'Flip fee' ban not for condos
Broker problem is created when renting a condominium without a listing agreement or other written document that controls the relationship between the owner and the agent. Credit: ISTOCK
Long Island condo owners can breathe a sigh of relief. Their "flip fees" are safe.
The problem started far from Long Island, in the Sunbelt, where some builders decided they could profit by inserting a "resale fee" into documents when they sell a new home. From then on, every time a house changes hands, the original builder gets a small cut of the purchase price - for up to 99 years.
To stop the practice, the Federal Housing Finance Agency wanted to recommend that Fannie Mae, Freddie Mac and the Federal Home Loan Banks stop dealing in mortgages on homes encumbered with such fees. But condo, co-op and homeowner associations on Long Island and elsewhere have been imposing such fees on themselves for years to pay for capital improvements. And these legitimate, democratically adopted fees - imposed on sellers at nearly half the complexes on Long Island - would have been collateral damage in the FHFA proposal.
In all likelihood, that would have meant higher monthly maintenance fees for condo owners who stayed put - or deteriorating properties if associations didn't find some other source of funding. On Long Island, the fees are usually less than $2,500 per unit.
After many complaints, the FHFA has altered its proposal to exempt flip fees paid to associations that benefit the property. It's a smart change that will benefit communities as well as condo owners.
