Home Builders Playing Dirty - 08.26.10
Today's Poll: How do you feel about the builder transfer fee?
A. It's great. Love it.
B. I guess in certain situations it's okay.
C. I hope it doesn't happen.
D. Nuke 'em! That's bull!
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DanLobbABR: (August 28, 2010 4:22pm)
Sometimes its not the home builder but the developer. It may show up as a deed restriction. May not show up in the title work.
rm5280: (August 27, 2010 5:11pm)
Oakwood Homes was developer of Green Valley Ranch Subdivision in Denver Colorado. GVR has a permanent transfer fee for original & resales...
janleeking: (August 27, 2010 10:43am)
Goodo info gentlemen...I found this current info on the states which have ban this activity...All others beware: To date, Arizona, Florida, Iowa, Kansas, Maryland, Minnesota, Missouri, Ohio, Oregon and Utah have enacted total bans on the fees, and three other states -- Hawaii, Illinois and Louisiana -- have sent bills to their governors that would do the same. Texas, meanwhile, has banned the fees on residential transfers only, and California requires that the fee be disclosed to the buyer.
janleeking: (August 27, 2010 10:41am)
Selling real estate in the North Dallas, TX area for over 15 years.
xxbigmikexx: (August 27, 2010 9:53am)
, and Legality make a contract enforceable. When the value of the consideration is in question, it is not an issue of Legality.
xxbigmikexx: (August 27, 2010 9:52am)
, and Legality make a contract enforceable. When the value of the consideration is in question, it is not an issue of Legality.
xxbigmikexx: (August 27, 2010 9:50am)
Utah Guy. I haven’t heard of any class action lawsuit with regard to transfer fees which means it was probably an isolated incident (My assumption so if you have any info I would love it). Transfer fees that were recorded in Utah prior to this spring (I think May) are grandfathered in by the law because there is nothing illegal about them so the government couldn’t revoke the covenants that were already recorded legally in the office of public record. If they did it would be an impermissible taking of which we are protected from by the constitution. We are also given the right to contract by the constitution which is what a transfer fee agreement is. Whether I support transfer fees or not is irrelevant. My concern comes when the government starts to infringe on our rights to contract. Utah didn’t make transfer fee agreements illegal, the exact verbiage is “void and unenforceable” and if the fee can’t be enforced then the agreement is worthless. Consent, Consideration, Competence,
xxbigmikexx: (August 27, 2010 9:50am)
Thank you Barbara for helping me to prove my point about making assumptions and claims without all the facts. I am not a builder nor would I work for one. I have lost multiple buyers due to the builders not being bound by RESPA and them being able to offer anything and everything if the borrower uses “their lender.” The savings are passed to each buyer along with the fee. It’s hard for me to see how everyone is fine with a real estate agent adding 6% in commissions that will inevitably raise the price of the home however they reject a 1% commission that will lower the price of the home. Interesting…Is it not? (Not saying real estate agents shouldn’t make commission). Why do I have to pay a fee every time I cross The Golden Gate Bridge?
KCaae: (August 27, 2010 8:25am)
Thank you Barbara! Those transfer fees just means transfering the past cost to future buyers - sort of like what Congress does . . . buy now pay later. No thanks - look where it has gotten our economy as a nation.
Tommerare: (August 27, 2010 5:51am)
The "spread infrastructure costs over many future buyers" argument doesn't hold water from a financial perspective. You can't build a proforma based on an unknown (future resales from too small a population), and a fee so small (again from a financial perspective), gets discounted to zero really fast from time value of money. The fee is revenue enhancement pure and simple. Gravy.
Tommerare: (August 27, 2010 5:50am)
The "spread infrastructure costs over many future buyers" argument doesn't hold water from a financial perspective. You can't build a proforma based on an unknown (future resales from too small a population), and a fee so small (again from a financial perspective), gets discounted to zero really fast from time value of money. The fee is revenue enhancement pure and simple. Gravy.
Utah Mortgage&Real Estate Guy: (August 27, 2010 3:13am)
BIG MIKE,I know this a day late, but I thought I would let you know that the Transfer Fee showed up in Utah about three years ago right as the housing bubble burst. In the process of poeple trying to get rid of their homes this TRANSFER FEE issue became a very big issue. So big that a Class Action Lawsuit by every person that purchased a home (that stepped forward) in a neighborhood with this Fee against EVERY Builder that implemented it. The Home Owners won the case, it was not settled out of court, it was determined by the State of Utah that the Fees could only exist if the Transfer Fee were disclosed on the purchase contract (which it wasn't by most builders). Most disclosed this fee in the CC&R's. Because it wasn't disclosed as part of transaction on the REPC, the builder and it's agents misled every borrower. Unsure of how much each builder had to pay to each homeowner,but it was about 5X the transfer fee per homeowner after attorneys fees.It has been determined ILLEGAL since then
barbara: (August 26, 2010 8:25pm)
Hmmm. Sounds like xxbigmikexx works for a builder, no? And his explanation for passing the costs down to future owners sounds like negative am to me. And keeping up with these "rights" sounds like a nightmare for the title companies. Nope, I don't like it one bit.
Valuequestor: (August 26, 2010 2:04pm)
By-the-way.... These enhancement and transfer fees are nothing new. Had them in Virginaa years ago in several upscale projects. It does help spread out the intial infrasrtucture costs on projects with lots of amenities. You just have to do your homework and compare.
Valuequestor: (August 26, 2010 1:59pm)
OBAMA Care is starting to kick in. Cali residents with ANTHEM BLUE CROSS are getting a 13% increase in premiums starting almost immediately. At least its not the 30+% increase they were asking for. Just what everybody needs in this economy.....a big kick in the balls. Thanks congress...thanks Mr.Pres.....thanks Anthem Blue Cross. And by the way....forget about using the emergency room in your local Cali hospital if you have a REAL emergency. Its full of illegals getting free healthcare on your dime. Vote out all democrats in California.
oc realtor: (August 26, 2010 1:37pm)
The community of Ladera Ranch in OC, California charges an enhancement fee each time a property is sold or resold. Fee is 1/4 of 1% of sales price. Community of Talega in San Clemente also charges enhancement fees.
xxbigmikexx: (August 26, 2010 1:24pm)
If you were to compare any two identical properties, one with a transfer fee and one without, basic economics will prove that the buyer is much better off with the transfer fee imposed than without.
xxbigmikexx: (August 26, 2010 1:22pm)
Traditionally a developer apportions 100% of the cost of improvements among initial buyers. Each buyer then has no choice but to pass along these costs to future buyers. However, creating reconveyance fees in a subdivision prior to the initial sale changes that. When a developer can impose a 1% reconveyance fee, and sell the rights for much-needed capital today, the developer can lower the price, the buyer can buy for less in return for paying a fee years down the road, and each buyer passes along the savings to future buyers. Each and every buyer also saves on closing costs, carrying costs, etc., and gets to use the initial savings to reduce other more expensive debt such as credit cards, consumer loans, etc. This concept is similar to issuing school bonds to more fairly apportion the costs over future families instead of burdening initial taxpayers with 100% of the costs. It is an efficient financing tool for long-term improvements.
Clulessdad: (August 26, 2010 1:13pm)
bigmike-please explain how this is a win-win-win for all parties?
Beverley Ramm: (August 26, 2010 12:58pm)
KB Homes Sacramento is a builder that has incorporated transfer fees to their new home community in Fiddyment Farms...rumored to be 1.5%!
xxbigmikexx: (August 26, 2010 11:53am)
Frank and Brian...I watch the daily everyday. I love your no nonsense/comical look at the industry and the awareness that you provide to other industry professionals. I have learned to trust your opinion because they are very much in line with the way I feel about the industry. However, I must say I was a bit taken back by your opinion on transfer fees without the proper information. I feel that if you were properly educated on the program then you would't be so quick to label. Contempt prior to investigation is the number one cause of failure. (Saying it won't or doesn't work before you try it.) Calling transfer fee rights stealing is like calling water rights, mineral rights, air rights, leasehold rights etc. Stealing. The transfer fee program is beneficial to the buyer, seller, builder, and agents involved. There is no negative side to the transfer fee design. How can that be bad? -Just looking for open discussion, and a chance to educate-
Tobby: (August 26, 2010 11:52am)
The 3.8% tax is complicated. It is paid on amounts in excess of the $250,000 (single) or $500,000 (married) exemption amounts. However, even that amount is offset against investment income. AND the sellers need to be making in excess of $250,000 (and a few other offsets) It is NOT paid on losses. It is NOT paid at the closing table as some have suggested. It is calculated when filing anual tax returns. It is possible to have a short-sale and owe this tax after 2010. However, someone would have had to pull a bunch of cash out of the house to owe this. This is moot for 2010 as these "gains" are exempt through the end of this year. Though in 2011 they will kick in again. The 3.8% tax (technically not a tax) affects very few people. Less than 1/4 of 1% of all sellers.
Lee in Santa Rosa: (August 26, 2010 11:28am)
A S-storm is hitting, with private $ loans coming due. Borrowers can not obtain a refi without verifiable income. If the lender demands payment, the borrower is screwed. Thanks Barney and Chris. They seem to have completely ignored the value and place for private money lending. What the hell do the feds have to do with a family borrowing from their next door neighbor? Get out of my life, and stop taking away the rights of homeowners to encumber their property with nanny laws. This is a huge problem facing some of our borrowers who have maintained perfect payment records for past 5 to 15 years. What if nobody signed-up for the MLO program? No more owner occupied loans from my shop.
Bryan/MortgageFinanceGroup: (August 26, 2010 10:44am)
Affordability apparently = Everywhere you wouldn't want to live.
Mike V: (August 26, 2010 10:15am)
It is easy to use the depression term when discussing the current economic conditions especially when folks realize how closely the administration is following the misguided path of the 30's President. Take recession and combine it with depression and you get "REPRESSION". How convenient.
BobbyC: (August 26, 2010 9:56am)
I loved the Niagara Falls skit. Need more fun stuff in a not so fun world. Thanks for the entertainment.
KCaae: (August 26, 2010 9:54am)
The Finance Wizards in Washington don't seem to understand that JOBS are the key to pulling out of this depression - oops, sorry, recession. Instead the constant flow of new regulations and fees and taxes are choking what we once called a free market. Did you see where the real estate agents in the Gulf are getting a bailout? Hmmmm! Haven't seen the 'Niagara Falls' bit in years! Ha!Sort of how it feels to be a Realtor these days!!
monicamat: (August 26, 2010 9:47am)
Yes my friends in Austin Tx got to the closing table to find they had to pay that 3.8% tax - On a home of 1.3M that they were already underwater on and losing 75K. And then.. you add the 3.8%. It's buried in the Health Care Bill. IT's total BS. One doesn't relate to the other and that's how we all missed it.
Evil Genius: (August 26, 2010 9:42am)
5pence! Another invite to look at my blog. I think you'll enjoy soaking up some of the intellect caught on numerous videos that I post everywher on the site. Rothschilds, BITE BACK, Fannie and Franks, corruption, our soon to come tax hikes. Check it out. http://realestatemarbles.com/newgeneration
Mandy: (August 26, 2010 9:23am)
Hey 5pence, They uploaded my client list for me and I hit set and forget it. Viola, it sends the emails for me and they are set to not be overkill. Just Do it!
5pence: (August 26, 2010 9:22am)
Mandy, seriously? Do you have a link?
5pence: (August 26, 2010 9:21am)
This is all so screwed up because Obama didn't have the balls to do the right things. Instead he kowtowed to the banksters, blamed the public and put the banksters in control to "fix" the problem. He blamed the public!! Unbelievable. And the banksters get rewarded! How did things get so screwed up??!! All they (the banksters) know how to do expertly is create mayhem and chaos in the markets to take profits out of the chaos.
Mandy: (August 26, 2010 9:17am)
Have you guys talked about the new 3.8 percent imposed on sellers in the health care bill.
Mandy: (August 26, 2010 9:16am)
Have you guys talked about the new 3.8 percent imposed on sellers in the health care bill.
5pence: (August 26, 2010 9:13am)
Associate broker, it sounds like you are describing bankruptcy for the TBTF zombie banks. I think you're right. Their sizes do not add any benefits to society and actually hurt us socio-economically. There is nothing the TBTF's are doing that any other smaller banks couldn't do if the zombie TBTF's were to be allowed to fail. Gee, restore equality in America in the tradition of the Founding Fathers and the Constitution - what a novel idea.
Mandy: (August 26, 2010 9:11am)
I heard new info the D.R.Horton is writing in Real Estate agents names and collecting the commission themselves.
Mike V: (August 26, 2010 9:09am)
I won't ever need Barney Frank. The man won't own up to his participation in this and many othr fiascos. The fee is pure BS. May as well give any realtors involved in one sale a portion of every sale from then on as well. Just another way of getting something for nothing.
5pence: (August 26, 2010 8:59am)
What the reasonable and customary fees should be is what the AMC's are charging for the appraisal to the homeowner. If you know those fees, put those down imho. Whatever you do appraisers, don't short-change yourselves.
5pence: (August 26, 2010 8:57am)
Appraisers, take the survey and don't quote 1980's fees. I think Appraisal Buzz is trying to establish their own 3rd party fees through this survey. Perosnally, I think reasonable and customary fees are what the AMC's are getting from the borrower for the appraisal - about $100-$200 more than I was charging. Anyway, appraisers - take the survey. Thanks... http://www.feesurvey.com/
associatebroker: (August 26, 2010 8:57am)
Re: the Housing Opportunity Index, does affordability really matter anymore? I postulate that potential buyers are waiting in the wings for our government to stop meddling with the free market, and for existing deadbeat homeowners to stop walking away from underwater mortgages or defaulting on their HAMP loan mods. Until real socio-economic responsibility returns as a virtue, until subsidization is abandoned as a way of life, and until the market demonstrates at least a modicum of persistent stability, buyers will rightfully continue to sit on the sidelines. Affordability is of secondary importance. Period.
Evil Genius: (August 26, 2010 8:52am)
I just read yesterday's volatile discussuin. I am sorry I missed it. But I have a comment. Debt is money and money is debt. The Fed, who is not the government is allowing banks like B of A, etc. to cut paper (create more debt). At some point there needs to be a value behind all this paper. When home prices went down, as well as other markets, the answer should have been to adjust the value of the paper. Simply recast. Write it all down to an acceptable value. The number doesn't matter. $1 today will be worth less value then $1 tomorrow. That's the way our monetary system is set up. What is the difference what the $ number says. We must focus on value. Printing more dollars means creating more debt. Stop it! Let the value catch back up. And by the way there are no dollars in existence yet to cover the interest. So we are paying interest with air. Those interest dollars are not yet printed. History lesson for you all. http://realestatemarbles.com/newgeneration
epsmithpa: (August 26, 2010 8:32am)
I read recently, in a local newspaper article, that there are steps being taken in Congress to outlaw these pass-through fees---although apparently condo associations want to be exempt, since they claim that they need the pass through to pay for common elements
Realist 1: (August 26, 2010 8:09am)
Transfer fees - file under corporate greed.
dirk2290: (August 26, 2010 8:06am)
We have been saying this for years and years...... the Builders are the biggest slime ball, predatorial, bait n switch, used car salesman, thieving, decieving, dirt bags in our industry. However, because of lobbying done by these side show artists, our BS politicians who have have received campaign money from big builders never go after these clowns. Instead they continue to go after the Originators. Don't know if you notice, but most of the politicians that are campaigning that they supported the SAFE Act and the Finacial Reform Act are Dumocrats. Interesting that the Financial Reform Bill does nothing to have over sight for the Ratings Agencies such as Mish or Moody's nor does it address kickback schemes from builders that hamper consumer opportunity for a better loan. Really? Just how stupid are Frank, Dodd, Geitner, Waters? About as dumb as it gets. Wonder why they call them dumocrats? Morons!
Nuke 'em Until They Glow and Shoot them In the Dark: (August 26, 2010 8:00am)
Yep Nuke 'em! Brian is right
barbara: (August 26, 2010 8:00am)
Of course, it should be illegal to take out an insurance policy on anybody without their permission. And as far as the "piece of the action" that Freehold must be getting. . .it should be a violation of RESPA. Where is Barney Fwank when you need him?
Bono Vox: (August 26, 2010 7:53am)
Barbara - just a guess, but I'm going to say Freehold cuts the developer a great deal on financing up front in exchange for a piece of the action on the transfer fee. Over time, they make out well. It reminds me of a deal where an insurance company offered to finance the building of a new church in exchange for the right to take out an insurance policy on every member of the congregation. Over time, they'd recoup the money and then some. Creepy.
Loanpro: (August 26, 2010 7:45am)
The entire sub-division of Ladera Ranch in mission Viejo Ca has a 1% transfer fee on all their transactions! Go get 'em boys!!
GODLIKE: (August 26, 2010 7:41am)
I would have bet money that DR Horton was in on the transfer fee. Poor build quality, shady sales & marketing techniques and corner cutting go hand in hand with them.
FirstWest: (August 26, 2010 7:29am)
Forget builders. What about all the JUNK fee's they charge buyers onShort Sale negotiations,, and escrow still charging email download fee;s,,, whaaaT// an email download fee!?? Ohh I passed both state and national.. did you?
Hammer: (August 26, 2010 7:22am)
Was anyone else concerned that Frank might have hit Brian a bit hard on that end "Niagra Falls" sketch? ;)
patrick6946: (August 26, 2010 7:08am)
http://realtytimes.com/rtpages/20070622_privatetaxes.htm check out this article written in 2007, this transfer fee is quite common in California. and has been going on for quite a while. I got burned on a couple of short sales with this surprise payoff.
barbara: (August 26, 2010 7:00am)
I always follow the money. What does Freehold Capital Partners get out of this?
Bizz Money: (August 26, 2010 6:57am)
When I purchased my home from DR Horton in 2005 I had a very big problem with them on that. The wouldn't budge. I went ahead because I did plan on staying in the home for over 2 years which is how long the thing was suppose to be in affect.
Van: (August 26, 2010 6:49am)
Shame on the homebuilders. Isn't this why us poor lowly mortgage brokers have become so regulated so as to stop the stealing. Maybe Cuomo had better get off his arse and go after someone else for a change.
Joe_DAgostino: (August 26, 2010 6:37am)
How is the builder transfer fee any different from the State Of New York's refinance fee of up to 2% on all re-fi's. We never talk about this stuff when the State or Feds do it, we call it the LAW. It's all legal stealing.
GODLIKE: (August 26, 2010 6:35am)
Thanks for the heads up on the transfer fee. I'd never heard of it. Now I'll have to poll my builders and see if any of them are scum and need to be cut off from my services.
GODLIKE: (August 26, 2010 6:33am)
ROSEBUD
GaryP: (August 26, 2010 6:22am)
As I recall, HUD just weighed in on transfer fees as well. The only time that I have seen them in my market is for HOAs and they're usually only $100-150. I'm guessing this is an "admin fee" that goes to the HOA "management company" and not to the HOA itself. I always thought that was a pretty hefty fee to change the owner's name in their invoice software. I wonder ifthis will become a "non-allowed fee" that the seller will be required o pay. In most cases the seller agrees to pay it, but not always. I've already sent out a heads up to the realtors on my distribution list on this but I haven't seen any guidance from HUD on this yet.
Old School Mortgage Banker: (August 26, 2010 5:40am)
Hi guys! Great stuff as always. A quick google search on the topic of transfer fees reveals that an outfit called Freehold Capital Partners is behind the push to get developers to attach this rip-off to their subdivision covenants. I'm with you guys, it's criminal what they're doing and how they're doing it. Bad enough some municipalities do this, not private enterprise wants in on the thievery. By the way, thanks for explaining why Frank 'went off' on Niagra Falls. I'm clearly not the Stooge Head I thought I was for not getting it to begin with!
KKS: (August 26, 2010 4:35am)
Homebuilders with transfer fees - check out KB - esp. the Martha Stewart subdivisions. Can't sell your home during the 1st 1-2 years or you pay a fee back to the builder.
panhandlenan: (August 26, 2010 4:34am)
St Joe company in Fl was the biggest land owner in the state and then they turned builder during the boom all the while by not paying regular real estate taxes like the rest of us. They got to keep their agriculture status. On their subdivisions there is a seller .50% transfer fee perpetually that goes to their " foundation" . They were making plenty during the boom but with the housing market so slow they have cut the positions at the "foundation". They still have that fee though.
Broker in RIC: (August 26, 2010 4:25am)
PED: buy the system if you want all the questions, you ass clown!
PED: (August 26, 2010 3:49am)
Frank & Brian, The SAFE Act test questions, being on your site, is a great idea. However, PLEASE VARY THE QUESTIONS. The SAME questions are provided EVERY DAY. Please provide an all-inclusive selection of questions. Thank you, Phil.
SGreek: (August 26, 2010 3:34am)
Hey Frank & Brian. Would like to get more info on "Follow My Clients" before committing. Yeah, yeah I know...it's only a buck. But, I'm the type of guy who will forget to cancel before 30 days is up or, because it IS so cheap initially, I'll keep putting things off. How do I find out what all it does and how good it is before deciding to pull the trigger?