Disposed of Assets For Less Than Fair Market Value (FMV)
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Disposed of Assets For Less Than Fair Market Value (FMV)
When do we ask about disposed of assets? During the application process At each certification/recertification
What is required? Applicants or existing tenants are required to give a written certification as to whether any family member did or did not dispose of any assets for less than the FMV during the two years preceding the effective date of the certification or recertification.
Why is this required? This is required by HUD in Handbook 4350.3 Rev-1 Section 4-24 B.8, to ensure that applicants are not divesting themselves of assets in order to qualify for affordable housing.
How long? In HUD Handbook 4350.3 Rev-1 Section 5-7 G.8., any asset that is disposed of for less than its FMV within the two years preceding certification or recertification should be counted as an asset for two years from the date of disposition for the purposes of determining household eligibility. The rule applies to items such as cash gifts, irrevocable trusts, and property given away or sold for less than its net cash value.
Involuntary Dispositions (Foreclosure, Bankruptcy, Divorce) HUD Handbook 4350.3 Rev-1 Section 5-7 G.8.d. specifically states that assets disposed of for less than FMV as the result of a foreclosure, bankruptcy, or divorce or separation agreement are not counted as assets because these are involuntary dispositions. However, owners and managers should clearly document inquiries with the tenant as to why the disposition was involuntary and collect supporting documents where necessary, such as divorce agreements and foreclosure documents, to support the involuntary nature of the disposition.
Supporting Documentation Nevada’s LIHTC Compliance Manual requires owners and managers to obtain a sales contract, settlement statement, recorded quit claim, foreclosure documentation, divorce decree settlement, or other documentation providing proof of the manner of disposal of the asset and any proceeds received.
Questions?
