It’s always fun to buy a brand new home that has just been built or is being built. You get to pick out the amenities, choose whether to have a fourth bedroom or a den, and the list goes on. It’s almost like getting the home custom made. Right now in this economy many builders are giving incentives to new home buyers that in a normal environment might never happen, just to get their homes sold. Some new home builders have even taken substantial losses. It’s in these cases that the new home buyer needs to be aware of PTFs, or “Private Transfer Fees”.

Private Transfer Fees are the fees a builder/developer puts on a property usually through the CC & R’s that pays the original builder/developer a fee in the future every time the property sells. In Silicon Valley and the San Francisco Bay Area where real estate is rather expensive, these fees can be substantial even at just 1%. Being aware of whether or not the property you’re purchasing has a clause like that could make a difference to the new home buyer when negotiating the price. In the future depending on how much appreciation the home gained when you go to sell, it could actually break a deal.

Just recently the Governor of Minnesota signed a law prohibiting such fees, as have 9 other states. Two more are considering a ban. In California though, Private Transfer Fees are still legal. There have been some adjustments to the law making disclosure of the fees more prominent. Yet there are many exemptions, just like any other property transfer disclosure, such as if you buy your newly built residence from a bank who had taken the property back in foreclosure.

Anytime you buy a property and hopefully are going through an escrow, you should receive a preliminary title report. In that report are “exceptions” to the coverage. Its these exceptions you should be interested in and where you will likely find any PTFs, or Private Transfer Fees that go along with the property.

If you have had any experiences with this kind of fee, feel free to tell your story below. New home buyers really do need to be aware of PTFs that could effect their property forever.