I am thinking about going into a coop in Windsor Terrace.The flip tax
when I eventually sell the coop is 4% of the selling price. Is this
reasonable?

No it's not reasonable but it is what it is, do you love the building? then go for it, if not, find something else with a lower flip tax.

up to 2% of sale price is typical

4% is a bit excessive.
Are you going to pay or is the seller?
When you sell are you going to ask the buyer to pay?
Consider the 4% as just another chip to bargin over.
When you reside in the coop it's always nice to have a year with a lot of turnover bc the coffers are full.
Everything cuts both ways...even spoons

"The flip tax when I eventually sell the coop is 4% of the selling price. Is this reasonable?"

What difference does it make? It is what it is. Take it or leave it.

The building you're moving into needs money to run -- to pay its underlying mortgage, ongoing maintenance, and utilities. If you didn't help finance this in the form of a flip tax, you'd be facing higher monthlies.

So maybe one way to think about it is to calculate the flip tax based on the price you're offering, divide that amount up by the number of years you intend to stay, and see how much your monthlies would increase if you were contributing to the building that way, and whether you think that's an "appropriate" number.

ali r.
DG Neary Realty

Buyers (typically) will make the mental adjustment for the flip tax by discounting the price to account for the flip tax. When I was looking for a property to buy, I always made adjustments if a unit had high maintenance and flip tax. So, offer a lower price precisely because the unit has a high flip tax compared to other units you are looking at.

Co-op boards don't care about the flip tax because current owners benefit from the $ it brings in. Also most co-op board members are long-term residents who will almost never move...So, there is no incentive for them to reduce or remove the flip tax.

In my opinion, if a flip tax is instituted, it should be only levied only if there is a gain on the sale, and it should be a percentage of the actual gain on the sale of property INSTEAD of the entire sales price, i.e. similar to capital gains tax.

Bob

That's insane. That's a disincentive to renovate. Who would buy a gut if they had to hand over x% of the nominal gain back to the building?

"That's insane. That's a disincentive to renovate. Who would buy a gut if they had to hand over x% of the nominal gain back to the building?"

No.

What's "insane" is thinking that people would refuse to renovate their home, choosing instead to live in a run-down shithole, just to avoid paying a higher flip tax.

if it's on vanderbuilt, run.

for that neighborhood, 4% is very high. i know of one building that institutes 4% if sold within 2-3 years and then goes down to 2%.

flip taxes make the coop reliant on an unstable income. when the sales dry up, they have to raise maintenance significantly. keep that in mind when buying.

Indifference to a flip tax probably increases the longer you anticipate being in the apartment.

that's assuming you own it already. this is a question about whether to buy in.

buy in a building with significant commercial income. That is the lesson here. if no commercial income, they will get the money from you one way or the other.

The larger issue with Cooperative living has to do with how much a person wants to live/own within a particular Cooperative. The flip tax---and the subsequent high/low percentage of same---becomes acceptable based on the desire to live in the Co-Op. Same with restrictions peculiar to a particular Cooperative. In a way it's an extension of the three rules of real estate: Location, Location, Location.

Focus on your reasons for wanting to live in that Cooperative.

Trevor Curran
NMLS #40140
Mobile: 516-582-9181
Office: 516-829-2900
Fax: 516-829-2944
PowerHouse Solutions, Inc.
185 Great Neck Rd, Suite 240
Great Neck NY 11021
Licensed Mortgage Banker – NYS Dept. of Financial Services
NMLS#3528

4% is about twice the usual flip tax of 2%. But there are all sorts of variations on the norm. Some charge 3-5% but only on the amount the apartment appreciated if it is held more than x years. Some charge a formula based on shares being transfered in a coop. Some only charge people who sell in fewer than x years after purchasing.

No matter how you slice it, 4% of gross sales price is very high. It suggests to me that the building's financials should be very closely scrutinized to see why they felt the need to impose such an unusaully high flip tax. If maintenance is already quite high and expenses aren't being met, the tax may be an attempt to prevent the monthlies from climbing any further for now and thus to preserve value in the apartments. Or maybe the building is more driven by "culture." It could have tons of residents who stay forever and run the place and the board chooses to keep the old gang's costs lower by sticking it to anyone jumping ship. Their is obviously not just one explanation.