GFE disclosure rules are unforgiving when it comes to under-disclosing. But most loan officers have become adept at accurately disclosing and GFE refunds are less frequent than before. Hopefully my efforts in this column to educate the banking community has helped, and of course don’t forget the comprehensive closing cost brochures for NYC and the surrounding NY counties.

Both coops and condominiums can have flip taxes and “flip tax like” transfer fees. In condos they are more rare, but as budget conscious boards seek to shore up balance sheets, a transfer fee can be a saving grace. For example, 173 Perry Street (West Perry Condominium) charges 1.5% to sellers who did not purchase in the initial offering. With sale prices there exceeding $5,000,000 regularly, that amounts to $75,000 or more!

So what if the contract requires the buyer to pay such fee? Is the loan officer’s failure to disclose a GFE violation subject to reimbursement?

The RESPA guidelines do not include a category that encompasses these transfer fees (unlike transfer taxes which are specifically mentioned), so it is unlikely that this would be subject to a refund for failure to disclose within tolerance limits.

But it doesn’t hurt to add it, and of course, post-closing liquidity calculations will be impacted significantly by the omission of this large fee.

There is one important distinction here that a careful loan officer will remember. The NYS Department of Taxation has been taking the (I think very aggressive) position that where the by-laws of the condominium or coop impose the transfer fee or flip tax on the seller, and the contract of sale requires the payment by the purchaser, then this fee is “additional consideration” subject to an adjusted purchase price. We’re used to this adjustment when a buyer pays seller transfer taxes (such as in many new construction deals), but it’s less common to see the situation where the buyer is paying a non-statutory seller fee (like a flip tax) and it’s added back into the consideration. Where it gets tricky is when the addition of the “additional consideration” puts the transaction into the mansion tax category, and the loan officer has failed to disclose this on the GFE. That error can cost well over $10,000 in refunds.

An example might help: Suppose the buyer is in contract to buy a coop at $975,000. The seller pays her own transfer taxes, but the contract provides that the purchaser will pay the flip tax of $30,000 at closing. And suppose also that the by-laws of the cooperative housing corporation impose the flip tax obligation on the seller. This shift of fee to the purchaser’s side by contract would require a “bump up” in the consideration, putting the deal at total consideration of $1,005,000, and thus requiring payment of – and GFE disclosure of – mansion tax of $10,050.