Flip Tax Paid By Buyer

I think in at least some of the buildings where you see "flip tax to be paid by purchaser" there was some pushback in instituting a flip tax and the people who were against it we're convinced to let it pass by using this language.

In addition I don't think I have ever seen a flip tax which is to be paid by the purchaser calculated as "percent of profit", while I have certainly seen a number of flip taxes paid by seller calculated this way.

The flip tax is a way for the coop to cover their expenses (or build up reserves for big ticket projects). Some boards consider them more palatable than periodic assessments, or a higher maintenance, as it's viewed as a known 'one time' expense. As the income stream to the building is irregular (unless it's a large building and there is a regular flow of sales), some consider it poor financial management to become too dependent on the tax for funding.

In my building last year, the residents overwhelmingly voted down implementing a flip tax. The people I talked to felt it would depress prices, which don't currently command any particular premium over comparable units.

You are probably correct, 30. Another way to get a flip tax approved by shareholder, as my building did, was to charge a 1% flip tax for the first sale, then 2% for all subsequent sales.

I think flip taxes are inherently undemocratic but I know they are becoming more common. Calculating the tax as a percent of gain seems more fair although more difficult to calculate especially if meant to mirror what is done for income tax purposes.

Coops that impose a flip tax exclusively on buyers make the argument that it is ultimately the buyer who benefits from the tax in the form of higher reserves or completion of necessary capital improvements.

This argument seems spurious so my original question still stands. I think most buildings don't care who pays the flip tax. But to me, it seems best to require the seller to pay the flip tax as it results in higher recorded sales prices which coop boards seem to take great interest in especially in a housing downturn.

I have to say that I am not a fan of flip taxes in general and feel that buildings should run off of their maintenance. But buildings feel that flip taxes are "free money" just like when they assess back the real estate tax rebate (they would never think of instituting an annual assessment but feel they can sneak it in because for most shareholders it's revenue-neutral). Although, I do believe in sublet fees because I feel that a) Coops should really be for owner-occupants and should discourage subletting when possible, and b) subletters don't treat buildings as well as owners and tend to create more wear and tear.

An assessment per share is the only completely fair way to raise needed capital as far as I can see. My old coop, in spit of a recently passed flip tax, told shareholders we still needed an assessment (for a cosmetic improvement) because flip tax income could not be predicted with any certainty or consistency. Fair enough but why then was a flip tax so strongly supported by the board?

I hate flip taxes, I think I've said that elsewhere. I think they're regressive -- in my building, smaller apartments turn over more often than larger ones. -- and unpredictable as a source of revenue. You need more money, just raise the #$%! maintenance.

ali r.

I think board members support flip taxes because they are often the least likely shareholders to sell.

I agree with both Ali and ximon, but will add that I think they are so popular because
a) there is the impression of "these people are making so much money so the Coop should take a piece of it", and,
b) the sellers are "on their way out" so they never get to object, or even if they do object such a small percentage are selling at any one time that they don't have any kind of critical mass and everybody sees it as someone else's Ox getting gored.

Does anyone know where to find data on the the percentage of buildings in Manhattan that have a flip tax? My building wants to pass a flip tax and has announced that 80% of coop buildings have a flip tax-- we would like to verify that. And possibly drill down further & find out how many flip tax buildings have amenities (gym/ pool) to justify the imposed fee?

It is extremely common and actually a bit rare to find a co-op without some sort of flip tax these days. And no, amenities don't really factor into the equation. Funds from flip tax generally go towards building improvements, not operational or upkeep costs.

2ndave, maybe the best solution would be to look for the most comparable coops to your building and see what SE listings say about flip taxes. I feel pretty certain your board was guessing about the 80% but probably not far from the truth.

>>I feel pretty certain your board was guessing about the 80% but probably not far from the truth.<<

Definitely the 80% figure sounds like something that came directly from your building's managing agent (probably calculating the percentage of flip-tax buildings in his own roster).

The last time I was looking for a co-op to buy (now 5 yrs ago), I would say the number that had a flip tax was less than 50%. Caveats: The majority of the buildings I was researching were on the UES, I was basing this only on SE information (building info + recent sale listings), and the buildings tended to be larger (70+ units). I'd be really interested in seeing current stats (mostly because I'm sure it will come up again in my current building [see prior post]).

in my building the flip tax is paid by the seller as a % of the resale price. I would prefer to be based on the net profit (Original Price - Contract Price), at least those who bought too high and have to sell low wouldn't be hurt.

My broker told me a couple of years ago he thought about 50% of NYC co-ops had flip taxes.

If the flip tax is based on "profit", do you factor in inflation. $500,000 20 years ago is the same as 2 million today.

Also how do you factor in renovations. Someone may have bought a wreck and spent $200, 000 to renovate. When the apartment is resold do you back out the renovation cost from the sale price?

This method seems like it's fraught with issues.

RealEstateNY: you are absolutely right. Better to stay with a % of the resale price. I was trying to find a way to "save" unlucky sellers this further expense, but in reality there is no good way to do that.

If you want an indepth overview of the tax: https://www.hauseit.com/flip-tax-nyc/

Some condos (newer) are considering them, not just coops.

And per the article, prop lease doesn't actually specify :-)