Realtors Pushes Back on Private Transfer Fees and Protecting Your Rights

Private transfer fees requiring sellers to pay a sum to developers — usually 0.5 percent to 1 percent of the sale price of a home — are meeting with increasing resistance around the country.

Gerry Allen, communications manager for the NATIONAL ASSOCIATION OF REALTORS® Community and Political Affairs group, told the State and Local Issues Committee Wednesday at the 2010 Midyear Legislative Meetings & Expo that eight states (Florida, Missouri, Kansas, Oregon, Arizona, Iowa, Maryland, and Utah) have passed laws banning the fees. Fourteen additional states have legislation pending that would prohibit the fees.

"We are on the front end of this issue," Allen says. "Our goal is to get legislation passed in all 50 states as soon as possible."

Transfer fees are different from transfer taxes paid to state and local governments. These fees are paid to private corporations or investors seeking to create a long-term revenue stream. In some cases, the fees are on the books for 99 years. Allen noted that the fees serve to “drive up the cost of housing.”

The NAR Board of Directors formally opposed the fees in 2008. Since then, the association has been offering technical assistance at no charge to state associations interested in introducing legislative bans on the use of the fees.

NAR has also sought and received clarification from the U.S. Department of Housing and Urban Development on its position on the use of private transfer fees for FHA-insured mortgages.

In April, HUD noted that such fees attached to a property insured by the FHA would be a violation of HUD regulations. NAR is awaiting word from the Federal Housing Finance Agency for clarification of its position on the use of the fees for Fannie Mae, Freddie Mac, and Federal Home Loan Bank mortgage purchases.

— Wendy Cole, REALTOR® Magazine