Home Buyers Only Finding Out About Resale Fees When It's Too Late

We've been covering the growing practice of adding a "resale fee" to homes, that give developers a copyright-like extended control over a piece of your house long after the house has been sold. The idea is that they can get 1% of any future sale -- which of course makes the house worth less to both buyers and sellers, as they know right away, that 1% of the sale (and any future sale) goes elsewhere. The main company behind this concept is called Freehold Capital Partners, which is really trying to take those fees and securitize them, so the developers actually get a lump sum upfront (making it attractive to them) and you get random investors collecting whatever fees they can get.

The NY Times also covered this story recently, and added the fact that these resale fees are often totally hidden from buyers, such that they either don't find out about them at all until they later try to sell their homes, or mixed in with the closing process, by which point they've more or less committed to buying the property. Meanwhile, the story also notes that HUD has stated that these deals violate regulations, and it won't finance mortgages that include them. A growing number of states are outlawing such deals, and the federal government is looking into them as well -- meaning that the investors who are buying into these sorts of things may discover that their investment is worthless. You would think after the last mess created by trying to securitize a part of the residential real estate market and pawning off the risk on less and less sophisticated buyers that people would know to stay away from such things -- top to bottom. However, it seems like some will always try to find ways to game the system.

Permalink | Comments | Email This Story

ANIXTER INTERNATIONAL APPLE COMPUTER APPLIED MATERIALS ARIAN SEMICONDUCTOR EQUIPMENT