13.19 Special Instructions for Substantial Rehabilitation

HUD Multifamily Accelerated Processing (MAP) Guide, HUD Handbook 4430.G (2020 ed., rev. Mar. 19, 2021) · 2026 edition · updated 2026-10-05 · United States

A. Cost certification instructions (which are set by statute) dictate that, in substantial rehabilitation cases, the lesser of the “as is” value of the land and improvements (before repair or rehabilitation), or the purchase price of the land and improvements, is used in the cost build up for Criterion 3 of form HUD92264-A. Consequently, when mortgage proceeds will be used to fund the acquisition of the property, the “as is” value estimation will be used as a test of the reasonableness of the acquisition price.

B. When the acquisition price is less than the “as is” value of the land and improvements (as accepted by HUD), and mortgage proceeds will be used to fund the acquisition of the property, the acquisition price will be used in the cost build up for Criterion 3, forming the cost basis for the Firm Commitment.

C. When the acquisition price exceeds the “as is” value of the land and improvements (as accepted by HUD), and mortgage proceeds will be used to fund the acquisition of the property, then the “as is” value will comprise the basis of the cost build up for the Firm Commitment.

D. When mortgage proceeds will not be used to fund the acquisition of the property, the “as is” market value of the property will be used in the cost build up for Criterion 3, forming the cost basis for the Firm Commitment. This is particularly significant when below market rent restrictions are in place (such as in the case of LIHTC limited rents or Section 8 rent subsidy) and the use of market rents in valuing the property will result in a premium over these rent restrictions. (See Chapter 7, Section 7.13.3 on defining how rents are derived as the basis for the “as is” value).

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Chapter 13 Page 13-33

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Chapter 13 Cost Certification 13.20 Mortgage Reduction after Cost Certification

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▸Contents — HUD Multifamily Accelerated Processing (MAP) Guide, HUD Handbook 4430.G (2020 ed., rev. Mar. 19, 2021)

HUD Multifamily Accelerated Processing (MAP) Guide, HUD Handbook 4430.G (2020 ed., rev. Mar. 19, 2021)

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