Federal proposal would ban controversial new type of builder fees

Q. We are interested in purchasing a newly built home in a nearby housing tract. In looking at the preliminary sales agreement, though, we got concerned because the contract would require us to pay the developer a 1 percent commission when we eventually sell and would require all future buyers and sellers of the house to pay a similar fee. Is this normal? Is it legal?

A. Such nefarious fees are legal in some states, banned in others, but definitely not “normal.

I briefly mentioned such fees several months ago. In a typical scenario, the buyer of a new house agrees to pay the builder 1 percent of the home's price when it is eventually resold. A covenant is added to the property's title that requires all future buyers of the same property to pay the developer the 1 percent transfer fee, sometimes called a reconveyance charge, when they eventually sell, too.

Builders say the fees help to spread out the cost of development especially for big-ticket items like roads, sewers and the like so they don't fall entirely onto the shoulders of the very first buyers in a tract.

Consumer advocates disagree, saying the transfer fees are little more than the latest twist for developers to bolster their long-term profits.

A bill that was introduced in Congress in late September would enact a nationwide ban on this type of fee. It closely resembles the restrictions that Arizona, California, Florida, Texas and a handful of other states have already placed on such charges.

No one can say for sure whether the bill will be watered down by powerful home-building interests or nixed altogether. In the meantime, I personally would avoid purchasing in a development where such a fee is charged: It would cut deeply into your proceeds when you eventually sell, and it might even make it harder to market the property, because a potential buyer might balk at eventually having to pay the 1 percent commission, too.

Q. The paint on the wood of the exterior walls of my home has developed several cracks, both vertical and horizontal. The cracks sort of make my home look like a giant checkerboard. What is causing this? How do I fix it?

A. Professional house-painters call this problem “alligatoring, because the vertical and horizontal cracks make the walls look like the skin of an alligator.

Experts say the problem is usually caused by one of two mistakes: Either the painter applied a second coat of paint before the first one completely dried, or the new paint isn't compatible with the old one.

If the alligatoring on your home isn't too severe, you should be able to simply sand the walls smooth and repaint without any problem. But if the cracking allows you to see the bare wood underneath, or if it's flaking badly, you probably will have to remove the old paint, sand the wood completely and apply a coat of primer before repainting.

Q. I got an e-mail last week that says President Barack Obama has secretly signed a bill that would void all foreclosures in the past 10 years and give the homes back to their previous owners. Is this true?

A. Absolutely not.

I have received that same e-mail too and so have many of my readers but it's nothing but a bunch of baloney.

Television and print media now monitor Congress and the president 24-hours-a-day, seven days per week. There is absolutely no way that such a bill could be secretly introduced, approved by Congress and then signed into law by Obama without massive public scrutiny.

Such a plan also would raise serious constitutional and ethical issues. For example, the Fifth Amendment prevents the government from unilaterally taking a person's property without “just compensation, so the feds would have to pay current homeowners a fair price for their homes if they really wanted to return the properties to their previous owners. That would cost several trillion dollars that the deficit-ridden Treasury just doesn't have.

And besides, even if the government really did approve a repurchase plan, what would happen to all the people who would be forcibly displaced? Answer: The homeless rate would soar as millions of elderly people and young families were abruptly tossed onto the streets.

I'm sure the good folks who lost their homes to foreclosure in the past decade would like to get their properties back, but there's no way lawmakers are going to do it for them.

Ÿ For the booklet “Straight Talk About Living Trusts, send $4 and a self-addressed, stamped envelope to David Myers/Trust, P.O. Box 2960, Culver City, CA 90231-2960

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