What is a Flip Tax?

In some co-operatives there might be a fee that is called a "Flip Tax", its not the governmental type of tax but this is a tax that creates an ongoing cash flow for the co-operative and this build a healthy reserve for the co-op board. 

In my history of dealing with flip taxes, there is not one set person who pays the tax, so in other words it can be either the buyer or the seller who pays.  If the buyer is requested to pay by the seller, then most likely this will be taken into consideration during the bidding process.   If the seller pays at closing then it will be taken from the proceeds of the sale. 

How are flip taxes charged?

• A set dollar amount times the amount of shares owned. 
• A percentage of the total sales price.  This type tends to be a bit more steep than the first one.
• A percentage of the PROFIT from the sale.
• A flat fee.

If you live in a co-op that charges a flip tax and you are selling then this is something that MUST be disclosed to your agent (they should know right off the bat - but, they might not know the exact fees), because like I said this needs to be taken into consideration before the bidding process takes place and noted into the contract of sale as to who is paying. 

 

Comments

[NYbuyer]

Can anybody explain how a flip tax based on % of profit when sold may effect the terms of your mortgage from the bank?