Home Buying in Gramercy Park>Question Details

RG, Home Buyer in New York, NY

I was not informed of a flip tax that the seller has to pay to the co-op board. I am the buyer and now the

Asked by RG, New York, NY Thu Mar 6, 2008

bank found out and the bank is imposing a PMI on my loan even though I am putting 20% down. Can the bank do that? And can I pull back out of the deal and get my 10% down back since this flip tax was not mentioned on my original contract?

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Vincent Carrieri’s answer
i know this answer is about 2 years late but i didnt like any of the answers on saw on here. any flip tax over 3% ajusts your ltv. this is a fannie mae guideline. if your flip tax is more than 3% then your ltv is no longer 80%. any flip taxes under 3% will not effect ltv. lets say your puchasing a 100k home with a 5k flip tax imposed on the seller. you put 20% down on a 100k purchase leaving 80k loan amount. this should avoid pmi however you have take the following into concideration. subtract 5k from purchase price and divide it into the loan amount to figure out your new ltv. 80k/95k=.842 this means your borrowing 84% of the property's value. the reason the value is 95k is because in the event of a forclosure the bank would be responsable to eat the 5k flip tax when they sold it off to recoup their assets. the house may appraise for 100k because others are buying at that, but the house is only worth 95k because it would cost 5k to make that 100k. hope this helps.
1 vote Thank Flag Link Mon Apr 11, 2011
Vincent - I know this posting is 2 + years old but thanks for educating agents who are not fully aware of this. but I have just been introduced to this situation and your explanation makes it clear, why a buyer might need to pay more than the coop's "required" downpayment. Thanks so much!
Flag Wed Jul 31, 2013
It sounds like what is happening is that the seller is trying to make you pay the flip tax as part of your closing, and the bank is applying that against your down payment and saying, hey, you're really only putting down 18% . .. is that what's happening?

The answer is of course that your agent and your attorney have to push back to the seller that this is not a cost of closing that you are prepared to accept . . . both your attorney and your agent should have gone over the costs of closing with you, and told what charges you should expect. If a flip tax was not included in that list, either your side has been remiss or the seller is trying to "sneak" it in.

I can't see your contract so I don't know what it says, but it sounds like it is time to bring everybody back to the negotiating table to work this out.

the co-op board doesn't give a hoot who pays the flip tax, as long as they get paid.

Good luck!

ali

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Alison Rogers
author, "Diary of a Real Estate Rookie"
Insider Real Estate Tips with a Twist of Humor: http://tinyurl.com/2ag28z
Web Reference: http://tinyurl.com/2ag28z
2 votes Thank Flag Link Sat Mar 8, 2008
Sudie -

I am sure the NY Trulia voices will chime in with better information, but I found this article that you might find helpful.

http://www.nytimes.com/2005/02/13/realestate/13home.html

There was also this previous post on Trulia:
http://www.trulia.com/voices/Home_Buying/What_is_a_Flip_Tax_…

and:
http://pview.findlaw.com/view/3730293_1

Hope these help until one of the local professional chime in.

CJ
Web Reference: http://www.TalkToCJ.com
2 votes Thank Flag Link Thu Mar 6, 2008
PMI should have nothing to do with a "flip" tax. PMI is based on the loan to value ratio of your loan. 20% down should be the right number not to have to take PMI. Speak to someone else at your bank or contact a mortgage broker.
Web Reference: http://GailGladstone.com
1 vote Thank Flag Link Thu Mar 6, 2008
Dear R.G.,

Flip taxes” are common in coops. Imposed by the coop, the flip tax is used to build up the capital reserve fund and/or pay for improvements to a building. The tax is usually one to two percent of the purchase price (although other formulas exist) and is payable by the buyer or seller, depending upon the coop’s rules. While the number of cooperative conversions has dropped, many long established co-ops still impose these fees on the sale of apartments. Some condominium buildings also charge this type of fee.

Your broker should have informed you about this. Talk to your broker and see if he/she can get the seller to pay the flip tax. If I can be of any help please feel free to contact me.

Ross Ellis
Halstead Property
212-317-7828
Member of the Real Estate Board of New York (REBNY)
Web Reference: http://www.halstead.com
0 votes Thank Flag Link Fri Nov 20, 2009
Hi RG - I'd seen your question regarding your search for New York property.
Most, not all, flip taxes are paid by the seller. Some properties don't have one. The agent or seller representing the property should have disclosed the flip tax.
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0 votes Thank Flag Link Fri Jan 16, 2009
The flip tax is a seller expense and should not affect your mortgage. What has your attorney advised. It is unlikely you can withdraw from the deal because of PMI. What has your attorney advised? Virtually all contracts in NY contain a standard clause that the Seller pays the flip tax. That holds unless someone changed it in your contract. I am an a attorney. Good luck RG
0 votes Thank Flag Link Wed Mar 12, 2008
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