3.1 For units differing in size (square foot area) from the basic unit, the structure cost will be increased or decreased at one-half the unit type square foot cost. Minimum and maximum sizes of units are as shown on the MPDU standards addendum to these regulations.
3.2 The construction loan interest rate used to calculate construction financing costs is based upon a prime interest rate of 10 percent plus two percentage points. Variations from this construction loan interest rate will be adjusted to the prime interest rate that exists at the time of the offering plus two percentage points.
3.3 The following costs, in addition to the construction loan expenses, are included in the allowable sales price and are expressed as a percentage of the total price as follows:
(a) Construction loan placement fee - 1.5 percent
(b) Legal and closing costs - 3.5 percent
(c) Marketing expenses and sales commissions - 4.5 percent
(d) Builder's overhead expenses - 8 percent
(e) Pre-Development Expenses and contingencies - 5 percent
3.4 The allowable sales price includes the following closing costs which are to be paid by the seller:
(a) one-half percent for a permanent loan origination fee;
(b) County tax certificate, transfer charges, revenue stamps and recordation charges;
(c) title examination, settlement, and attorney fees;
(d) notary fees and fees for preparation of a deed of conveyance, a deed of trust or mortgage, and the deed of trust or mortgage note;
(e) house location survey plat; and
(f) appraisal fees and credit report charges.
3.5 Fees required to place permanent financing will be permitted to be added to the allowable sales price to determine the final sales price to the purchaser. These fees may include the seller's permanent loan fees (points) which are in excess of one-half percent and any buy-down fees paid to a financial institution to reduce mortgage interest rates on the purchaser's loan below current market interest rates. There will be no additions if the buyers secure their own financing.
3.6 The above prices for single-family, semi-detached, and townhouses include the cost of a basement. A basement cost will not be permitted on back-to-back or piggyback townhouses unless one or more of the following criteria are satisfied:
(a) the MPDUs are attached units and are scattered among market-rate units with basements, or;
(b) the MPDUs are constructed on land where the topography necessitates the construction of basements and the developer can demonstrate such topographical requirements to the satisfaction of the Director of the Department.
3.7 In any instance where a townhouse MPDU is constructed as an end-unit dwelling, the allowable structure cost will be adjusted to reflect the increased costs associated with the construction of the end unit.
3.8 The allowable sales prices listed in Section 2.1 may be adjusted for dwellings where space for future bedrooms that can be finished by the purchaser is provided. For each potential additional bedroom where adequate space is provided, the square foot price for this area will be reduced by ten dollars per square foot from the square foot price. The minimum area, height, lighting, and ventilation as defined by the Montgomery County Code, must be provided in a MPDU in order to meet the requirements of the MPH Law. Expandable space must include the installation of heating and air conditioning duct work, rough electrical wiring, rough-in plumbing, and insulation. Walkout basements will not be considered as expandable space.
3.9 Water and sewer house connection fees are not included in the calculation of the MPDU base sales price. In any instance where water and sewer connection charges are not deferred, the allowable sales price will be adjusted to reflect this increased cost to the developer.
3.10 When permitted by the Director, significant items included in the minimum MPDU specifications, but which are not constructed in a unit will result in an adjustment to the allowable sales prices to reflect these omissions. Minimum specifications for MPDUs which exceed building code requirements are shown on the attached addendum. It is the responsibility of the developer/builder to provide these items, or otherwise to obtain permission from the Department not to meet the minimum standards.
3.11 When a gas heating and air-conditioning system is substituted for an electric system in a MPDU, the allowable sales price will be adjusted by the Department.
3.12 When the buyer and seller of a MPDU agree to modify the unit structurally to facilitate access or use by a disabled person(s), the Department may adjust the allowable sales price by the amount of the additional costs. The builder/developer must obtain approval of the price from the Department prior to executing a sales contract.
3.13 The Department may adjust the allowable sales price of a MPDU if the developer/builder can demonstrate that additional unusual costs have been incurred (i.e., costs not already included in the allowable structure or lot development costs) which are directly attributable to and benefit the MPDUs and which are the result of:
(a) conditions or fees; such as impact or similar fees imposed by a governmental unit or as condition for building permit approvals;
(b) additional considerations or fees as a condition of obtaining governmental financing programs; or
(c) additional fees imposed by public utilities.
Documentation for such costs must accompany the sales offering agreement submitted to the Department. Requests for price adjustments must be initiated by the builder/developer. Additional costs for correcting or adapting the usability of marginal land, soils, or topography will not result in an increase to the allowable sales price.
3.14 The Director may permit an increase in the allowable sales price of a MPDU in exceptional cases when the Director finds that a price increase is justified to cover the cost of modifying the external design of the MPDU that is necessary to reduce excessive visual and marketing impact of the MPDUs on the market-rate units in the subdivision. The increase in the allowable sales price will only be permitted in accordance with the following conditions:
(a) The MPDUs are interspersed among or adjacent to the market rate houses and are plainly visible to the occupants of the market rate housing. A site plan must be submitted which shows the location of the MPDUs and the market priced units.
(b) The design elements requested will be similar to those elements used on the market- rate housing units in order to reduce substantial differences in appearance. Compensation may be allowed for full or half brick veneer facades and the sides of end units, roofing material, window and door treatments, materials for walkways, and similar architectural elements approved on a case-by-case basis.
(c) Compensation will be based upon the cost difference between the design elements included in the calculation of the MPDU allowable structure cost and those design elements for which the builder is requesting compensation. Cost estimates or construction bids must be submitted that will establish this difference in cost. The Department may establish standard costs for approved design elements. The final determination of the amount of the compensation will be made by the Department.
(d) The increase approved for architectural compatibility will be limited to 10 percent of the allowable base cost for each unit increased by the direct costs percentages listed below. The allowable base cost will be determined using the square foot and lot development costs contained in Addendum No. I of this regulation.
(1) construction loan interest - prime rate plus 2 percent;
(2) Construction loan expenses - 1.5 percent;
(3) builder's overhead expenses - 8 percent;
(4) pre-development expenses and overhead - 5 percent.
3.15 When the State of Maryland Community Development Administration's Homeownership Development Program is utilized to provide permanent financing for purchasers of MPDUs, the seller must exclude closing costs from the authorized sales price. The resulting sales price must reflect a deduction which equals the actual closing costs paid by the buyer. This provision only applies to those MPDUs for which a commitment of permanent financing has been received from the State of Maryland Community Development Administration in association with the Homeownership Development Program.
3.16 The maximum, allowable sales price for new MPDUs sold to the Housing Opportunities Commission (Commission), or to a non-profit corporation approved and certified by the Commission will be reduced to reflect the reduced selling and marketing costs associated with these units. In such cases, the maximum allowable sales price will be reduced by 4.5 percent.
3.17 The loan amount, but not the final sales price, may be increased to cover the cost of amortizing the mortgage insurance premium on FHA and Commission/FHA loans.
3.18 The MPDU Pricing Standards and provisions of this regulation apply to all MPDUs offered for sale through the Department on or after the effective date of this regulation. The maximum allowable sales price for the MPDUs will be fixed when the offering agreement is signed by the Department.
