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Home sellers could pay hidden fee to real estate developers for generations

Homes in San Antonio

Jennifer Hiller wrote an interesting story about a company started in Austin that is trying to sell developers on a novel way to make a profit:

Here’s a new concept in real estate: Buy a house, and when you go to sell it years later, owe the original developer or builder 1 percent of the sales price.

Freehold Capital Partners, a company started in Texas, is selling developers across the country on a plan that would attach a private transfer fee to homes, allowing developers to profit for generations.

Express-News story about developer feeJen, who covers real estate and architecture, said she got a tip about the company’s proposed fee and worked on the story in her spare time for a couple months while also working on stories about the retaining wall collapse at the Hills of Rivermist.

“I thought it was a cool story, but I had all those Rivermist stories going on,” she said.

I like enterprise stories like this that take a long time for a reporter to dig into. It’s a lot of work, but the payoff is a story based on a rich variety of sources that tells readers something new about the world.

Related: How to research a property’s history using Bexar County’s free records search

Some of the sources Jen relied on for the story included:

  • The user-friendly Texas legislative Web site, where Jen searched for bills pertaining to the real estate fee;
  • Property records that showed Freehold’s founder Joe Alderman was pitching the fee to developers across the country, but removed the fee from his own nine-bedroom home in Roundrock when it was listed for sale last year;
  • U.S. Patent office records that showed how the company had tried to patent the fee but the effort failed, at least for now;
  • The Internet Archive, which revealed how a predecessor company was trying to sell the fee to individual home sellers, not just developers. The company’s original Web site said: “Maybe you planted a tree, added on a room or rehabbed a home. Fifty years from now, when a family is enjoying the property that you improved, and making a profit by selling the property you improved, why shouldn’t you benefit? Of course you should.” The current company says it has stopped marketing the fees to individuals.
  • The story has already sparked outraged comments from readers, and Freehold has also posted several comments seeking to explain its position. One comment from Freehold says: “The issue is how to pay for infrastructure? Do you prefer that developers put 100% of the burden onto the first time buyer, or lower the initial cost by apportioning the costs over those who live in the development? More importantly, the only seller that will ever pay the fee is a seller who willingly agreed to do so.”

    A doctor responded:

    This is absolutely a ridiculous. I’m as pro-market and pro-business as just about anyone out there, but this even reeks of bald-faced greed and putrid corruption to me. The sooner these are banned the better. I’m a doctor…with their line of thinking, if I save a life should I be entitled to a percentage of my patients income for the rest of his life? Does Ford deserve a cut when you sell your car? Only the government has the balls to lay claim on people and property like that.