Cathy, Other/Just Looking in 17033

What are the advantages/disadvantages of a coop?

Asked by Cathy, 17033 Mon Feb 25, 2013

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This question was asked from this property: http://www.trulia.com/property/3109954252-1440-W-St-NW-407-W…

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The popularity of co-ops varies by jurisdiction. There are numerous co-ops in DC (and NYC of course) and very few in Virginia. In my experience, a co-op "lives" like a condo but has different paperwork and financing requirements. In a co-op you are buying essentially shares in a corporation, or personal property--a lease that entitles you to the use of a particular unit. There aren't particularly advantages or disadvantages in my opinion, except in your personal viewpoint--just differences.
-In a condo, if you can buy the unit, you can live there and **potentially** rent it out per condo rules. In a co-op you will have some form of interview (could be in person with one or more board members, or could be a paper questionnaire (such as River Place in Rosslyn). Some co-op boards may screen you out, for example, if they perceive that you intend to rent out the unit rather than live there.
-Financing a condo is like financing a house, you get whatever mortgage you can get, and you can get pre-approval so you know what works for you before you fall in love with a property. Financing a co-op is possible only through a small group (could be one, could be a handful) of lenders with more restrictive financing rules than for a condo. For example, you often need at least 20% down payment. Your rates may differ from the prevailing rates for "regular" mortgages--remember, the range of available lenders is smaller and hence less competition and possibly more risk for the lender. Co-ops often have an "approved" list of lenders they allow.Hence when you are house hunting, you may not have a clear picture of whether you can afford a particular property until you pick one out, rather than pre-qualifying with confidence about what you can afford.
-Monthly fees may be higher in a co-op relative to a similar condo. In some co-ops the monthly fee includes a portion of the underlying mortgage that bought the entire building a few years ago--but this portion would be tax deductible to the extent that any mortage is.
-Before you start house hunting, go ahead and get a solid lender pre-approval so at least you know what is possible. If you fall in love with a co-op, you at least have a head start with your documentation and thoughts.
1 vote Thank Flag Link Mon Feb 25, 2013
Advantages:
- You can buy into a coop, usually, for much less than the price of a condo.
- If you like exclusivity, you can get it with a coop because all owners have to be approved by the coop board. They can disapprove if they don't like your hair or the way you dress because you are not buying a unit, but you are becoming a business partner with the ability to live in one of their units.
- Utilities are typically part of the coop fee
- You can get elected to the board and wield your own power over who gets to live there.
- Your coop fee is mostly tax deductible because it includes taxes and interest on the building mortgage
- They tend to have more security measures in place than condos for allowing outsiders in on a daily basis

Disadvantages:
- You don't actually own the unit you live in and any changes you make to it have to be approved by the board before you make them.
- The coop fee is a LOT higher than a condo fee, but that's because it typically includes utilities, taxes and interest on the building mortgage
- Coops can be very restrictive. If you need to move and want to keep the coop, they can restrict whether or not you can rent it out, or put a time limit on how long you can rent it.
- Selling a coop can be a long drawn out process, depending on who sits on the board and who manages the building. A buyer has to be approved before you can sell to them.
0 votes Thank Flag Link Mon Feb 25, 2013
With my clients, what I find is that the offerring price is very eye-catching ($153,972 in this case) but on closer inspection the coop fees are amazing ($1,233). While this includes the underlying mortgage not all coops have, it can be daunting for budgeting purposes. In other words, you would receive part of this back when you file income taxes for your share of the second mortgage. In addition this coop has income restrictions: under $59,450 for a single and under $67,950 for a couple. Once you're past the numbers there are other concerns, many of which are the same as in a condo (pets, renovation, etc.) but the ability to rent is a major difference. Call me if you want some help in navigating this.
0 votes Thank Flag Link Mon Feb 25, 2013
Hi Cathy,

Each Coop is different and has different rules, regulations, and bylaws.
This Coop does allow for renovation of the unit upon approval. However, they will not allow for a installation of a dishwasher or W/D.

Please note, that effective January 2013, the income restrictions dropped from $59,000 to $45,000 for one person. In addition to the income restrictions, the coop doesn’t allow pets (although they are working on revising that restriction), there is no off-street parking, the buildings doesn’t have elevators, and as an owner you must resided in your unit for 18 months prior to renting it out for 24 months.

Not all Coops have income restrictions or such restrictions on renovating.

Is this property of interest to you because of it's price? Location? Size? Etc.? Along with being a Realtor I also live in another Coop in DC, so I am fully capable to help you should you be interested in exploring Coops, condos, or homes in DC. Email me or call me and let me know how I can help you.
0 votes Thank Flag Link Mon Feb 25, 2013
The major disadvantage of coop's is that most have rules against renting so if you want to have that option, you will want to focus on condo's. Visit my website for free access to the MLS for real time postings of available properties @ http://www.ISellDChomes.com
0 votes Thank Flag Link Mon Feb 25, 2013
Hi Cathy! Generally co-ops have a board that may have a say in decisions of who new occupants will be among other things involving residents.
0 votes Thank Flag Link Mon Feb 25, 2013
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