When it comes to developer's private transfer fees, the message is not necessarily buyers beware, but more buyers be aware.  All homebuyers should review their paperwork even more closely than before and be on the lookout for a new fee that is being added to some properties. This is a private transfer fee.  Completely separate from your run of the mill government transfer tax, homeowner association fee or environmental protection fee, the developer's private transfer fee will be a private requirement that runs with the land. What to beware of as buyers or sellers is that if there is any refusal to pay this fee to a third-party trustee at closing and then the home sale won't proceed.

What is this new real estate money making fee (that doesn't make any cash for your realtor or you) and where is it coming from? A company based in New York has created a way to tap into real estate transactions for years to come.  This "patent pending" system will allow for the original developer of a property to earn 1 percent of the selling price of a property-to be shared with investing partners-for around 99 years.   This takes real estate investing to a totally different level, but only if it doesn't scare potential buyers away from the deal. 

There are mixed reviews from experts about the new developer's private transfer fee.  Some say that it is untested and controversial politically.  There are legislative controversies in many states and real estate trade groups that openly oppose this private-fee concept.  The National Association of Realtors and the American Land Title Association have asked members to persuade legislators to limit the use of investor-oriented private-transfer-fee programs and even prohibit such. Some members of The National Association of Home Builders have signed up to participate in this transfer fee program but are not convinced that the idea is a good one.

Many experts are critical of the private transfer fee program and fear it will lower the value of homes, making them harder to sell. There are six states with either limited or restricted private transfer fees, but most states have no restrictions. For buyers in the later group of states most buyers are not even made aware of the fees that are simply including in closing costs.  As more people are made aware of the private transfer fee, it is likely that litigation regarding the fee will increase. 

Ask your realtor or lender if about private transfer fees not only on this home purchase, but in your State.