Pay attention! Developers/Wall Street are attempting to strip your equity

[Phoebe Loosinhouse]

http://online.wsj.com/article/SB10001424052748703314904575399290511802382.html?mod=googlenews_wsj
JULY 30, 2010, 7:36 P.M. ET
Home-Resale Fees Under Attack
By ROBBIE WHELAN

A coalition of real-estate industry groups is asking the government to ban a new type of fee on property transactions they say unfairly strips equity from property owners, including homeowners, and redistributes the funds to developers.

The group, led by the National Association of Realtors and the American Land Title Association, has asked U.S. Treasury Secretary Timothy Geithner to use the consumer-protection agency created by the recent financial-reform legislation to outlaw "capital recovery fees."

The fees, also known as re-conveyance fees, are inserted by developers into covenants governing newly built subdivisions and commercial real-estate developments. They require sellers of a property to pay a percentage, often 1%, of the selling price to the original developer of the property every time it changes hands, for up to 99 years.

Municipalities have long used similar fees, called transfer taxes, to raise revenues or recoup public subsidies for private development projects, but private transfer fees are relatively new.

(more at link -please read)

Raise your hand if you think Geithner will use the consumer-protection agency to outlaw "capital recovery fees.

As a consumer, you can just refuse to buy in a development that has covenant reconveyance fees.

They never stop thinking of new and creative ways to pick our pockets do they? Doesn't this give a builder an actual equity interest in your home after the sale, if you think about it? Would they have to approve the terms of the sale? What if they didn't? What if they withheld approval and forced you to sell it back to them? There's all kinds of places this could go.

[geckosfeet]

1. My propety taxes have doubled, that's a 100% increase, from when I bought

12 years ago.

Although 1% seems a pittance compared to what municipalities can do, this 'transfer tax' has the flavor of indentured servitude for property owners.

If builders are willing to stand by their products and repair structures that fail in any way, this could possibly be justifiable. Otherwise, keep your hands out of my pockets.

[WinkyDink]

2. I thought one owned one's house "free and clear"?

[zipplewrath]

3. Deed covenants

One can write all manner of features into deeds. History is repleat with them, including the infamous race restrictions. I wouldn't particularly purchase such a place, but 1% on a sale is smaller than alot of other "closing costs" one will pay. On a $200K home, that's gonna be $2000. It won't particularly "make or break" a sale. I would think it is the mortgage company that will object to these the most. On a foreclosure, it would seem to be just one more complication, along the line of past due HOA fees, and liens from the government for code enforcment isssues.

[kelly1mm]

4. Don't pay your property taxes and see how "free and clear" it is. nt

[Phoebe Loosinhouse]

5. evening kick!This kind of stuff creeps in, people don't protest and then suddenly, it's "standard"

Don't go for it. If you are interested in a house with this kind of covenant, tell them you'll buy, but only if they remove the covenant. Property rights are under enough assault without adding brand new encumbrances like this.