HELENA, Mont. - With real estate values still low in most of the
country, a new investment device has surfaced - and a coalition of
consumer groups and real estate industry organizations is sounding an
alarm. "Private transfer fee covenants" are being placed on homes by
investors and developers. They require a percentage of the final sale
price to be paid to a private third party every
property is sold - for up to 99 years.
Kurt Pfotenhauer, president of the American Land Title Association
(a member of the Coalition to Stop Wall Street Home Resale Fees
says his organization is joining the coalition's call to state
legislatures to take action, and for a federal ban.
"The whole thing's set up to make money. It's marketed to the
developers: 'This is money in your pocket.' Clearly, you've just given 1
percent of your equity away to somebody else."
Companies backing the fees promote them as a way to reimburse developers
for infrastructure expenses. The fees are also pitched as a steady cash
stream and a product that can be sold to other investors and packaged
for Wall Street.
Pfotenhauer claims buyers do not understand this new financial product
being attached to properties, and some are not even finding out about
the fees until they go to sell their home. He calls the resale fees
"damaging to homeowners and homebuyers," as well as to the real estate
"The truth of the matter is that when you're in a down market, when
prices are depreciating or flat, you're that much more under water if
one of these things is attached to your house."
So far, 16 states have restricted the resale fees, and HUD will not
insure loans that have the fees attached. The coalition is delivering a
letter to U.S. financial officials on the issue this week.
Members of the Coalition to Stop Wall Street Home Resale Fees
include the National Association of Realtors, AFSCME, Vote Vets,
Center for Responsible Lending
and the Property Rights Alliance. A
complete list is at www.stophomeresalefees.org