Real Estate Journal Online

Imagine this: you are getting ready to buy a new home, and you’ve reached an agreement with the seller. You are both eager to get the deal done. Then, when you reach the closing table, you find out that you need several hundred – or even several thousand – dollars more than purchase price and closing costs you were expecting. You walk away, disappointed, and the homeowner continues to struggle to sell their house.

The situation described above can happen if a neighborhood has private transfer fees written into its deed restrictions, but no more in Texas, making the state the 33^rd to ban these transfer fees[1]. Private transfer fees are a technique that developers often use to create an income stream outside of building and construction, and they are in use throughout the country. Many homeowners’ associations also implement these types of fees in order to fund community improvements and help track property transfers. While they have only fairly recently become the subject of wide scrutiny, critics argue that they hurt homeowners’ ability to sell their homes and compete in a down market. The Texas legislature agrees, and has banned new transfer fees and will require developers receiving transfer fees presently to update a notice in county property records every three years or the transfer fee will become void.

Some states have done away with transfer fees all together, but Texas opted to continue to allow HOAs to continue to collect these fees. And although the FHA had considered globally ceasing to make loans on properties where these fees were in effect, currently FHA lending regulations only exclude developer transfer fees, which may be why Texas opted to leave HOA fees alone[2].

Many homeowner advocate groups have urged the remaining 17 state legislatures to also eliminate developer transfer fees, and they also complain that “grandfathering” legislation like that in Texas is simply not enough to deal with the problem. Do you think that the Texas law is a good one, or do they need to do more (or less)?

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Let us know what you think about transfer fees from developers or from HOAs in the space below.

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[1] http://www.chron.com/disp/story.mpl/business/7581758.html

[2] http://www.ourbroker.com/closing/whats-a-private-transfer-fee-in-real-estate/#axzz1NYQ6dNbf