NMLS # 6395
Financing Kentucky One Home at a Time
When you purchase a condominium unit, you are purchasing real estate. The space between the walls in which you live (assuming you are not an investor renting it out) you own outright. You also own a percentage of the common area (hallways, staircases, elevators, roof, boiler. etc.) in common with every other unit owner. You pay your own real property taxes and monthly common charges to the condo association to cover the cost of maintaining and operating the condominium.
A coop is different. You purchase shares of stock in a corporation which owns the real estate. Along with you shares of stock, you receive a proprietary lease entitling you to reside in a particular apartment. You pay monthly maintenance charges to the coop to the cost of maintaining and operating the real estate owned by the coop corporation, plus real estate taxes and usually a mortgage on the real estate which is in addition to any loan you have taken out to purchase your interest in the coop. While the sale of a condo unit is subject only to the condo's right of first refusal to buy the unit on the same terms that a buyer has contracted to purchase the unit from the seller, a coop apartment is subject to an approval process by the coop's board of directors who can reject the purchaser for any legal reason.
Licensed Real Estate Associate Broker
450 7th Avenue Suite 1501
New York, NY 10123
The condo advantage of individual unit ownership can be compared to the benefit of being able to choose your neighbors in a co-op setting, where the application process is very often quite selective. In the sale of a condo, once a price is agreed upon, the deal is done; whereas the sale of a co-op requires approval by the Board of Directorsâ€”which can be (and often is) withheld based upon arbitrary selection criteriaâ€”with no recourse to the buyer or seller if the sale is not approved.
Co-op ownership represents an interest (i.e. stock) in realty; condo ownership is actual ownership of realty. Price differences reflect demographic and geographic distinctions. You decide whatâ€™s best for you.
The fundamental differences under NY Real Property Law are as follows:
CONDOMINIUM: is considered "real property" similar to a house. You get a DEED to reflect your ownership of the property.
COOPERATIVE: is not considered "real property." What you're buying is shares in a corporation. The corporation owns the "real property" or the land and its improvements (the building where the Co-Op is located).
Financing: Traditionally more difficult to finance a Co-Op than a CONDO, but here in New York, with the prevalance of Co-Ops, there are local Lenders who lend often for Co-Ops. In the current lending environment we Lenders are finding it increasingly difficult to lend both in Condos and Co-Ops for a variety of reasons including poor management, delinquent Homeowner's fees, high investor concentrations to name but a few.
My advice to you is this: meet with a Local Mortgage Banker to get prequalified for mortgage financing. I personally meet many potential Buyers who believe (mistakenly) that it is both cheaper and easier to buy a Condo or Co-Op. Often when I prequalify them and demonstrate how they could both own a home and how the costs are comparable (sometimes less!) to a Condo or Co-Op purchase, I find my clients' eyes are opened to different possibilities.
PowerHouse Solutions, Inc.
185 Great Neck Rd, Suite 240
Great Neck NY 11021
Licensed Mortgage Banker â€“ NYS Dept. of Financial Services
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A co-op is short for a cooperative corporation. This is treated in many ways as real property, but it is not. When purchasing a co-op, the purchaser is will receive on closing shares in the corporation plus a proprietary lease for that unit. The shares represent a percentage of the total amount of corporate shares, usually based on the unit's square footage. The unit holder's percentage of property taxes on the entire building are included in the maintenance charges. Many times the maintenance charges will also include the heat (oil or gas), gas for cooking, water, landscaping and snow removal in addition to the unit holder's percentage of the entire building's mortgage principle & interest. To purchase a co-op, the prospective purchaser will complete an application , along with bank statements, references, prospective occupants to the unit, a mortgage committment and whatever application and move-in fees are required by the co-op Board and management company. The Board generally requires a minimum cash payment of 10% and may require 20% of the purchase price. The Board and management company will decide whether a prospective unit purchaser will be permitted to make the purchase . This permission may be denied without cause.
If you have any further questions, please don't hesitate to contact me.
Arlynn B. Palmer, ESQ, CBR, SRES
Associate Broker, Daniel Gale Sotheby's International Realty