Flip taxes are a foolproof method to raise funds for a building without incurring additional costs. It is a transfer fee that a buyer or seller pays the cooperative after selling or transferring an apartment. Additionally, flip taxes provide funds for capital improvements. Cooperatives and co-ops have to treat all shareholders equally to ensure the courts approve of the flip tax. Averagely, transfer taxes in NYC range between 1% to 3% of the building’s final sales price. Flip taxes are part of the building’s closing costs.
What Are the NYC Flip Taxes?
There are multiple flip taxes from which to choose. Carefully weigh the pros and cons of each flip tax before making a decision.
The flat fee and per share amount types of flip transfer taxes are similar. Both require that the cooperative sets a fixed flip fee for all shareholders. Also, the flat fee flip tax requires cooperatives to set a flat fee amount for all shareholders. The per-share amount requires shareholders to pay a fixed dollar amount per share. This policy is beneficial to shareholders to a larger property and those who bought buildings years ago at fair prices. It is a total disaster for shareholders who have smaller buildings and those who bought buildings a few years ago. Nonetheless, it helps maintain a certain degree of order when calculating flip taxes. It is important to know that the flip tax is different from the NYC mansion taxes.
The percentage of the sales price is not so different. Here, the cooperative demands a percent of the total amount made from selling the building.
Another method is the percentage of net profit. It is the most stressful method for cooperatives because it is not easy to calculate only the gain from selling a property. After which, they request a certain percentage of the amount.
The combining method is a less popular method cooperatives use to collect flip taxes. It requires combining two or more flip tax methods. Although it works, it is quite tedious.
Who pays the Flip Tax?
Sellers typically cover the cost of flip taxes. Nevertheless, buyers will pay if the cooperative demands the payment of this tax. Therefore, buyers have to carefully read through their real estate contract to know if the seller will pay the NYC flip taxes.
The amount a seller or buyer pays as flip taxes depends on how much the cooperative requires. Since there is no specific amount that cuts across all cooperatives, they demand different amounts. Some cooperatives make a higher demand if the seller sells the property at a high price. The goal is to add funds to the cooperative’s reserve funds.
Cooperatives can change their flip taxes by voting. Every shareholder has to vote before the board makes a final decision. They can only change the flip taxes if the majority agrees to it.
In summary, flip taxes are a fee cooperatives request for maintaining buildings without incurring additional costs. Family members may not pay house flip taxes depending on the cooperative’s policy. Seek the assistance of a real estate agent if you need clarification on your real estate contract.