Real Estate Ripoffs: Private Transfer Fees Gouge New-Home Buyers


You've probably never heard of them, but private transfer fee covenants exist in new-home real estate contracts in 45 states. These nasty little debt agreements hidden in the hundreds of pages of a new-home contract can mean someone gets a part of the profits on that home over a 99-year period.

Now the Federal Housing Finance Agency wants to stop the prevalence of these fees by restricting the purchase of mortgages by Fannie Mae, Freddie Mac and the Federal Home Loan Banks that include PTF covenants. Currently 15 states have banned these fees. One state, California, requires disclosure of these fees. Thirteen other states have legislation pending or are planning to introduce it in 2011. By the end of 2011 private transfer fees could be banned in as many as 28 states.

So how do PTFs work?