Condo vs CO-OP

[gitak]

I'm trying to decide between purchasing a condo or a coop. I know that coops often have strict boards and the owner doesn't actually own the unit itself, whereas condos don't, but are there any other differences that I should be aware of in deciding between the two? Any input would help. Thanks.

[TonyO]

Co-ops are restrictive and usually require the owner to occupy the property for a certain # of years at a time. Condos are typically more expensive for the same type of unit. If you are planning on living in the unit and don't mind the approval process, co-ops might be for you. If you want more investment and subletting opportunities, condos are better.

[gitak]

I am buying for my own occupancy so that shouldn't matter too much. However, are there any rules/regulations when it come to selling the property? I'm not sure how long I would want to live there before moving out.

[TonyO]

You'll need to check the property's rules for flipping. There are many variations on the flipping rules for a co-op.

[Zoe]

Co-ops are just more restrictive period. There are rules when you sell that you do not encounter with a condo. The biggest difference is that the Co-op board must approve your buyer (and can reject them for numerous reasons depending on the building).

[mortgagecommitments]

Understanding the history of coops and condos in NYC is key to understanding the differences... you can learn more about this here: http://www.mortgagecom.com/coopcondo.htm but meanwhile, here are some differences:


Ownership - The main difference between condos and coops is the actual form of ownership. A condominium is real property and ownership is evidenced by a deed allowing the owner to occupy the space as each owner sees fit. A coop is personal property and ownership is evidenced by shares of stock in a corporation in combination with a proprietary lease which allows each shareholder the right to occupy space under specific restrictions. Condominiums have a condominium association and coops have a board of directors, each committee serves a similar purpose of making decisions on behalf of the owners and shareholders, respectively. For tax purposes, both generally filed as a non profit corporation.
Occupancy Restrictions - Another major difference between coop and condo is the set of restrictions placed upon the shareholders of a coop in use of occupancy which contained in the proprietary lease. The proprietary lease may restrict the amount of financing one can obtain using the shares as collateral, it may restrict a shareholder from subletting their space, or from having a specified number of occupants, or from having pets, or whatever else the "board" deems to be appropriate. The proprietary lease also gives the board of directors the right to refuse any prospective buyers or sublets for any reason, or no reason. Most coops have a very formal application and interview process before the board reaches their decision. Condominiums on the other hand have virtually one restriction which is their "right of first refusal." The right of first refusal gives the condominium association first opportunity to buy an apartment from a selling owner at the same terms under contract with a prospective buyer. Condo associations rarely exercise this option.
Feeling of Neighborhood - Because of the lack of controls in place, condominiums may become less homogenous in nature and may have somewhat of a more transient feeling. Cooperative apartment corporations on the other hand tend to be highly homogenous and more stable in terms of neighborhood.
Purchase Prices - As a broad rule of thumb, coops tend to have lower purchase prices than condos.
Common Elements and Services - As broad rule of thumb, condos generally may be slightly less expensive to maintain over time. Owners of condominiums pay for the common elements (ie: management, staff, doormen, plumbing, roofing, common walls, etc.) in the form of common charges, and they pay their taxes separately. Most condo owners are generally responsible for paying their own utility usage. Coops on the other hand pay for the common elements in the form of maintenance charges which generally include everything to upkeep the building, including taxes and most often utility usage. Another component of the maintenance fee that generally does not exist with a condominium is the cost associated with an underlying mortgage (introduced in the history section). Some coops and condos offer recreation, parking, storage and other facilities as a part of the common charges or maintenance, others require additional payments. To be able to compare an apple with an apple, it is very important to understand what costs are included in the common charges or maintenance, and what services are offered in return.
Mortgage Vs. Assess - coops have no restrictions other than that imposed by the lender in terms of size of underlying mortgage. Underlying mortgages on condos have restrictions. In the event the building needs money, coops may be in a more flexible position not to assess each owner.
Settlement Costs - The closing costs to obtain a mortgage for a condominium are very expensive in relation to settlement costs to finance coops. The major differences are the inclusion of mortgage recording tax, title insurance and tax escrow when obtaining a mortgage for a condo, as these items are not required to close on a cooperative apartment loan.
Availability - In Manhattan, it does not take long to figure out that there are very few condos, and that most buildings, particularly "prewar" buildings are coops.
Which is better? - Answering this question is like trying to determine if an apple tastes better than an orange. Both are excellent forms of ownership, condos may not be for everyone, coops may not be for everyone; It is up to each individual to become an informed consumer, to identify their personal preferences, physically look at the spaces, analyze the cost and benefits of each, and make an informed decision.


Mortgage Commitments specializes in working with buyers and owners of coops and condos. We understand the special considerations it takes when financing a coop or condo. Our commitment is to get you informed and make the process easy and enjoyable... 212-490-4200

[Front_Porch]

I have lived in both, and I sell both -- but personally, I prefer co-ops.

Why?

1) The fact that you have to go through the board process means that when you do move in, you already know some of your neighbors -- so you already have a connection to the building -- that feels friendlier to me.

2) Because lots of people don't want to disclose their financials to a board, they tend to be cheaper per square foot -- so I think you get more value for your money.

3) They tend to be biased towards primary owners, with fewer renters and fewer weekenders, so there's less of a risk of them being "party buildings."

Whichever kind of building you pick, there will be surprises -- good and bad -- after you move in. The best way to minimize these is to try and chat with one or more of your prospective neighbors beforehand.

Good luck!


ali r.
{downtown broker}

[bigkdc]

I think the grass is always greener. I am selling my co-op and moving into a condo as I am sick of the restrictions (especially as it relates to renting or selling). As of now, I'd never live in a co-op again. I am sure when I move into the condo I will have problems with it somehow and want to be back in a co-op...

I have found my co-op to be really slow moving and disorganized. I guess I could do something about it and get involved but don't really have the time/effort. Before you commit to any co-op you should do a ton of diligence on that board and how they conduct business.