Foes want the Obama administration to ban a 1% ‘private transfer’ charge — assessed every time a property is sold for 99 years — paid to investors who backed the home’s original builder.
Can you name a housing controversy that pulls Iraq and Afghanistan veterans, consumer advocates, labor unions representing transport workers and government employees, the title insurance industry, the National Council of La Raza, libertarian and property rights groups and the National Assn. of Realtors all together into a protest coalition demanding quick action from the Obama administration?
A more unlikely collection of real estate bedfellows is hard to imagine. Yet at the end of July, 11 groups with widely divergent agendas and memberships formed something called the Coalition to Stop Wall Street Home Resale Fees.
The target of their protest: private transfer fees being attached as liens on homes and requiring successions of property owners to pay a fee every time the house or lot resells during the coming 99 years. Though proponents say the concept helps real estate developers raise capital for projects by bringing in Wall Street investors, critics contend the liens amount to a perpetual money machine that lowers equity values for unsuspecting consumers and complicates real estate sales.
Here’s how the plan works. Say you buy a $300,000 house in a subdivision where the developer is participating in a private transfer fee program and has recorded liens on every lot. When you later sell the property, you will be required to pay a fee of 1% of the price you receive. The money must be disbursed out of the closing proceeds and sent to a trustee representing investors. Those investors fronted cash to the developer in exchange for the right to receive streams of payments for decades as individual houses sell and resell.
So, if you buy a house this year for $300,000 and resell it for $325,000 a few years from now, you will owe $3,250 at closing. Even if the house drops in value, you will still owe the 1% fee. And if you refuse to pay it, the deal will not close because a lien has been recorded that runs with the title to the property and mandates that every seller pay.
Your purchaser might not like the fee requirement either, and might demand a lower price as compensation. When your purchaser later goes to sell, the same rules will kick in. And so on, through successions of sales until 2109, when the covenant recorded in 2010 disappears. Along the way, assuming modest appreciation in real estate values, investors and their estates stand to reap huge amounts of cash.
In the words of Kurt Pfotenhauer, chief executive of the American Land Title Assn., “it’s a pretty slick way to make money, but it’s bad public policy and bad for consumers.” Pfotenhauer’s group and the National Assn. of Realtors have spearheaded drives directed at state legislatures to ban or restrict private transfer fees. But now the focus has shifted to the federal level, where the 11-member coalition wants the Obama administration to prohibit transfer fees on all mortgages purchased or backed by Fannie Mae, Freddie Mac and the Federal Housing Administration.
The FHA has already indicated that the fees violate its rules, the coalition said in a July 29 letter to Treasury Secretary Timothy F. Geithner. If Fannie Mae and Freddie Mac, which both operate under federal conservatorship, follow suit, the underlying mortgage-financing fuel that feeds transfer-fee programs effectively will be shut off. Along with the FHA, Fannie and Freddie now account for an estimated 95% of all mortgage financings.
The principal advocate for the private transfer fee concept, Freehold Capital Partners of New York, did not respond to repeated requests for comment. In an e-mail earlier this year, Curtis Campbell, a spokesman for Freehold, said that “private transfer fees represent an adaptation in how to pay for development costs” incurred by builders “at a time when funding is not available” to them on “reasonable terms.”
On its website, Freehold claims that major real estate development firms controlling “hundreds of billions of dollars in real estate projects nationwide,” including some of the “largest, most well respected,” have participated in the program. However, the company has declined to identify any of them.
Members of the new anti-fee coalition said they have very specific reasons for joining. For example, Jon Soltz, co-founder and chairman of VoteVets.org, said military families generally move every three years, and have been disproportionately hard hit by the real estate bust. Because of their frequent moves, “these fees hurt the military more than anyone,” he said, and “take advantage of unsuspecting homeowners and buyers.”
RELATED ARTICLES
- Ukrainian Children are being Kidnapped from Poland and Sold to Pedophiles or Killed for Organ Harvesting
- Elon Musk bought the Entirety of Twitter, Let's see what will Happen to Free Speech and Shadow Banning
- Are the Lockdowns a Dirty Money Grab Scheme by the Rich Billionaires?
- Judge Fines Amish Farmer $250K and Threatens Jail Time for Providing Club Members Food They Want
- US Government now forcing Tractor Manufacturers to build them with Kill Switches
Loading ...
Indeed taxes are designed to stimulate the movement/flow of money, thereby stimulating the economy. If overdone it can be detrimental.
For an economy to be vibrant and healthy, there has to be a healthy flow of money in and out of each sector, and ideally, a balance between the sectors.
When one sector starts hogging all the money, as the energy sector did when oil went to almost $150 a barrel under Bush and Cheney, the other sectors suffer. Also, the wall street speculators deliberately created a bubble, contributing to the high oil prices, as well as what happened in the mortgage industry.
This greedy nature of speculators needs to be curbed by regulation and by setting a sensible cap on the prices of the involved commodities.
The insanity of rampant speculation can be seen the history of the tulip market in Holland.
Personally, I have given up on America. I see everything moving into monopoly.
When I saw Exxon and Mobil merge, and Texaco and Chevron, as far as I am concerned, the Standard Oil Trust was getting back together, although nobody was CALLING it that.
The food industry is almost monopolized.
Chain stores have run the independents under.
Time warner has a near monopoly on the media.
The fewer owners you have, it makes a government takeover extremely viable and possible.
GOODBYE LADY LIBERTY. NICE KNOWING YOU. HERE. DRY YOUR TEARS WITH A CHINESE KLEENEX.
Taxes do not stimulate the economy. Ever. If the housing market can’t stand on its own, it should fail. There are other industries that will stand up to take its place. There are too many houses built now in the U.S. Everyone who needs a home could just move to Miami…
Most of us do not understand the Freehold Capital Partners Program. I live in California and have purchased a home in a community where they have this type of program/product in place. My community is about 8234 homes, everyone was made aware of the 1%. The builder was upfront and honest and becuase of the 1% we have more community parks, buildings and overall a nicer community than others and this is why our local real estate market has less problems and REO’s. The comment above is from a person that really does not understand what the program/product is. In some area’s around the United States you just pay more in Tax’s and really don’t know it and you don’t get any upgrades, such as community buildings, parks, etc. Freehold type of programs/products are good and I hereby stand for them. This has helped out community and has kept our prices strong in this bad real estate market. In fact our local real estate office that services our area, supports this idea and they should it helps them sell these homes faster and for more money and win win for all.
you guys are a bunch a f…… idiots , screw you i for one would never buy one of these developers houses and i am certain knowing how these things go believe no one will tell a unsuspecting buyer who after selling there house magically has to take there 1 % and give it away to someone who they already had to purchase there house from anyway screw that .
Jon, you do not understand the offer. Check your tax’s and where you live, you might be able to use the 1% to make some improvements and for most home owners this 1% is not that much and if you live in the right community and have all the benefits this program offers you should have a increase in value. Good luck on your next purchase.
I agree with the following comment from Mr. Riddle. Freehold Capital Partners has a great program whereas it will help the builders, owners of commercial property and will create more value for the properties that are enlisted. Part of the proceeds will be used for properties that need repair, thus increasing the value and making it easier to sell. This 1% fee is not different then other fees we pay and in the end the funds can and will be put to great use where we can all benefit. Keep in mind that there will be an increase in job’s 5 Million +++, most people are quick to compain and slow to commend, study this proposal, you will see the benefits are in front of you.
Several groups are missing the point. Real estate, and construction, in a large part, determines how well we do as an economy. The industry employs and affects millions of people. The industry is dead.
The purpose of a transfer fee is not to make wealthy builders richer. The purpose of the fee is to create financing to get the industry back on its feet by generating jobs to revitalize the economy.
The National Association of Realtors (NAR) and the American land Title Association (ALTA), by trying to sink these transfer fees, demonstrate their ignorance or simple lack of research regarding this program. Transfer fee basics: A financial source, such as Wall Street or the government, lends a builder funds to re-start their existing projects. They fund these projects because they will earn back their invested dollars from the transfer fees. The transfer fees do not go into the builder’s pocket – they pay back the investor, (Wall Street – government).
ALTA indicates that it is too difficult to track a transfer fee over 99 years. It is a recorded document that all parties sign-off on at point of sale – with full disclosure. This is what a title company is paid to do.
NAR is just as oblivious. They seem afraid that people will balk at paying real estate agents a 6% commission if they have an additional 1% transfer fee. Is the NAR even aware that there is a 3.8% federal tax on certain home sales in the new, approved federal healthcare plan? We did not hear from them about that. In California there are Mello Roos taxes that require you to pay taxes, every year, equal up to twice your annual property taxes – an additional 1%+ per year. No objection to that?
Verified statistics indicate that if the transfer fees go into effect, more than 5.5 million jobs would be created and we would be on our way out of this current economic mess.
Do a little research. Maybe we could all get employed again.