Situation
The city of Chicago has a Tax Increment Finance Purchase Rehab program (TIFPR) to assist people who otherwise might not be able to qualify for homeownership. It offers forgivable loans for those looking to purchase and rehab vacant 1–4-unit residential properties within active TIF districts. The terms of the mortgage stipulate that it can’t be paid off before the 30-year term. For most people, this is unrealistic as the average person moves every seven years. Our client needed to move but was bound by the terms of TIF.
Challenge
In this case, our client needed to sell their home at the 15-year mark, posing issues with the TIF agreement. Adding to their problem, they had also purchased a parking space separately. Parking spaces are considered a luxury and therefore are not included within the TIF parameters.
Solution
We contacted the City of Chicago and discovered that although the mortgage could not be removed, the property could be sold to another qualified, low-income purchaser. In order to do so, the buyers had to be vetted for the purchase by submitting financial information to the city. However, we first had to find the right buyer for our client.
We researched and worked with the city to understand the right language required when listing a TIF property to ensure we found qualified buyers. Once vetted and approved, the
buyer had to secure a mortgage to cover the difference of the original mortgage and the selling price which was $30,000. The mortgage could be transferred to the buyer, and the balance would be covered by the city.
Because there were 15-years remaining on the original mortgage, the new buyer would have the option of selling in 15-years or finding another low-income qualified purchaser prior to the 15-year period. For the parking space, it would be sold separately since it could not be included with the TIF mortgage.
Outcome
Our client was finally able to sell the property and access their equity. Additionally, the new buyer received a $30,000 reduction against their purchase. In addition, the new owners now have the option to reside in the home for the next 15 years or sell to another low-income qualified buyer. Working with a short time frame, we enabled our client to benefit from the TIF and become property owners in an area they never could have afforded. They accessed their equity and were able to move on with their lives. Plus, they had a parking space they could sell separately to another resident in the building.
