UPDATE: Outrage Over the Most Outrageous Fee Ever

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A fee that lasts 99 years? Thankfully, we weren't the only ones really upset about it. The "capital recovery fee" is becoming increasingly illegal.

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.

Stacy Johnson

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