Ban On Transfer Fees

Image by marsmet47 via Flickr

Those dreadful transfer fees that the homeowner simply can't understand are about to become history. The FHFA will make these fees illegal.

In case you have forgotten. The transfer fee is incurred each time a house is sold. The developer gets 1% to 3% of the selling price for life. Developer argue that the fee is needed to attract investors so that the developer can raise capital and build more housing.

Opponents of the transfer fee say that the fee is just another way to gouge home buyers. I believe that the fee helps developer make additional profits. It is an income stream that continues to reward the initial developers. There is no evidence that any savings are passed on to the home buyers.

The new law means that Fannie Mae and Freddie Mac will not be allowed to participate in any mortgage transaction that involves transfer fee, or the capital recovery fee as some people refer to it. Private deals will be exempt from the new ruling.

The fee often comes as a surprise to the home buyer. The first time the issue is raised is at closing. So imagine purchasing a house for $500,000 and realizing that you have to come up with an additional $5,000.

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