Does Your Home Come with a Hidden Transfer Fee?
Something new and somewhat sinister is popping up in some places. I have seen it here in Utah, where I live. It’s called a transfer fee, and it is usually hidden within the mounds of paperwork that you have to do in order to buy a home. Here’s how it works:
The developer, homebuilder or even some savvy homeowner decides that they want a steady stream of income for whenever the home is sold and adds a transfer fee to the property. Most transfer fees are put into the CC&Rs that come with the paperwork. Most buyers don’t read all that fine print, so they might miss the transfer fee. The transfer fee is usually 1% of the gross sale price. The seller pays it to the developer or whoever it is owed to when the home sells. And many of these transfer fees remain in place for 99 years. This means that anyone who sells the home has to pay this 1% to the original establisher of the transfer fee.
The disclosure on these types of transfer fees is murky. Laws in other states have worked to make things more transparent, but in Utah, which has long been one of the worst mortgage fraud offenders, it is little surprise that something like this does not have to be as transparent as it could be. While these transfer fees are perfect legal, they are not exactly above board. They are being hidden for a reason: Most homeowners would balk at paying them.
Even though reading through the paperwork is a tedious task, it is an important one. Make sure that you go through the paperwork — or have a trusted legal adviser do so. Pay special attention to the CC&Rs. And make sure that there isn’t anything extra in there that you haven’t been told about. And if something like this transfer fee comes up, be prepared to walk away.
Video Courtesy of KSL.com
July 14th, 2009 at 9:18 am
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