Beware of the 99 Year Transfer Fee
It appears to be possible to sell a house and collect a transfer fee for 99 years. Who knew? I certainly did not, even after 25 years as a realtor in Austin, Texas. For those who have not encountered the 99 year transfer fee, here's how it works.
First, you need to place a special deed restriction on your property: Every time this property is sold during the next 99 years the seller will pay 1% (of sales price) to the person who created the special deed restriction.
This needs only to be filed one time, and will run with the land for 99 years. The title company will exclude this deed restriction from their title insurance protection. This means that the buyer accepts responsibility for paying the fee when he later sells the house.
There is a company—Freehold Licensing—who claims credit for this idea and receives part of the fee. When I became aware that this private transfer fee was to be a part of the deed for a house, I had to call the agent to be sure I understood it. My reaction was, well…disgust.
Can you imagine explaining to a buyer that this home comes with a very unique requirement? "Mr. and Mrs. Buyer, here’s a little item you need to know. Each new seller of this property must pay a 1% fee to the person who originated this provision. But don’t worry, folks. All you have to do is sell this idea to the next buyer, and you won't have to think about it again. Just sell the house, pay the fee, and you’re out of the picture. Let the next guy worry about it."
Haven’t we learned our lesson about this recently? Haven’t we bled out the future equity of real estate long enough, and are now paying the price for it? Here we have a new way to bet that real estate values will always go up. If the value of the home appreciates in a big way in a few years, then the 1% fee may be a minor inconvenience. But if market values stay level or go down, then this provision might make the home extra hard to sell. Buyers can just move on to their next choice.
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