Condos and Co-ops

Can someone please explain the diffence (pros &cons) between owning a condo vs owning a co-op ?

Re: Condos and Co-ops

In a condo, you own your unit. In a co-op, you own shares of the entire property, represented by your particular unit.

Condos and Co-ops

Coop are not actually property you buy shares so it is more of a business contract where condos are property.

Message edited 9/27/2014 10:01:38 AM.

Re: Condos and Co-ops

You own shares in a co-op. I do not recommend them due to my negative experience when trying to sell ours. The co-op board gets final say on who you sell your unit to.

Re: Condos and Co-ops

Pros/cons:

As others have said, condos are generally a better form of ownership because you actually own the real estate (co-op = own shares in a corporation/essentially lease the unit).

Co-ops are usually more affordable, and it's easier to predict your monthly expenses because you have one monthly maintenance fee that covers pro rata share of taxes, maintenance of the property, and usually some utilities, such as heat and water. With condos, you pay your property taxes separately, just like with a house, plus you have common charges (for maintenance of common areas, snow removal, etc.). Prices of condos are usually higher. It varies with the type of building, development, etc. - but on Long Island, a lot of condos involve more responsibility (heating system in your unit, etc.) whereas with a co-op, the building also maintains the heating system and similar items.

Co-ops have more rules and restrictions. You need board approval to do almost anything (knock down a wall in your unit, add a washer/dryer). There are generally more restrictions on pets as well.

There are more restrictions with buying and selling a co-op - - To buy a co-op, you have to get co-op board approval (so as a seller, you need to find a buyer who will get board approval). A condo, you can decide to sell and just sell it.

As far as getting financing, if you buy a co-op, you can't get an FHA loan (FHA doesn't lend on co-ops). So you need to be able to qualify for a conventional loan (or, of course, buy all cash). Also, you need a substantial down payment, as most co-op boards require at least 10% down, and many require 20%.

Re: Condos and Co-ops

Thank you for the explanations.

Re: Condos and Co-ops

It just took us 3 1/2 years to sell our co-op. What a pain in the ass!

Re: Condos and Co-ops

Our last rental was in a co-op which obviously allowed renters.

There were some shady characters in the building as a result.

One of our neighbors got beat up on occasion for not paying his drug dealer.

This was in Long Beach.

I'd look into this before making the committment......

Condos I feel like they are regular people looking to buy without the committment of all the responsibilities that come with a house.

My ILs are planning to sell their house and buy a condo to save on taxes, maintenance, utilities, etc.

Message edited 9/28/2014 9:57:48 AM.

Re: Condos and Co-ops

A lot of condos have a significant rental population, too. If this is a concern, I think it's definitely something to look into complex by complex, and not a co-op versus condo thing. A lot of co-op and condo owners who bought at the height of the market and can't afford to sell turn to renting as an option when they outgrow their apartment and need to move. But not all condos and co-ops allow renting.

Also, as far as the caliber of occupant, one would expect that many co-ops would better weed out troublesome occupants by the fact that there is a board approval process. Every co-op I've ever dealt with that allows rentals places restrictions on it (for example, a lot of places will let you rent out your unit only if it's been owner occupied for a set period of time and will place restrictions on how long a unit may be rented for, e.g. 2 years at a time). Also, rentals have to go through the board approval process and show income, good credit, and overall financial stability. Many co-ops do criminal background checks, too.

But again, it all depends on how the co-op is run and how much the rules are enforced. If you have an active board and a good management company, and fellow owners don't turn a blind eye to illegal subletting and that type of thing, there shouldn't be concern about rentals driving down the property value (or the safety of the community).

I think both co-ops and condos attract those who would otherwise own purchase a home but prefer to live a more maintenance free lifestyle. I see no difference with that.

And if anything, the financial hurdles to purchasing a co-op are greater... need a larger down payment, fewer financing options (no FHA loan), board scrutiny of financials (all-cash buyers are sometimes turned down for co-ops because they can't adequately show income or cash reserves for ongoing maintenance payments).

Co-ops and condos both tend to appreciate more slowly in terms of value, so it's hard to build a lot of equity. Usually no one gets rich off of a co-op or condo. And they can both be harder to sell than a single family home, but it really depends on the area, the supply/demand in that complex, and a lot of other factors.

I wouldn't rule out co-ops, but there is less control for an owner, anyone considering buying them really has to do their due diligence (themselves, as well as through their agent and attorney) to fully investigate the co-op financials and policies on various issues.

Re: Condos and Co-ops

Christine as usual brought up some good points.

I guess because we had a bad experience I am super sensitive to those kinds of communities.

I even feel this way about rental complexes in general, but I suppose you can't pick your neighbors anywhere.

Re: Condos and Co-ops

Again, thank you all for giving me some valuable insight into the world of Condos/Co-ops. There is a lot to consider.