Flip Tax Question

seller for residential coop.

have no experience re: commercial.

Thanx cc

It is so common for the seller to pay the flip tax, that if the seller wants the buyer to pay the flip tax, it should be laid out upfront.

Tell the seller that if you're the one paying the flip tax, the price on the apartment is to be reduced by the same amount. A flip tax is no different than the seller paying a broker's fee, it's a cost to selling the place, and reduces their profit accordingly.

Good luck, and please let us know how it turns out.

from what i've seen, it states that the seller pays it. i think there was one instance where i saw that the seller had to pay 4% and the buyer 1%. that was only one time in dozens of different instances.

please keep in mind that the mortgage amount is decreased by the flip tax %. if you buy a $1M property and the flip tax is 5%, the property's value for the bank is $950K. to get to a 20% down, you need to put down $240K, not $200K.

the seller may want to push it to you to get a lower selling price to ensure appraisal will be easier for them.

Falco. It's the mkt. Like the mortgage contingency, it was always there for 60 years, only bubble made ppl laugh it off in the last 7 years. Hit em hard falco. You are in driver seat.

the person who enjoys the flip tax is the buyer. You either raise the price of the unit by the flip tax or have the buyer pay for it. The discussion is hypothetical in a profitble sale but I would always negotiate for the buyer to pay.

Hi, if you ring the managing agent of the building and ask what it says in that buildings by laws, usually 90% of time it is the seller that pays. Having said that if a seller right from the beginning wants to put in all literature, advertising and websites that the flip is paid by the buyer then it is up for negotiation.
Interestingly some building co ops wave the flip tax if the seller is moving with in the building to another apt. As it would be the sellers responsibility to pay the flip tax(or sometimes called exit tax), however if they are not exiting the building there is no tax.

great info thank again

In NYC, residential coop, norm across the board is that a seller pays flip tax. Period. There may be an abherant building out there that says buyers pay, and there may be a seller here and there trying to pass this cost on to a buyer, but in 95+% of cases, seller pays. Period.

in my building -- buyer pays the flip -- better as it goes to basis and since price rose -- better to be the seller..

What about a flip tax for a condo? Unusual?

Some condos require the buyer to cough up an amount equal to a few month's CCs. Don't remember what it's called, though.

I am referring to a Harelm CONDO with a 3% flip tax of purchase price (who pays and how much is part of negotiation). Is this a red flag related to reserves.

"please keep in mind that the mortgage amount is decreased by the flip tax %. if you buy a $1M property and the flip tax is 5%, the property's value for the bank is $950K. to get to a 20% down, you need to put down $240K, not $200K."

How does this work? I don't understand how you would have to pay 240K to get 20% down.

to the bank, the property is $950K not $1M. $950K * .2 = $190K + $50K (flip tax) = $240K.

flip tax is not mortgageable, at least that's what my friends and i ran into when purchasing units that had them.

OK. Gotcha. Never heard of that before. I always thought it was part of the total sale price. Why wouldn't the bank factor out the broker's commission as well?

you can sell by yourself, but you'll always have to pay that darn flip tax. hopefully they'll not raise it by the time you're ready to sell.

I have never heard of the situation you describe.

You never heard of the situation largely because seller's pay the flip charges and the buyer need not calculate the fee into the purchase price at all in terms of obtaining a mortgage or %-age down.

Yes but this just sounds strange. The seller is paying the flip tax using a % of the proceeds of the sale and the bank is subtracting that from the total for mortgage purposes? Is that even legal?

bob, as I understood what ab_11218 was saying (and I admittedly read this all quickly as I don't find it fascinating stuff), he was referring to a situation where the BUYER WAS PAYING the flip tax. A bank doesn't give a hoot what a seller does with the money from the sale.

kyle, that is not it. the banks state the following "when you sell, you guaranteed to pay the coop X%, so we won't mortgage that amount. it's bad enough that your closing costs on the sale will be 8-10% that we're covering already. find a normal coop that gets it's money the old fashion way, through maintenance and assessments." in manhattan, you typically have to put down more than 20% to pass the board, so that's why most don't notice this.

ab: I've just never heard of this. I recently purchased in a coop with a 2% flip tax paid by the seller and I got the mortgage for the regular amount no adjustments for flip taxes. Is what you describe done by particular banks or just certain buyers? So far as "normal coops," about 1/2 of NYC coops collect flip taxes I believe, but even if it is 25%, I don't think that makes them "abnormal." Flip taxes are a reasonable way to raise revenue in a relatively painless way for all involved and really hasn't been shown to affect apt values so long as the flip fees are kept within industry standard margins. High maintenance on the other hand kills values, so if you need to fund your building, flip fees paid by sellers are in my view a very good business decision for a coop.