Fascinating. Theoretically, this would reduce the price of new homes. Developers wouldn't need as much money up front, since they would be making money on the sale of the home in perpetuity.

Ha!

It actually would probably result in a lower selling price, but not a lower asking price.

Thankfully, Oregon has banned this practice.

Justin -

It is heartening to hear that Oregon has banned the ongoing developer fee practice.

Educate us with a cite, please.

It says so in the article.

"Florida, Oregon, Missouri and Kansas have banned transfer fees in recent years."

I know this is not allowed in Oregon but I don't know of any property in Portland that would be so compelling to purchase knowing that fee is attached. I am sure it is the same in Texas. One just wouldn’t have to buy the property with such fees. I don’t think those kind of transactions have real legs in this economy. The only people that would be dumb enough to purchase a property like that would be members of our city council.

Justin -

Ahh. "DOH!"

Thank you.

A land lease would be so much simpler if developers wanted a cash flow. At least they'd be on the hook for the non-improvement part of the property tax.

I'd like to say what I really want to say about this but I'll probably be arrested. Who the f@@@ do these guys think they are? Do they sit around their offices all day dreaming up ways to rip people off?Unbelievable.

Couldn't this help people who are having a tough time in a bad economy by allowing them to move into a house at a lower price, because the bundle of rights they are purchasing doesn't include the right to keep the fee when they sell? It seems like the price of the property would be less, allowing someone to finance less, pay less interest, etc.. An appraisal of the property would have to take this into account wouldn't it? As I think someone mentioned above, it seems also that the holder of the future fee would have to pay property taxes on that portion of the property as it is a retained interest, which would reduce the property tax that would be paid by the person living in the house. I freely admit that I might be missing something here.

Why is everyone so hip on banning a transaction between free individuals. No one puts a gun to someone's head to make them buy a piece of property.

Lets say there are two identical houses next door to each other. One is $250,000 and the other is $235,000 but has this 1% transfer fee deal. You think the government should prevent me from buying house number 2? Why? As long as I am ok with the deal, what is wrong with it? I hate you nanny state folks.

John, in a perfect world, I would agree with you.

But I'm a pragmatist. And practically speaking, the developers would just hide this provision in a mountain of paperwork. And folks wouldn't realize they owed a fee until 10 years later. At which point the original developer, realtor and mortgage broker would all be long gone. And then, I the tax payer, would once again have to bail out the homeowner. I'm sick of it.

So yeah, as uncomfortable as I am with the Nanny State, I prefer it to the state where I keep bailing-out people who got taken advantage of.

Couldn't this help people who are having a tough time in a bad economy . . . It seems like the price of the property would be less, allowing someone to finance less, pay less interest, etc.

Indeed! In fact, it's already being done here, by what used to be the Portland Community Land Trust but which now calls itself Proud Ground. Unless they've changed their model from when I was reading up on homebuying a few years ago, they try to make housing more affordable for low-income folks by letting them purchase the house while Proud Ground owns the land underneath in perpetuity, or something like that. I'm sure their lawyer was able to put her kid through a full two years of college from the billings from writing up that convoluted deed.

Eric, Proud Ground has a transfer fee as well.

Justin, it is a vicious cycle. The more government "protects us" from this kind of thing, the more people are inclined to not read the paperwork thinking that the government must be taking care of us. I still contend that free people need to be free to enter into any deal they want to. If it is a bad on we should not be bailing anyone out either.

"The only people that would be dumb enough to purchase a property like that..." Unfortunately, due to either lack of common sense or a desperate desire to buy a house, a lot of people have been "dumb enough" to buy houses they can't afford due to relaxed eligibility standards. I don't think the government should be bailing them out, but I also don't think those relaxed standards should be allowed. Nanny state? No, I don't think that's what I'm advocating. I just think people shouldn't be allowed to do shady business deals.

This is similar to what the Oregon Legislature was considering in a property transfer tax-I believe Multnomah Co also. Are there any updates on those attempts? Maybe what's good (NOT) for government is good for private enterprise.

If the government does it, like in Washington County, is it shady? I'm not saying it should be a secret, just that people should be free to buy and sell any portion of the bundle of rights.

One more think Justin, if you are not capable or motivated enough to read the "mountain" of paperwork, you deserve what you get. You pay a mortgage broker thousands and a Realtor even more thousands...maybe you should shell out a few hundred for an attorney to review the legal documents you don't want to read. I am not pro-attorney but that bill would have more bang for the buck than the others.

The rivers are way underutilized for thugs like dese guys....

I understand that the City of Burbank owns the rights to properties on Mt Hood, including Timberline Lodge. When the Day Lodge was built, I asked an architect who wanted to dig it into the ground rather than compete with the main lodge. The answer was no, that Burbank owned the ground and wouldn't be able to do it.

I never followed up on that but ...really?

BTW, the precedent may in fact be from the arts. I vaguely remember a similar proposal concerning resale of art work.

Will they share in any losses and have to pony up on a short sale?

But maybe it's not entirely a bad idea. if we allowed these deferred developer fees at resale, it might cause some of them to think twice before they proceeded to build something like this. Or, considering the developer has a position in the deed, it might allow the owner more leverage to sue when things go bad out of the warranty period.

Please give me an instance where lowering cost, fees, taxes, etc. for a product actually resulted in the company, corporation, or developer offering the product at a lower price.

How about this one?

http://www.johnlscott.com/propertydetail.aspx?GroupID=218300824&ListingID=300566520&Sort=0

Builder got a break on SDC's if he sells to median income family (or less) and passes it on. I've seen this a lot actually.

I thought I'd chime in, as the Executive Director of Proud Ground, to clarify a few things.

Our mission is make homes affordable for those who can't access the market and to keep homes affordable over time. The practice described in this post is one we'd never support.

Similar to a real estate agent, we do help homebuyers purchasing their first home, and we help current homeowners identify buyers. We charge a small fee for this--about half a usual broker--and it represents less than 10% of our operating budget.

And our ground lease hasn't really changed much in ten years. It's based on the national model ground lease developed and revised over the past thirty years--so our lawyers at the nonprofit Community Development Law Center--didn't spend all that much time nor make all that much money in making it work for Portland.

Thanks for wading in, Jesse, and for slapping me out of my cynicism (often required after reading and posting to this blog. : ) ).

I personally wouldn't ever buy a home encumbered with a ground lease, but it seems like a good option for some people, especially for affordability's sake. Thanks for making it available.

There is another Land Trust provider in the Clackamas County area that runs on a similar model. Clackamas Community Land Trust. clackamasclt.org