Private Transfer Fees: A Bad Idea Whose Time May Be Coming Anyway
Blissfully minding my own business one evening this past summer, I happened into one of my favorite watering holes and ordered my usual glass of water. Unfortunately the bartender misunderstood me, and served me a glass of water with two olives in it.
"Wow," I exclaimed. "That's some of the best water I've ever tasted. What kind is it?"
"Gray Goose," he said.
"Boy, they make great water. I"ll have another."
My thirst quenched a bit, I found myself engaged in conversation with a couple who were also devout water-drinkers. The conversation went on about this-n-that until the man mentioned that they had just purchased a new home near Lake Tahoe, California. They described it as a stunning home where they plan to retire to get away from Florida's hurricanes.
"Of course, we had to pay an extra $7,000 Private Transfer Tax out there," he said. "We don't have those here, do we?"
Since I had never heard of a Private Transfer Tax as being part of any closing paperwork, I assured him that we did not. I told him it must be one of those California ideas that hasn't quite swept the country yet.
So, my water-drinking friend and his wife explained to me what a Private Transfer Tax is and why they didn't really like paying it. I'll leave out the four-letter words.
In case you haven't heard of a Private Transfer Tax, here's what it is -- and yes, it is one of those California things that might sweep east and take over the rest of the country.
A Private Transfer Tax is an unregulated fee that is charged to a buyer by a builder, although anybody can probably assess this fee including private home sellers. Originally, the Private Transfer Tax was designed to help California developers win support from environmental organizations who might otherwise oppose a new development. Developers agree to put a covenant in the deed of each property they sell which requires home buyers to pay a percentage of the selling price to a land trust, charity, environmental group etc.
Since the fee is part of the deed, it can not be reversed once it is in place. So, it lasts forever. Each time the property changes hands, the new owner will have to pay the Private Transfer Tax -- usually about 1-percent of the selling price, although fees of nearly 2-percent have been known to be charged.
My initial reaction to this can be summarized in two words: Legalized Extortion.
I've done a little checking and found out that there is a company in Florida that is helping private property owners place transfer fees on their own homes. I'm not going to tell you the name of this outfit -- why give them any publicity. The way they set this up, the money does not go to any charity or environmental group. The revenues become extra income to the selling household.
Now, here's the kicker. The people who support this legalized extortion say that it helps reduce property prices. They say sellers generally reduce the selling price by the amount of the tranfer fee. This, they contend, reduces the debt load for the buyer and makes the house easier to sell.
Sure.
But what happens in the case where a seller does not reduce his price by the amount of the Private Transfer Tax? Well, then the buyer has to pay more to get into the house.
If this kind of thing becomes common, the Florida legislature needs to make an effort to regulate the practice. Monies raised from this kind of thing need to be earmarked only for charitable and environmental use, not pocketed by the seller. There needs to be a cap on the amount of the fee -- nothing more than 1 percent and probably a lot less. And there needs to be a sunset clause in the deed that brings an end to the transfer tax after a specific period of time -- say 10 years or three sales, whichever comes first.
Look, I've been a real estate agent and a water drinker for a long, long, time. And I know two things. First, anytime a buyer has to bring additional money to the closing table for whatever reason, real estate gets harder to sell. Private Transfer Taxes will make real estate harder to sell. Second -- and this is earth-shattering news that may shock you -- that Gray Goose company does not make water!
For more informtion about real estate in the Tampa Bay area, please visit my website at http://www.thestpeterealestatesite.com/.
"Wow," I exclaimed. "That's some of the best water I've ever tasted. What kind is it?"
"Gray Goose," he said.
"Boy, they make great water. I"ll have another."
My thirst quenched a bit, I found myself engaged in conversation with a couple who were also devout water-drinkers. The conversation went on about this-n-that until the man mentioned that they had just purchased a new home near Lake Tahoe, California. They described it as a stunning home where they plan to retire to get away from Florida's hurricanes.
"Of course, we had to pay an extra $7,000 Private Transfer Tax out there," he said. "We don't have those here, do we?"
Since I had never heard of a Private Transfer Tax as being part of any closing paperwork, I assured him that we did not. I told him it must be one of those California ideas that hasn't quite swept the country yet.
So, my water-drinking friend and his wife explained to me what a Private Transfer Tax is and why they didn't really like paying it. I'll leave out the four-letter words.
In case you haven't heard of a Private Transfer Tax, here's what it is -- and yes, it is one of those California things that might sweep east and take over the rest of the country.
A Private Transfer Tax is an unregulated fee that is charged to a buyer by a builder, although anybody can probably assess this fee including private home sellers. Originally, the Private Transfer Tax was designed to help California developers win support from environmental organizations who might otherwise oppose a new development. Developers agree to put a covenant in the deed of each property they sell which requires home buyers to pay a percentage of the selling price to a land trust, charity, environmental group etc.
Since the fee is part of the deed, it can not be reversed once it is in place. So, it lasts forever. Each time the property changes hands, the new owner will have to pay the Private Transfer Tax -- usually about 1-percent of the selling price, although fees of nearly 2-percent have been known to be charged.
My initial reaction to this can be summarized in two words: Legalized Extortion.
I've done a little checking and found out that there is a company in Florida that is helping private property owners place transfer fees on their own homes. I'm not going to tell you the name of this outfit -- why give them any publicity. The way they set this up, the money does not go to any charity or environmental group. The revenues become extra income to the selling household.
Now, here's the kicker. The people who support this legalized extortion say that it helps reduce property prices. They say sellers generally reduce the selling price by the amount of the tranfer fee. This, they contend, reduces the debt load for the buyer and makes the house easier to sell.
Sure.
But what happens in the case where a seller does not reduce his price by the amount of the Private Transfer Tax? Well, then the buyer has to pay more to get into the house.
If this kind of thing becomes common, the Florida legislature needs to make an effort to regulate the practice. Monies raised from this kind of thing need to be earmarked only for charitable and environmental use, not pocketed by the seller. There needs to be a cap on the amount of the fee -- nothing more than 1 percent and probably a lot less. And there needs to be a sunset clause in the deed that brings an end to the transfer tax after a specific period of time -- say 10 years or three sales, whichever comes first.
Look, I've been a real estate agent and a water drinker for a long, long, time. And I know two things. First, anytime a buyer has to bring additional money to the closing table for whatever reason, real estate gets harder to sell. Private Transfer Taxes will make real estate harder to sell. Second -- and this is earth-shattering news that may shock you -- that Gray Goose company does not make water!
For more informtion about real estate in the Tampa Bay area, please visit my website at http://www.thestpeterealestatesite.com/.
-30-
posted by Terry Ward at 5:19 AM
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