Real Estate Private Transfer Fees Banned by Federal Housing Finance Agency
The Federal Housing Finance Agency has now banned private transfer fees from loans handled by Fannie Mac, Freddie Mac and the Federal Home Loan Banks. FHA already has a ban on the fees in place. Almost 40 states already have a ban on private transfer fees, including Idaho. On March 22, 2011, the Idaho Senate passed SB 1123, which made new private transfer fees not binding and unforceable.
What is a private transfer fee?
Private transfer fees or private transfer taxes were most common in California but also existed in other states. Builders agree to add covenants to each new home that would require future buyers of the property to pay a percentage of the selling price to a designated land trust or charity. The transfer fee would be attached to the deed so once it is in place there is not way to remove it. Subsequently, every buyer for that property will pay the designated percentage, which is usually about 1% of a home’s sale price.
Builders argue that private transfer fees help defray the costs associated with getting new communities approved and dealing with any litigation from environmentalists about development of the land. Builders may also waive the fee for the first home buyer, thus making the property easier to sell.
What about an association transfer fee?
An association transfer fee is charged when a home is purchased and that home belongs to a homeowners association. These fees are not banned and are used by homeowners association to defray adminsitrative costs that arise from setting up new owners in the association.