William, you are correct. Full disclosure is absolutely the only way to go. I don't believe anyone would think that this was a legitimate concept if the hope was to "trick" someone into paying a percentage at closing without their full knowledge up front. However, that has been the spin for the anti FH folks. As well as describing anyone who participates as, "greedy", "unscrupulous", etc. etc. developers or Wall Street types.
If the concept doesn't work and people choose to not buy in subdivisions that have imposed this covenant. The loser will ultimately be the developer. Private transfer fees are currently on millions of homes( and have been for decades) and if you look at the CAI or other community associations, they say their private transfer fees are incredible and people want to live in these subdivisions because of the benefits that they provide. They say there are no reported closing problems, title insurers close them with no problem, they actually help property appreciate and on and on.
The armageddon of people just discovering the covenants (that has been put forth on various blogs and media reports) as they are about to sell is a total fabrication. It is just not happening. Maybe you can find someone who says they did not know, but hell, I can find anyone to say anything.
Again, if the concept doesn't work, the ultimate losers will be the developers. But I tend to think that it will. Just a "new" way to finance a portion of development costs. FULL DISCLOSURE before the closing table is the key.
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