family homes and $50 for condos.
You get all the tax advantages of home ownership. All mortgage principal payments build your equity in your house instead of going into a landlord’s pockets. When you sell, you also get 25% of the increase in appraised value of your house. And you get to do what you want with the house — it is your home!
Land trust houses are for people with modest incomes who simply cannot afford a house in the high-priced Madison market. If you can afford to buy a house on the conventional market – go for it! You would keep 100% of the increase in the value of your house.
The ground lease is a very long document that describes all the rights conveyed to the homebuyer when they purchase a land trust home. It states that as a land trust homeowner, you have full use of the land for 98 years, which is renewable at the option of the homeowner for another 98 years — which is a very long time! And it is a lengthy document because it has to cover all the different things that can come up over 200 years. And it also contains language to make sure that the house remains affordable to future generations of homeowners. The key element of the ground lease is that the purchaser buys the house, but not the land under the house. The land is leased from the Community Land Trust. If you ever sell your land trust home, the sale price will be based on a resale formula designed to maintain affordability for future owners. The resale formula is pretty simple — if you ever sell your land trust home, you will get (a) what you paid for the house when you bought it, plus (b) 25% of the increase in market value of your home.The Community Land Trust has a three page summary of the ground lease available. The summary has some of the legalese translated into plain English. In addition, the Community Land Trust requires that you go over the ground lease with a lawyer of your own choosing to make sure that the agreement is entered into with full understanding.
Retaining ownership of the land accomplishes several goals. First, it means that the buyer does not have to finance the cost of the land when purchasing the home. Second, it ensures that the land trust will have the right to repurchase the home whenever it comes up for sale, at the resale formula price.
We almost always have more interested potential buyers than we do houses. The board developed the policy below to answer this question:
Selection Criteria for CLT home sales
Approved by board August 24, 2020
Revised September 28, 2020
Revised October 27, 2020
After a home comes up for sale and is appraised, the Madison Area Community Land Trust (MACLT) calculates a purchase option price (POP) and notifies the seller within 45 days of the receipt of the appraisal of MACLT’s “Notice of Exercise of Option” which states that MACLT intends to exercise or assign our right of first refusal.
MACLT posts information on their website (www.affordablehome.org) immediately after a home becomes available for marketing and sends out email notifications of any open house and to solicit interest to schedule tours of the property (prospective homeowners may subscribe to our interest list on our website).
For each home, there will be an initial 7-day showing period (which may include an open house). During this period, showings will be conducted with any interested homebuyers and MACLT staff will keep a list of all prospective homeowners expressing serious interest. Within one week of the end of the initial showing period, each interested homebuyer must provide MACLT staff with a pre-approval letter from a lender and an MACLT pre-application.
If at this point there is only one eligible applicant interested in the property, that person will automatically have the option to purchase the home. If more than one eligible applicant is interested in the property, the point preference system below will be applied to determine the order in which applicants will be given the option to purchase the property.
MACLT staff will ensure that all applicants are contacted within one week to let them know the results. If there are no interested and eligible homebuyers at the end of the initial showing period, the property will become available on a first come, first-serve basis where the applicant with the first pre-application submission will have first right to purchase (as long as the applicant still meets all of the eligibility criteria below by the time of closing). If no closing is complete within 60 days of MACLT’s Notice of Exercise of Option to the seller, the rules of the groundlease will prevail for allowing the homeowner to find their own buyer.
POINT PREFERENCE SYSTEM
- Lowest percent of median income: 1 point
The household that has the lowest percent of median income based on household size will receive one point. The household’s ratio of housing costs to gross income has to be 35% or lower to qualify for this point.
- Number of bedrooms matches or is less than the household size: ½ to 1 point
If the number of bedrooms matches or is less than the size of the household, the applicants will receive one point and if home size is only one bedroom over the needed number the household will receive ½ point. This assumes 1.5 people per bedroom.
- The applicant has accessibility needs that requires the features of the property: 1 point
If at least one member of the household has accessibility needs that requires the features of the property (for example, 1st floor flat for a person with a mobility impairment), the household will receive one point.
- Current MACLT resident: 1 point
All current MACLT residents in good standing will receive one point.
- First-time Homebuyer: 1 point
Any applicant who is applying to buy their first home through MACLT will receive one point.
- First-generation Homebuyer: 1 point
Any applicant whose parents never owned a home will receive one point.
- Risk of displacement: 1 point
Applicants will receive 1 point if they are at risk of displacement through no fault of their own, through condemnation or sale of property, divorce or domestic abuse, or other unfortunate external circumstance.
- Actively seeking MACLT properties for at least six months: ½, 1, or 1 ½ points
Any household that has been actively seeking to purchase an MACLT property will receive: ½ point for every six months (cap of 1 ½ points) from the time the homeowner application was submitted.
The household with the highest points will be selected as the buyer. In the event of a tie, the property will be offered to the household with the lowest median income based on household size.
EQUAL HOUSING OPPORTUNITY
Madison Area Community Land Trust applies Fair Housing standards to all of our programs and services, and is committed to providing equal access to our housing.
ELIGIBILITY CRITERIA FOR MACLT HOMEOWNERSHIP
- Household income must be below 80% county median income
- Submit a MACLT Pre-application to determine eligibility
- Attend an MACLT orientation with staff
- Be pre-approved for a mortgage at the value of the house available, with necessary down-payment or down-payment assistance
- Attend a homeowner education workshop (completion certificate valid for 18 months)
- Submit program application with all information verifying income and asset requirements of our program
Pre-applications should be submitted as soon as possible. All other eligibility criteria do not need to be met in any order; however, all must be met before a prospective buyer can close on a CLT home.
You should first fill out the MACLT Pre-application and send it to firstname.lastname@example.org to begin the process of buying an MACLT home!