I disagree with the analysis. Once the initial offering plan and flips go thru, a flip tax which should be exclusively written to go directly into the reserves, can be a significant income stream especially to coops with no commercial or retail income. A small building in a high price zone can see significant returns. It should be a two stage process in that owners of less than 3-5 years should have to pay 3% to prevent flippers, and longer term shareholders 1% or 1.5%.
It's a payback from the seller to the Coop for all the years of benefit from owning there, in a well run coop with a nice appreciation in realized asset valuation I.e. profits to them. Since they are leaving, the tax is on them not the purchaser, and therefore of little concern to the purchaser, just like the sellers Agent's fee.
Doing a % based on the gross sale price keeps it nice and legal vs. Dollars and shares, which is a problem.
It's a win-win all around for remaining shareholders and new shareholders alike.
After years of highly questionable to downright ridiculous applicants, as a Board President I was disabused of any feelings of owing the seller anything. And really surprised when past Board members sponsored purchasers who would pay a high asking price because they were totally unqualified to own.
Remember the purchase price is what the seller walks away with. What you have to ascertain is after paying that price, can the prospect show financial holding and stability, income and projections to meet future demands of maintenance and possible unknown assessments.
We don't know: future oil/fuel costs, RE taxes, water or insurance costs.
Surprise, surprise - OPEC, 9/11, Hurricane Sandy, global warming impact on water, utilities, temp, oh yeah and Local Law 11 - what's that new crack in the facade all about?
We can't predict the future, so we need to make reasonably sure we are financially healthy. Reserves and shareholder capability. Flip taxes are a reasonable and legitimate small revenue stream that should never be used in calculating operation budget projections. They are a serendipitous addition to your reserves.