Bill Introduced To Ban Home Resale Fees

from the no-sale dept

For a while now, we've been covering attempts by some banker-types to get housing developers to add a resale fee to homes so that if and when you resell your house, you have to pay a percentage of the sale price back to the developer. Of course, the real plans is for the main company behind this plan, Freehold Capital Partners, to securitize and sell off these fees, giving developers a chunk of money upfront. As with any such thing, what this really does is drive down the value of your home and make it more difficult to sell. And, these terms are often slipped in with little to no notice.

A bunch of states have banned these fees, but now a federal bill has been introduced in the House to ban such things nationwide, as a predatory transfer fee. I'm not sure an overall ban makes sense, but at the very least, these sorts of deals (and their serious implications) should be made clear to home buyers well before they decide to purchase a house.

Filed Under: fees, home development, resale fees
Companies: freehold capital partners

Home Buyers Only Finding Out About Resale Fees When It's Too Late

from the sneaky,-sneaky dept

We've been covering the growing practice of adding a "resale fee" to homes, that give developers a copyright-like extended control over a piece of your house long after the house has been sold. The idea is that they can get 1% of any future sale -- which of course makes the house worth less to both buyers and sellers, as they know right away, that 1% of the sale (and any future sale) goes elsewhere. The main company behind this concept is called Freehold Capital Partners, which is really trying to take those fees and securitize them, so the developers actually get a lump sum upfront (making it attractive to them) and you get random investors collecting whatever fees they can get.

The NY Times also covered this story recently, and added the fact that these resale fees are often totally hidden from buyers, such that they either don't find out about them at all until they later try to sell their homes, or mixed in with the closing process, by which point they've more or less committed to buying the property. Meanwhile, the story also notes that HUD has stated that these deals violate regulations, and it won't finance mortgages that include them. A growing number of states are outlawing such deals, and the federal government is looking into them as well -- meaning that the investors who are buying into these sorts of things may discover that their investment is worthless. You would think after the last mess created by trying to securitize a part of the residential real estate market and pawning off the risk on less and less sophisticated buyers that people would know to stay away from such things -- top to bottom. However, it seems like some will always try to find ways to game the system.

Filed Under: houses, resale fees
Companies: freehold capital partners