flip tax

define huge.

15% of the profit if you sell in the first 12 years; 25% after that.

completely out of the question. never ever would I agree to that. factor in possible down turn in market, subsequent closing costs, broker fees. just never. its below market now, it'll be below market forever with that outrageous fee.

That's a big bite assuming a nice run up in value on a five year hold, you will pay 15% of your profit out to the coop and possibly another 15% on capital gains if your value increase exceeds the federal allowance of 250k for a single or 500k for a married couple.

Personally I would never, ever buy a coop under any conditions. As many posters on other threads have pointed out, too often they are run by grumpy old coots who have lived there forever and revel in making other peoples lives miserable by flexing their power. A 15% flip tax puts you at HUGE risk in a flat market! Unless you plan on dying there, in which case who cares, I wouldn't touch it.

I don't think it's a particularly smart idea, but it doesn't put the buyer at HUGE risk. The tax is on profit, so if the market is flat, the seller pays nothing.

Although I used to live in a coop (and was on the board for a while) I prefer a condo now - but that's a matter of personal taste.

Regarding the flip tax you described, it's heinous. I would never, EVER buy into a coop building that was greedy and stupid enough to put anything like that in their house rules as an amendment. Please believe me on this - there are many, many other coops out there that you will find with hard work and a bit of luck that will offer you what you want without having to sign into such a terrible situation as this. Please, please stay away - trust me.

#7 you are right; sorry, I didn't read the post carefully enough. If you don't mind everything else about buying a coop, then I would just factor that into your offering price in a manner similar to how you would discount the price based an overly high underlying mortgage or high maintenance costs..

15% sounds steep. I looked at one building that had a flip tax of 10% of profit but allowed you to deduct the costs of any rennovations. I think most buildings with flip taxes charge a $ amout per share.

It might make sense if the building has very low monthly maintenance, but still, a sore selling point. Also, what happens if you sell at a loss? You pay nothing? So how would the building benefit in a down market?

i recently looked at a large coop downtown. broker says places very rarely come on the market!!! here's why. 25% down payment reqt. no sublet ever. flat $10000 flip tax on resales. that plus they have an extra fee for electricity which is more than would be a regular con ed bill. manhattan coops truly suck.

#11 sounds like THAT coop truly sucks. Places probably don't come to market because they can't sell. And what's with the extra fee for electricity? Unless the place is super cheap or has extremely low maintenance...

OP, are you sure it's not 25% in the FIRST 12 years, and less thereafter? Usually one goal of a time-based system is to reduce flipping (not that 12 years would be considered a flip anyway).

Also, that kind of a flip tax sounds like it could only be in an HDFC coop. They often have much greater problems than just the flip tax.

If you're still considering buying it, find out if the coop is locked into it by a lien or requirement of a gov't agency. If not, there's some hope that the shareholders can vote a change to the flip tax structure at some point in the future.

25% down and no subletting doesn't sound that unusual to me for a co-op. Neither does some sort of flip tax. I don't get the electricity surcharge.

#13, OP here. It's HDFC and I believe they're locked in for 30 years. The increase in the tax is correct.

Weird regarding the increase after 12 years.

There are a few well-run HDFCs, but many more that have any of these problems:
1. building went to crap to such an extent that gut-rehab is needed
2. gut rehab was done, but building was saddled with excessive debt
3. building/board is under the thumbs of the evil and misguiding UHAB/SHUHAB or some similar advocate non-profit for low-income housing. They want to keep poor people poor, rather than fight poverty. And they're incompetent at whatever they get involved in, including advising the board about anything.
4. high number of rent-reg tenants who didn't choose to "buy" -- supported by the rest of the owners.
5. audited financials are "not available yet" for no good reason.
6. inappropriate management-company relationships, including vendor/contractor selection.
7. possible phase-in schedule of real estate taxes that will jack up maintenance over the years
8. this is the most important one: etc. etc. etc.

I'd tread very cautiously if at all. And get a sense of whether most of the current owners have a mindset that will lead to market-rate as soon as possible. And if you proceed, have your lawyer spell out what's locked-in, what's flexible, and who gets the flip tax. Have the lawyer and even an accountant spell out details (notes included) of the audited financials. What's the maintenance-arrears situation?

Just out of curiosity, what would you estimate is the percentage discount of the asking price from market rate, and what's the discount/premium in monthly maintenance?

Thanks. Our lawyer has looked at the financials and thinks they're solid, but I don't have notes of the audited financials. I'll ask for those. There's no non-profit involved and rent-reg tenants will be market in 9 years. Maintenance is not discounted from what I know: $1/sf and it's about 20% below market. No major problems with the complex according to the inspections in the offering plan. No gut re-hab. That said, it's obviously not a luxury co-op.

Also find out if there are any other resale restrictions -- max buyer income, max sale price (in any form--dollar amount or percentage).

Where is this, by the way?

Was away for the weekend and just getting back. No resale restrictions. It's in the former West Village Houses.