from the New Mexico News Connection - A statewide news service for New Mexico
Albuquerque, NM – A coalition including the National Association of Realtors, AFSCME, and the Property Rights Alliance is calling foul on a new Wall Street real estate investment device called a “private transfer fee covenant.” Sixteen state legislatures have restricted their use, and the coalition is asking for a federal ban.
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” being placed on homes by investors and developers require a percentage of the final sale price to be paid to a private third party every time the property is sold. Kurt Pfotenhauer with the American Land Title Association says his organization is joining the coalition’s call for 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 one percent of your equity away to somebody else."
So far, sixteen states have restricted the resale fees, and HUD won’t insure loans that have the fees attached. The coalition is delivering a letter to US financial officials on the issue this week. 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 don’t understand this new financial product being attached to properties, and some aren’t 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 the real estate market overall, "The truth of the matter is, 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."
Members of the Coalition to Stop Wall Street Home Resale fees include: National Association of Realtors, AFSCME, Vote Vets, Center for Responsible Lending and the Property Rights Alliance.
A complete list is at www.stophomeresalefees.org.