flip tax

I think it is still pending. But the big hubbub about it was that Fanny Mae would not buy loans for apartments in buildings that had a flip tax (or some other fancy wording of it)... making it near impossible for anyone in Manhattan to get a 'normal' loan of any kind.

Considering that both Condos and Co-ops have these kind of taxes or fees (although not all of them do) it would seriously hurt the real estate market in NYC.

I could be leaving some details out though, so please chime in if you have more info.

(Matthew Russell - Brown Harris Stevens)

See this thread for an explanation. Good references to the proposal.

http://nycblogestate.com/2010/09/fannie-mae-flip-tax-proposed-rule.html

Do only co-ops impose a flip tax or do condos also have them?
Has this been passed?

I'd like to hear what the condo version of a flip tax is... because there isn't one.

@ gcondo: The condo version of a flip tax would be a non-refundable move-out fee, or something along those lines.

Charging to move out of the building is no different than charging a flip tax to add money to the reserve fund. Is it apples to apples the same? No, it tends to be substantially less than what a normal co-op flip tax is (flat fee vs a percentage of profit or a dollar amount times a number of shares) but it is a fee you pay when you move which you have no way of getting back.

oh god, coops have non-refundable move out fees too. that does not compare to a 3% flip tax. Also, my condo does not have such a non-refundable fee, neither did the coop I lived in.

I dont know of a coop without a flip tax, but the non-refundable move-out fee is not a standard, and it exists in some coops and condos... so... not the same!

Flip taxes are not a standard either, there just happen to be a lot more of them. And that makes sense since 75% of the apartments in Manhattan are co-ops compared to the 25% of condominiums. Additionally, condominiums have really only been around roughly 30 years compared to the cooperatives which have been around for over 100. The buildings that are most likely to want to add money to their reserves are the older buildings.

To the best of my knowledge, I don't see a reason why a condominium couldn't charge a flip tax. And in time I wouldn't be surprised if you see condominiums with them. All buildings want to add to their reserves, and flip taxes and fees are the best way to do it.

(Matthew Russell - Brown Harris Stevens)

When you buy into a building with a 2% flip tax then its reasonable to conclude that your property depreciates by 2% as soon as it's purchased.
Any bank should be concerned with this.

There's a reason that flip taxes don't exist in any other form of real estate transaction.
It's illegal.

Flip taxes were originally conceived as a way to raise funds during the initial stages of a coop conversion.

Flip taxes should be illegal after the initial inside purchasers flip. That's what the "flip tax" was intended for - inside purchasers getting ridiculous deals from the sponsor who was desperate to turn his rentals into coops. Then the" insiders" immediately selling their apartments for huge profits overnight. THAT's a flip.

Landlords... uhm... I mean "sponsors", quickly learned that they could have a perpetual revenue stream regardless of market conditions and the flip tax quietly became an excepted factor in the coop ponzi scheme.

Condo's don't have flip taxes.

Since I have slightly derailed the topic a bit... You are absolutely right, any sort of fees (such as a non-refundable move out fee) is NOT a transfer/flip tax for a condo. I was merely stating that they served the same purpose for the building, which is add funds to the reserve.

And to add something of relevance... I received this email from REBNY President Steven Spinola this evening (it wasn't just to me obviously, but all REBNY members:

Dear Member,

We want to thank you for your support of REBNY’s opposition to the Federal Housing Finance Agency’s Flip Tax proposal.

Through the use of REBNY’s Action Center, 629 members sent emails to FHFA and federal elected officials on the issue. As a result of your efforts, more than a quarter of all the comments HFHA received came through the REBNY Action Center.

We also want to let you know that we reached out to Congressman Anthony D. Weiner who sent a letter to FHFA to express his concern. In addition, he enlisted the support of the New York City Congressional Delegation, Gary L. Ackerman, Yvette D. Clarke, Joseph Crowley, Eliot L. Engel, Carolyn B. Maloney, Michael E. McMahon, Gregory W. Meeks, Jerrold L. Nadler, Charles B. Rangel, Jose E. Serrano, Edolphus Towns and Nydia M. Velazquez who also signed the letter. A copy of this letter is attached.

We will keep you informed about the outcome of our efforts.

Cordially,

Steven Spinola

The letter is hosted here: http://www.filesavr.com/72X45M1XP4N7ZNK

Long story short, it's still being worked on.