Shining a Light on Home Resale Fees [Price of Progress or Regress?]

Property Rights Alliance ^ | 2011-06-07 | Kelsey Zahourek

[92nina]

At the height of the housing crash, developers found themselves strapped for cash to build new developments. Over the last few years, a few financial firms rode to the rescue of developers, but with a questionable catch. In exchange for a percentage of the take and other undisclosed benefits, the developers agreed to insert provisions into home sale contracts that required that every time the home is sold for the next 99 years, a percentage of the sale price (usually 1%) would be paid to a third party.

Covenants in home sale contracts are nothing new: for instance, homeowners’ and condo associations frequently levy resale fees on property. However, these fees benefit the property and its value in the form of maintenance, infrastructure and amenity improvements. The transfer fees at issue here do nothing to benefit the property or its rightful owner. In fact, the opposite is true: since these transfer fees are calculated as a percentage of the sale price each time the property is sold for the next 99 years, any improvements made by the original and subsequent homeowners that increases its value further enriches a third party at the expense of homeowners’ equity in the property. Further, a prospective buyer would be remiss not to leverage the home transfer fee as a bargaining chip, thereby reducing the sale price and further decreasing the sellers’ realized equity in his or her own property...

[92nina]

Covenants as I seem to recall, once upon were sealed in blood...

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