Are Shared Ownership Properties Hard to Sell?

Shared ownership properties, also known as shared equity homes, involve an arrangement where an individual owns a portion of a home and pays rent on the remaining share to an affordable housing provider. This model makes homeownership more accessible for low- and moderate-income individuals by reducing the initial purchase price and mortgage burden. Selling these properties differs from traditional real estate due to regulations designed to preserve long-term affordability, including restrictions on resale prices and buyer eligibility.

Initiating the Sale Process

To sell a shared ownership property, homeowners must formally notify the affordable housing program administrator or community land trust that facilitated the original purchase. This notification includes details about the property and the owner’s intent. Many programs, especially those with public funding, have a “right of first refusal” or “nomination period.” During this time, the administrator has the first opportunity to buy back the share or find a new qualified buyer, ensuring the property remains within the affordable housing inventory.

A professional valuation of the property is mandatory. An independent, licensed appraiser assesses the home’s market value, considering its condition, market dynamics, and any existing affordability restrictions. The determined value helps set the sale price and calculates the homeowner’s equity, subject to the program’s resale formula. The seller typically bears the appraisal cost.

Attracting a Buyer and Eligibility Requirements

Following notification and valuation, the program administrator usually initiates its nomination period, often lasting around 60 days. During this time, the administrator actively seeks a suitable buyer from its waiting list of pre-qualified applicants. This period ensures the property continues to serve its purpose of providing affordable housing to eligible individuals. If a buyer is identified, the sale proceeds under the program’s terms.

If the program administrator does not find a qualified buyer within the nomination period, the homeowner can market the property on the open market, often through a real estate agent. However, the property remains subject to specific buyer eligibility criteria. These commonly include income thresholds, such as 80% or 120% Area Median Income (AMI), and often require buyers to be first-time homeowners. These restrictions are embedded in deed restrictions or covenants, ensuring long-term affordability.

Financial and Legal Aspects of the Sale

Selling a shared ownership property involves distinct financial and legal considerations, primarily due to its leasehold nature and affordability covenants. These homes often involve a ground lease, where the homeowner owns improvements but not the land, typically owned by the program administrator. This arrangement impacts the remaining lease term, ground rent payments, and service charges, which are important details for a prospective buyer. Any outstanding financial obligations must be addressed during the sale.

The legal conveyancing process for shared ownership properties is more intricate than a standard sale. It requires close coordination with the program administrator’s legal team and obtaining specific consents for the transfer of the lease and share. Legal documents, such as deed restrictions or declarations of covenants, outline the resale price formula and buyer qualifications, ensuring continued affordability. Sellers incur costs, including attorney fees and potential real estate agent fees if sold on the open market. Any outstanding mortgage must be paid off at closing, and capital gains taxes may apply if profit exceeds $250,000 for single filers or $500,000 for married couples filing jointly.