UPDATE: Outrage Over the Most Outrageous Fee Ever

Back in June, we were one of the first media outlets to report on the innocent-sounding “capital recovery fee” being marketed by a company called Freehold Capital Partners. Our story described it like this…

A 1 percent “transfer fee” split between Freehold and the developer of your house every time it’s sold for the next 99 years. So if you sell your house for $300,000, you’ll owe $3,000. And if 20 years later it’s sold for $600,000, that seller will owe $6,000.

Also called a “private recovery fee,” the most insidious part of the scheme is that homeowners aren’t always aware of what’s happening – this fee can get buried in the reams of paper that get signed at closing.

Well, since mid-June when the news first broke, the reporting – and the outrage – has spread to The Washington Post, CNN, and many other major media outlets. The result? These states have banned the insane practice of charging you to sell your house for nearly a century:

  • Arizona
  • Florida
  • Kansas
  • Iowa
  • Louisiana
  • Maryland
  • Minnesota
  • Missouri
  • Ohio
  • Oregon
  • Texas
  • Utah

Less than a month after our original story, several real estate-based organizations – including the National Association of Realtors and the American Land Title Association – formed The Coalition to Stop Wall Street Home Resale Fees. The coalition is now lobbying the federal government to enact a nationwide ban on these fees. And people are starting to listen – recently the Federal Housing Finance Agency (FHFA) proposed restricting government-sponsored enterprises from investing in mortgages with private transfer fees. If that proposal goes through, the fee will be essentially dead, since government-sponsored Fannie Mae and Freddie Mac currently provide a market for the vast majority of mortgages.

That’s why we’re bringing this story up again, this time adding a video news story that will air nationwide: we’re doing what we can to expose this scheme to the maximum number of people – and quash this dumb idea once and for all.

“It’s a pretty slick way to make money, but it’s bad public policy and bad for consumers,” Kurt Pfotenhauer, chief executive of the American Land Title Association, told The Washington Post last month.

We couldn’t agree more. If you’re planning to buy a house and don’t live in the one of the states listed above, ask about these fees – because if you get stuck with one, it’s for life.

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Comments & discussion

We welcome your opinions, but let’s keep it civil. Like many businesses, we reserve the right to refuse service to anyone. In our case, that means those who communicate by name-calling, racism, using words designed to hurt others or generally acting like an uninformed bully. Also, comments that include links to email addresses or commercial websites typically aren't posted. This isn't a place to advertise your business.

  • Anonymous

    The real estate industry employed millions of people. The industry is dead. Transfer fees could improve the economy and greatly reduce the unemployed numbers, nationwide.
    The main purpose of the transfer fee is to create financing to get the building industry back on its feet by generating jobs to revitalize the economy.
    Wall Street or the U.S. government, are willing to 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 or Freehold – they pay back the investor, (Wall Street – The U.S. government).
    The fiduciary duty of a title company is to insure that all parties are fully aware of these fees. There are no surprises, when purchasing or selling a house.

    If the transfer fees go into effect, more than 5.5 million jobs could be created. From the government that brought you a $trillion health plan, it would be nice to see them support transfer fees and give us a chance to be employed again.

  • Anonymous

    The real estate industry employed millions of people. The industry is dead. Transfer fees could improve the economy and greatly reduce the unemployed numbers, nationwide.
    The main purpose of the transfer fee is to create financing to get the building industry back on its feet by generating jobs to revitalize the economy.
    Wall Street or the U.S. government, are willing to 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 or Freehold’s – they pay back the investor, (Wall Street – The U.S. government).
    The fiduciary duty of a title company is to insure that all parties are fully aware of these fees. There are no surprises, when purchasing or selling a home.

    If the transfer fees go into effect, more than 5.5 million jobs could be created. From the government that brought you a $trillion health plan, it would be nice to see them support transfer fees and give us a chance to be employed again.

  • Anonymous

    Just another way to rip off the consumers, fees like this are illegal in so many other countries, suprises me that something like this even exists in here.

  • Anonymous

    These transfer fees have been in existence for decades. They have been used to fund charities, HOA’s, etc. The fear about them being spread by the realtors and the title industry is only to protect their commissions and profits. A homeowner who pays this fee does so voluntarily and only after full disclosure. They can either not buy the home that has one or negotiate a lower price for that home to cover the cost of the fee down the road.

    These fees are an equitable way to spread the development cost of a community beyond the first sale. They are paid once by the seller of the home instead of a monthly assessment like a PID or a MUD. They are not a tax. If the title companies do their job, they are paid voluntarily after full disclosure. Title companies even have a protocol to catch them and require additional disclosure to to homeowner to make sure they are identified. In California, the existence of a transfer fee is placed on the seller’s disclosure form given to a prospective buyer so the buyer is fully aware of the fee.

    The only people opposed to them are realtors who charge 6% every time a home sells and title companies who fleece the public by charging insurance premiums yet rarely if ever pay a claim. Realtors oppose these fees because they call them a “commission-ectomy”. Title companies oppose them because they want to be protected from their own negligence

    If you were really looking out for the consumer you should do a story on why real estate fees are uniformly 6% across the country and why the NAR has had to be sued for antitrust whenever others try to charge a lower fee. Or why title companies only use 5% of the premiums charged to pay out claims, with the rest going to profits.

  • Anonymous

    Transfer fees have been around for decades. They are used to fund charities, HOA’s etc. They are a fair and equitable way to spread development costs beyond the first sale of the property. If the realtors and the title company does their job, the buyer and seller of the property are fully aware of the fee prior to the purchase and can negotiate accordingly. So unlike a tax, everyone who pays these fees do so voluntarily.

    The only people who are against them are realtors who charge 6% every time a home sells and title companies who want to be protected from their own negligence. If a home sells every eight years, over a 99 year period homeowners will pay 48% in realtors fees. Now that is outrageous.