Fannie and Freddie are no longer permitted to purchase a mortgage if the home is encumbered by a private transfer fee.

Developers sometimes attach a transfer fee to a home, requiring the owner to pay what amounts to a private sales tax when selling the home. To make matters worse, the fees are often based on the sale price of the home, not on any profit (or loss). Upside-down homeowners who make a short sale still have to pay for the privilege of selling, even at a loss.

In its ruling, the Federal Housing Finance Agency, which oversees F&F, said what would seem to be obvious: "[I]t is wrong to impose a fee on homeowners for exercising the right to sell their own homes."

One exception to the new rule: Transfer fees paid to POAs/HOAs, condos, and co-ops. Further, it will only apply to fees created on or after Feb. 8, 2011.

You can read more in the FHFA’s official rule. (I recommend starting at the bottom of page 5.)

And how about Virginia? VAR helped lead the fight, and private transfer fees were banned in Virginia in 2011. As our VP of Law & Policy, Jay DeBoer, wrote at the time:

Some developers have created a financing scheme which imposes a transfer fee, usually buried in the documents creating a project and customarily 1% of the purchase price, which is collected and paid to the developer each time the property is sold over the next
99 years. Such fees will be unenforceable in Virginia after July 1, 2011.

However, fees charged by and payable to homeowners associations, condominiums, and cooperatives may continue to be collected.