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vusoi617, Home Buyer in Forest Hills, NY

How much can a high flip tax hurt your selling price on a coop?

Asked by vusoi617, Forest Hills, NY Thu Aug 8, 2013

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The honest truth is that a high flip tax is a deterrant to many buyers. Most New Yorkers live in a their home for 5-7 years. When a buyer is considering that time frame, they will factor in closing costs to buy and later sell, as well as a high flip tax. Your asking price should therefore factor that in somewhat to make it more desirable. For example, Co-op Village in Manhattan, a very big Lower East Side development is known for its high flip tax of 5%. Therefore, purchase prices are somewhat lower than they might be because that flip tax does turn off many buyers.
1 vote Thank Flag Link Fri Aug 9, 2013
Much will depend on the flip tax amount; when a flip tax is too high, some potential buyers are turned off....
1 vote Thank Flag Link Fri Aug 9, 2013
You have to see coop by law , coop board can change it any time.
0 votes Thank Flag Link Fri Oct 4, 2013
One more important point. Most lenders will reduce the loan amount based on flip tax. The buyer will have to come up with that extra cash.
0 votes Thank Flag Link Fri Aug 9, 2013
Also keep in mind that flip tax varies from building to building, each creates it's own flip tax policy. Some co-op buildings have NO flip tax!
0 votes Thank Flag Link Fri Aug 9, 2013
A flip tax has pros & cons.
The pros are that the maintenance is normally kept lower due to the capital raised from flip taxes, also flip taxes are often imposed to curb flippers or short term owners, so the building is more stable.
The cons are that if the seller tries to throw the flip tax to the buyer; yes it will deter buyers from buying because they have to show cash and assets in order to cover down payments, closing costs, reserves etc. To add on one more cash cost will discourage some buyers.
Most flip taxes are no more than 1-5% of selling price, anything more than that is excessive. But should always be paid by the seller, otherwise you will loose buyers. If a buyer is planning on staying for a while it is not normally a deterrent especially when the pros are explained.
But of course all this is dependent on the buildings financials, if a high flip tax is imposed to cover bad fiscal management....bad fiscal management will always discourage buyers, unless the price is low enough to cover the risk.
Kathryn Lilly, Broker
Realty on the Greene, LLC
0 votes Thank Flag Link Fri Aug 9, 2013
Dear vusoi617:

Flip tax is an additional means by which a co-op can raise money. It is a tax the co-op charges the co-op owner when they sell the co-op. If the flip tax is too high, some banks will refuse to give purchasers a mortgage for that building. As an example, if the co-op has a 20% flip tax, the bank will require the purchaser to add 20% to their down payment on top of what ever down payment they were already coming in with. Assuming the co-op is already imposing a minimum down payment of 20%, that means the purchaser would have to come in with 40%. Based on that, many purchasers cannot afford such a high down payment and/or would simply opt to purchase in a building that had a lower or no flip tax (that's right, some buildings have no flip tax).

The bottom line is that if the flip tax is too high, it can scare away some buyers. Less buyers equates to lower sales price. Just how much it will effect the sales price is hard to tel. It also depends on the location, condition and amenities of the building. So with some buildings it can have more of a negative effect than others.

In order to give you the best answer we would need to know exactly which building you are talking about. If you are thinking of selling a co-op in Brooklyn, contact me direct, I would love the opportunity to help you. If I were to see the co-op, I can give you an idea as to how much your co-op is worth based on the flip tax and all the other amenities of your co-op. Either way, good luck!

Mitchell S. Feldman
Associate Broker/ Director of Sales/ e-Pro Realtor
Fillmore Real Estate
Office: (718) 252-2000/ Cell: (917) 805-0783
0 votes Thank Flag Link Fri Aug 9, 2013
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