Builder
Shared Appreciation Program
The Shared Appreciation Program is a program
whereby homebuyers can elect to reduce the initial
purchase price on the home they are purchasing
in return for sharing the appreciation with
the builder when the house is resold.
For every 1% discount received, the builder
receives a 5% share of the appreciation. The
maximum discount the buyer may receive upon
the purchase of this house is 7.5%. All proceeds
up to the original discount price go to the
purchaser. Above the original list price, all
proceeds will be divided. The builder will receive
between 5% and 37.5% of the excess over the
original list price, depending on the amount
of the original discount.
In the event that the new sale price is less
than the original discounted price, the builder
receives nothing. If the selling price is more
than the initial discount sales price, but less
than the initial list price, the builder will
only be entitled to the excess over the initial
discount price. The builder has the right of
first refusal at the time of resale.
In the fifth year, the purchaser will have
th eopportunity to buy out of this program by
paying the builder the original discount amount
together with interest at an annual rate of
6.5% compunded annually.
For example, th einitial builder's list price
of this home is $389,900. Should the purchaser
receive a 7.5% discount, the price of the house
would be $360,657. Shown below are four possible
scenarios.
1) The house resells for $399,900.
The difference between the list price and the
discount price goes to the builder.
Builders List Price = $389,900
Discounted Price to Buyer = $360,657
Difference = $29,243.00 goes to the builder
Profit difference above #389,900 = $10,000
Builders share (37.5%) will be $3750.50
The purchaser's share will be $366,907.50 (Discounted
price $360,657 + profit $6250.50)
2) The house resells for $370,657.00
The builder receives $10,000
The purchaser receives $360,657
3) The house resells for $358,700
The builder will receive nothing.
The purchaser will receive $358,700
4) The buyer elects the buyout option
in the fifth year.
The amount owed to the builder by the purchaser
will be $40,075
($29,243 + $10,832 interest at 6.5% compounded
annually)
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