If you haven't heard about resale fees, then it's time you did. They are making headlines across the nation, and for very good reasons.
When you buy a house, how often do you read every line of your sales contract? If new legislation fails to pass, you'll need to read before signing anything.
Resale fees, also known as capital recovery fees or private transfer fees, are fees that a seller pays to the developer, each and every time the home sells for a specified period of time.
A recent article by the New York Times, detailed the story of one family who bought their dream home, only to find that resale fees allowed the developer to collect 1 percent of the sales price from the seller every time the property changes hands, for the next 99 years.
This particular detail is typically hidden deep inside the sales contract. And homebuyers simply sign away their rights to that 1 percent, without ever having knowledge of it. Why would a builder or developer want to use this questionable practice?
The New York Times explains it this way, "Many developers see the resale fee as a creative way to get new financing. They are hoping to one day use the trickle of cash from these fees as collateral for a loan, or to get cash up front if pools of the fees are packaged into securities to be bought and sold on Wall Street." As they see it, developers are desperate.
Be sure to talk to your agent about your contract and if resale fees could be an issue for you.
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