NAR and ALTA further attempt to stifle private enterprise on Private Transfer Fees

by Al Lorenz

Realtor, Media Mogul

Author website

When the National Association of Realtors and the American Land Title Association claim to be doing something to benefit consumers, those same consumers can expect to be fleeced once again.  Currently, they are trying to ban private transfer fees by getting the Federal Housing Finance Agency to amend rules so that almost defunct Fannie Mae and Freddie Mac can no longer back properties that have private transfer fees covenants recorded against them.

I’ve written about private transfer fees on Bloodhound before. At the time, I promised to do more work with them and report back.  Since then I have looked at them, and received proposals from Freehold Capital, on implementing them on two of my own projects.  I haven’t recorded their instruments on my projects even though I do like the concept.  As a developer, private transfer fees would be great if they could be securitized so the money was available up front to pay for infrastructure costs.  My issues with the Freehold proposal is they currently do not have a securities market for the instruments and I believe their cut of the action is too rich for what they are providing.  So, I have made a private decision that I do not see enough value in their proposal.

That does not mean that I think Private Transfer Fees should be banned.  It does not mean that a competitor, or Freehold themselves, might not have a proposal in the future I would like to be able to do.  The concept, used as I described it, could be fantastic and help create more valuable properties we can all sell!

Jeremy Yohe, spokesman for the American Land Title Association, claims that “The casual homebuyer would have no clue that these fees are even attached to the property that they’re going to purchase” as his reason that these fees should be banned.  He forgets to mention that the members of his association have the job or providing accurate title information for things recorded on the title, like covenants.  I just love it when people argue their own incompetence is a reason that something should not be allowed.

There are already three groups that take a percentage of the price of a home at each closing that have no ownership interest in the property.  The real estate agents (NAR), the title companies (ALTA) and the government with excise taxes.  This is the same triad that doesn’t want anybody else to be able to do something similar, even if they are just financing the very infrastructure that that created the development in the first place!

I’m sure there are ways that private transfer fees can be abused.  Pretty much anything can be abused.  However, that doesn’t mean I don’t want to have the right to make my own choices.  I also want the NAR and ALTA to quit trying to justify the protection of their pocketbooks while claiming to be watching out for consumers, when they aren’t.

Without private transfer fees, fewer developments will get done and consumers will have fewer, and more expensive options.  The FHFA has submitted the proposal to the Federal Register for public comment, which will be open for 60 days.  If you want to comment on private transfer fees one way or another, email: regcomments@fhfa.gov. Please include “Guidance on Private Transfer Fee Covenants, (No. 2010-N-11)” in the subject line of the message.