plans and procedures for publicizing the rental units and achieving early occupancy;

procedures for determining tenant eligibility;

A maintenance plan and a neighborhood services plan will also be incorporated into the mangement plan. The maintenance plan specifies procedures and responsibilities for maintaining the properties and the equipment installed in them. The neighborhood services plan focuses on existing social service programs and develops new ones as appropriate to address the particular needs and problems experienced by the residents. Chapter III discusses how to develop a management plan. Financial Accounting and Reporting Requirements

As part of the master lease, your project authority must establish appropriate fiscal accounting and reporting procedures. The nature of these procedures will depend partially on the organizational structure of the project authority. Accounting and reporting procedures must be adapted to the particular approach that is taken.

In addition to establishing specific accounts for receipt of rental payments and security deposits, the authority must establish the maintenance, management, and neighborhood services accounts specified in the management plan. Chapter IV is a manual of accounting and financial reporting procedures developed for use by a project authority.

STEP 8: ADVERTISE UNITS FOR RENTAL

An effective marketing program is crucial to the success of the Community Stabilization Program. You may need to make special efforts to overcome any adverse public image that the subdivision or neighborhood may have. In marketing the rental properties, your project authority should draw on its resources as a government entity.

The authority should make use of all traditional media advertising techniques, including television, radio, newspapers, local and general circulation magazines, and brochures. In addition, it should contact

and work through civic groups, special interest groups, labor unions, religious organizations, and so forth. Publicity generated by the news media is important in creating public awareness of the program.

You should begin the advertising campaign early in the renovation period and prepare a model unit for inspection by interested persons. Under the area management contract, HUD can make a property available to the project authority to be used as a neighborhood office. If you and your authority decide to use this property, it can also serve as a model unit.

All advertising must comply with federal regulations governing equal opportunity and fair housing. The authority should also develop an Affirmative Fair Housing Marketing Plan that details efforts to attract minority renters.

STEP 9: EVALUATE AND APPROVE RENTAL APPLICANTS

The major objective of the stabilization program is to attract renters who are qualified to purchase their properties without a subsidy. To do this, you must develop an equitable screening process that will successfully identify qualified applicants. The management plan should include the procedures and criteria to be used in evaluating applicants.

Applicants should be evaluated on their ability to support the projected monthly costs involved in purchasing a house. HUD will therefore need to establish a range in which the sales price will be set. The price range can only be an estimate; however, by making the best high and low estimates, you can determine the necessary income to support the resulting mortgage payments. HUD will assist you in establishing a minimum qualifying income.

The master lease stipulates that rents are to be raised gradually to maintain the fair rental value level necessary to support mortgage payments. Therefore, applicants should be evaluated as if they were going to purchase the house at the estimated sales price, rather than on their ability to meet the initial rent level.

STEP 10: CONDUCT ORIENTATION FOR RENTERS

Before the tenants move in, your project authority should introduce them to the operation of the overall stabilization program. This orientation should:

define the goals and objectives of the program.

explain the terms of the sublease, emphasizing the respon-
sibilities of both the renter and the authority (see the model
sublease shown in Appendix D);

explain routine maintenance and repair procedures for ap-
pliances; and

provide for the renter to inspect and certify the condition
of the property he or she will occupy.

The management plan specifies the steps to be taken during the orientation to make the renter aware of the Community Stabilization Program and his role in it. It is important that the renter feel a part of the program. Both the area management contract and the master lease encourage the active participation of residents in the stabilization program.

Explaining the sublease and the repair and maintenance procedures to the prospective tenant can save future time and money. Renter inspection of the unit prior to occupancy should be mandatory (some state laws require this). Such an inspection is necessary to assess financial liability for future repair work. Your authority should develop a checklist which the renter, accompanied by a staff member from the project authority, can use to certify the condition of the property. Once the renter certifies that the property is in good condition, he/she becomes liable for any repair work not otherwise specified in the master lease and sublease.

STEP 11: PREPARE SALES PLAN

The sales plan is the last major component of the stabilization program. It contains the terms and conditions of sale to be offered to qualified purchasers. The plan itself is the result of close interaction between HUD and your authority. This interaction will consist of your analysis, strategy formulations, and recommendations to HUD in the following

availability, source, and terms of the most favorable mort-
gage financing;

An analysis of the real estate market will assist you in determining when the properties should be offered for sale. The master lease stipulates that all properties must be sublet for a minimum of one year before they can be sold. If, after one year, the appraised value of properties does not fall within the sales price range that represents an acceptable return to HUD, you may continue to be sublet them. The market value of properties will depend on the impact and pace of the stabilization program as well as on general market and economic conditions.

Searching for the most favorable mortgage financing package is an important task. Its ease or difficulty will depend partially on the availability of money. If mortgage money is generally available, you should examine local lending sources. If money is scarce, you and HUD may have to go beyond local sources to large national lending institutions. You should not limit your search for favorable terms to your geographic location. HUD must arrange the participation of FHA and VA mortgage insurance. Potential mortgagees may insist on federal insurance as a condition for supplying mortgage money.

One way to ensure the success of your sales program it to require a realistic down payment that demonstrates the buyer's financial commitment to the house and the neighborhood. Three sources can cumulatively be tapped for the down payment: the renter's security deposit, the unexpended portion of the maintenance fund that can be allocated to the renter, and the renter's personal funds.

Under routine single-family disposition procedures, HUD assumes all closing costs except for prepaid items (property taxes and insurance). State laws vary regarding the amount of property taxes that must be placed in escrow. Therefore, closing costs will vary depending on state law and on when the property is sold.

If your original screening process for rental applicants follows the adopted guidelines, most renters should be able to exercise their purchase options. Early in the rental period, you should give each renter an estimate of the out-of-pocket costs he will be expected to pay, including down payment, since it is common for people to underestimate the total cost of purchasing a property. If tenants are aware early of probable closing costs, early in their residency, they can prepare themselves financially.

Once you have developed a sales plan and HUD has approved it, qualified purchasers will be given the opportunity to exercise their option to buy. Those renters who do not do so within a specified period (to be determined by you and HUD) will not have their subleases renewed. In these cases, the properties will be re-rented to qualified tenants, who also must occupy them for a time before being offered the opportunity to purchase.