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
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