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Resale Fees That Only Developers Could Love - U. S.

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http://www.nytimes.com/2010/09/12/business/12fees.html?_r=1&ref=business

REBECCA AND TRENT DUPAIX of Eagle Mountain, Utah, spent a year searching for their dream home. The couple, who have five children, considered 15 to 20 houses before finding “the one.”

They were thrilled when they closed on a $227,000, rock-and-stucco home with five bedrooms and two and a half baths in March 2009.

But four months later, when a local television reporter was doing a story on housing taxes in their subdivision, the Dupaixs discovered that their sales contract included a “resale fee” that allows the developer to collect 1 percent of the sales price from the seller every time the property changes hands — for the next 99 years.

Mrs. Dupaix, 34, says she and her husband had no clue about the fee when they closed on the house. “Of course we were upset,” she says. “We didn’t know about it, and our closer at the title company didn’t know about it.”

Other buyers gutsy enough to venture into the battered housing market in the hope of scoring a bargain might be wise to check the fine print before popping open the Champagne and signing on the dotted line.

A growing number of developers and builders have been quietly slipping “resale fee” covenants into sales agreements of newly built homes in some subdivisions. In the Dupaix contract, the clause was in a separate 13-page document — called the declaration of covenants, conditions and restrictions — that wasn’t even included in the closing papers and did not require a signature.

The fee, sometimes called a capital recovery fee or private transfer fee, has been gaining popularity among companies that have been frantically searching for new ways to gain access to cash in the depressed housing market.

“Developers are desperate,” says David Steffensen, a lawyer and a former developer in Salt Lake City. “They’re facing projects that are upside down” because the property value has fallen below the loan balance and lenders are refusing to refinance. “It’s a ticking time bomb,” he adds.

Freehold Capital Partners, a real estate financing firm founded by the Texas developer Joseph B. Alderman III, has been leading the charge. According to William White, Freehold’s chief operating officer, the firm has signed up more than 5,000 developers who are adding the covenant to developments worth hundreds of billions of dollars that will be built out over the next decade in 43 states.

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. Freehold has begun shopping the idea of securitizing the resale fees, much as subprime loans were packaged and sold to investors.

A very clever way for the builders to keep getting money, I assume that if the house is repo'd then the builder gets paid the next time it's sold.

This could be very profitable for builders. Coming to the UK soon?

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http://www.nytimes.com/2010/09/12/business/12fees.html?_r=1&ref=business

A very clever way for the builders to keep getting money, I assume that if the house is repo'd then the builder gets paid the next time it's sold.

This could be very profitable for builders. Coming to the UK soon?

Good try by the builders say I. Anydifferent to ground rents, leaseholds etc? Numbers may be different but same principle. Hang on as long as you can. BTW Eagle Mountain is a superb location and if the couple want to stay on then what do they care really? Much ado about feckall.

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http://www.nytimes.com/2010/09/12/business/12fees.html?_r=1&ref=business

A very clever way for the builders to keep getting money, I assume that if the house is repo'd then the builder gets paid the next time it's sold.

This could be very profitable for builders. Coming to the UK soon?

How on earth can conditions in an extra document "not included with the closing documents" be binding on the buyer?

tim

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How on earth can conditions in an extra document "not included with the closing documents" be binding on the buyer?

tim

If they weren't included with the contract of sale and weren't executed separately at some other point then they can't. I would assume that either the story is missing some vital detail or that there will be a court case deciding it at some point, most likely in favour of the house owner.

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  • 140 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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