I’m presuming the CSS Profile and most schools that require it are concerned with the value of available equity because of the amount of loans one could take out to finance the cost of education. The CSS form requires the home’s purchase price, date of purchase and estimated current market value of the home. Our home was purchased nearly 25 years ago, but along the way we built a large addition. Would the cost of the addition be included in the purchase price, as we would certainly use that cost to offset market gains for tax purposes, should we decide to sell it? Would that then change the purchase date to the date of the addition? Does any of this even matter when the school determines your assets and contribution, because they are only concerned with the home equity value?
From the Profile instructions:
PA-140 - Select the year your parents purchased their home. If they own a home but didn’t purchase it, select the year they took possession of it.
PA-145A - Enter the amount your parents originally purchased their home for. If they own a home but didn’t purchase it, enter the value of the home when they took possession of it.
I don’t think any improvements would factor onto the answer to either of these questions, because schools are probably only concerned with how much equity you have in the property.
I suspect (but honestly have no idea) that the some schools might use the purchase price as a check to see if the estimated market value is reasonable. For example if you paid 50K 20 years ago and claim the house is worth 200K and the data shows that the average house appreciates 800% in your area then they might conclude that your house is worth more than stated. In your case, your numbers would indicate appreciation far greater than average. Either way, the school is looking at the equity.
Do they ask how much you still owe? Otherwise how will they determine the equity?
Yes, the Profile also asks how much the home is currently worth and how much is owed on it.
So if OP used a home equity loan to build the addition, she may still owe on it and it would show up on CSS as liens, while the added value of the addition shows up in the current market value?
Yes.
I was wondering why they even ask what the purchase price was, and what relevancy there is in asking for the date of purchase, if all they really want is the equity value in your home.
I guess this information would help the university is trying to verify one’s estimate of the market value. But it seems like a lot of work for the university’s admissions/financial aid department to investigate every CSS profile.
Knowing when someone purchased a house and for how much would give some insight into someone’s financial situation. Buying a house 25 years ago for 200K that is worth 500K now is different than buying it 2 years ago for 475k. I’m just now sure how one might use that information.
I very strongly doubt that they do. Hundreds of schools use the Profile, and they don’t all use it the same way. Some Profile schools completely ignore primary home equity in the financial aid process, but the questions are there and get answered anyway. The information about date of purchase and purchase price at the very least add a bit of context to the family’s financial picture.
The key questions are:
- How much is your home CURRENTLY worth. This amount would include the value of the addition...right?
- How much do you currently OWE on the house? That would be any mortgages you have on the property.
The difference between the two is the equity you have in the home. Home equity is what the colleges are looking to find out.
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How much is your home CURRENTLY worth. This amount would include the value of the addition…right?
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YES…when indicating how much the home is worth, that would INCLUDE the value of the addition.
Some schools count home equity, others shield a portion of home equity from assets they expect are available to be tapped to pay for college, and others might exclude equity in the principle residence. Others might consider it only when the family income also at a certain level. The fact is, the schools that use the CSS profile are generally more generous with FA than FAFSA-only schools, but most of these schools are still limited in what they can offer all of their students. They all have different formulae -what factors they use, when, and to what extent.
The schools who shield a portion of equity from the calculation might also consider where the property is located, and the average value in the area. A family with a $2.5 million home in SoCal might get most of it shielded from Stanford’s FA calculation if they lived there more than 10 years, but if they only recently moved there and they only have a modest amount , say under $20K total mortgage left even if there are very little other assets, the school might (rightfully) determine the student’s family was trying to hide assets in buying a really expensive home. Basically, the school uses the info they ask to see if the picture that is presented makes sense, so they can be as fair as possible to all applicants.
That all makes sense. It seems that the CSS would save applicants some hassle by just requesting the home’s market value and the outstanding mortgages/liens on the property, and omitting the date of purchase and purchase price. Unless someone in FA actually digs into the application, which most seem to agree won’t happen, that information is largely irrelevant. A check against the zip code is all that would really be needed to determine if the stated market value is too low.
Huh? Given the wide range of real estate values within the same zip code, I don’t see how this could possibly be a good check.
The reason date and amount of purchase is requested is that those values can be plugged into the HPI calculator ( developed and used by FHFA) projecting what a given house purchased at a point in time would be worth today if it appreciated at the ave appreciation rate of all homes in the area.
As this info is easy to check on public records it is much more reliable than a home owners market value estimate.
It’s accuracy is another question and as has been noted, will the schools research it is another.
That’s true.