What Is a Flip Tax? How Bay Ridge Co-ops Handle It
A flip tax is a fee paid to a co-op building when an apartment sells. Despite the name, it is not a government tax. It is a transfer fee set by your building, usually paid by the seller at closing, and it goes to the co-op’s reserve fund. Many Bay Ridge co-ops charge one, and the amount varies widely from building to building.
How is a flip tax structured?
Buildings choose their own formula, and in Bay Ridge you will see all of the common ones: a percentage of the sale price, a flat dollar amount, a per share figure based on how many shares your apartment carries, or occasionally a percentage of the seller’s profit. The formula is written into the building’s governing documents or house rules, and it can only be changed by the process those documents set out, which usually involves a shareholder vote.
Who pays the flip tax, the buyer or the seller?
The seller, in the standard case. The building’s documents say who is responsible, and in most Bay Ridge co-ops that is the seller, with the fee deducted at closing. Like most closing terms it can become a negotiation point in a specific deal, but a buyer should not expect a seller to absorb it beyond what the documents require, and a seller should budget for it from the first pricing conversation.
Why do buildings charge a flip tax at all?
It funds the building without raising maintenance. Every sale contributes to reserves, which pay for roofs, boilers, elevators, and facades. A building with a sensible flip tax and healthy reserves is often a better place to own than a building with no flip tax and no cushion, so do not read the fee as a negative by itself. What matters is where the money goes, which is a question your attorney answers during due diligence by reviewing the building’s financials.
How do I find out what my building charges?
If you are selling, we confirm your building’s flip tax before you list, as part of a written estimate of your net proceeds, so the number never surprises you at closing. If you are buying, your attorney will confirm it during contract review. Our building guides cover individual Bay Ridge co-ops, and our guide to what it costs to sell a co-op puts the flip tax next to the other numbers that come out of a sale.
Selling a co-op and want your real net number? Start with a home value estimate or call or text the office at 718-333-5233.