Faculty and Staff Real Estate Services
Terms of Residential Purchase Plan
This summary sets forth the terms and conditions of the Princeton Faculty Residential Purchase Plan (PFRPP) Program for eligible faculty and senior staff.
Purchase Price
The purchase price of these properties is established by the University obtaining a price from a certified New Jersey real estate appraiser who determines the unrestricted fair-market appraised valued of a property.
The University conveys the property to an eligible employee in "fee simple" title, subject to specific restrictive covenants that a property may be used only for a principal personal residence; that prior University approval of major changes in the structure or exterior of the house is required; and including other similar use covenants set forth in the deeds of properties under the plan. Copies of such covenants are available upon request. Owners are solely responsible for all costs associated with carrying a property after closing of title, including maintenance, utilities, insurance, payment of real estate taxes and any other costs normally associated with homeownership.
University Repurchase Option
As a part of the transaction, the purchaser grants to the University an assignable option to repurchase the property upon the occurrence of any of the following events: the death of both the employee and his/her spouse or registered domestic partner; the employee leaves the employ of the University (other than by retirement); the employee ceases to make the house his/her principal personal residence; or if there is a change in title to the property.
The price for the University’s repurchase of the property is established as follows: The owner (at the owner's expense) obtains an appraisal from a qualified real estate appraiser who determines the unrestricted fair market value of the property. A copy of the appraisal is delivered to the Office of the Director of Housing and Real Estate Services, which will have the report reviewed by another appraiser to confirm the amount is appropriate in the current real estate market. After such review, if the University agrees with the value, the process will move forward with a title transfer. Should the University feel the value provided by the owner's appraiser is not appropriate, the University may elect to have an appraiser of its choice (at the University’s expense) provide a similar report that will be shared with the owner. Should the owner not accept the value of the second appraiser, the two appraisers (owner's and University's) will consult and choose a third appraiser to review both reports and establish a value for the property. The cost of this third report is shared equally by the owner and the University. The value established by the third appraiser is binding on all parties.
Once a value for the property is established, as set forth above, the University will have 60 days in which to exercise or assign its option to repurchase the property. If the University does not exercise or assign its option within the 60-day period, the owner of the property may sell the property to any person at any price.
Financing
The purchase of a home under this plan is normally financed by a University mortgage loan. University Mortgage Services administers the mortgage program and should be consulted regarding the financing options available to eligible employees to assist them in the purchase of homes under the program. Owners are not guaranteed that the resale price of a home purchased under this plan will equal or exceed the original price of the property or the outstanding principle balance of their mortgage when the house is sold.
The University has obtained a ruling from the Internal Revenue Service (IRS) regarding the information outlined above. In general, this ruling provides that the plan will not be challenged by the IRS in regard to its legal framework. The IRS will not, however, commit itself to accept factual assertions by taxpayers. Therefore, the correctness of appraisals obtained under the plan described above are subject to challenge by the IRS (generally speaking, for a three-year period after the year of the purchase). If the IRS determines a purchaser paid too little for a home, the "underpayment" might be treated as taxable income to the employee by the IRS.
This document is intended to provide a “summary” description of the program. Those who wish to pursue the possibility of making a purchase under this plan should obtain both legal and tax advice. The University will not be liable for any tax or other consequences that may result from changed circumstances in the future, such as changes in the law, changes in position on the part of the IRS or the like. The Housing and Real Estate Services Office will provide copies of all relevant documents and other related information available to potential purchasers and to their attorneys upon request, and should be reviewed in detail.