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Hmurten, Other/Just Looking in Boulder, CO

What are the pros & cons of buying a coop vs condo in Washington, DC?

Asked by Hmurten, Boulder, CO Thu Jan 12, 2012

I've noticed the HOA fees for coops are much higher, but that seems to include property tax, correct?

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Michael "Mike" Brown’s answer
Hello Mmurten,

Co-operative (aka "Co-op") ownership has long and well-established history - well over a hundred years - in the North Eastern/Mid-Atlantic areas, including Washington DC.

In general, most co-op fees do include the stockholder's individual share of property taxes (called a "pass-through") for using the designated unit which are normally tax-deductible. An upside benefit is that a coop is "exempt," since the deal is considered a "stock" transfer, from The District of Columbia's transfer and recording taxes, which ranges from 1.1% to 1.45% of the sales price in a "real estate" transaction.

A potential downside to cooperative ownership is that each cooperative board has specific lender "recognition or designated" agreements in place when the buyer requires a loan in the transaction. In some cases, this MAY mean larger down payments at slightly higher rates which can only go through, for example 1, 2 or 3, "recognized or designated" lenders.

While the other cooperative descriptions given by my peers are very good, additional information which may be helpful can be found at http://edmundjflynn.com.

Flynn, an old and highly-respected law and title firm, created most of the DC cooperatives when they were originally formed and still, handles almost all the closing transactions for all co-operative sellers and buyers, today.

Good luck and let me know if I can help.
Welcome to DC!
1 vote Thank Flag Link Mon Apr 9, 2012
Hi Hmurten,

Something else that was not mentioned previously, it that when you buy into a coop, the coop has to approve you personally to buy into it in an interview process, and if they don't like you, they don't have to let you in. Basically a coop is a business that just happens to be where all of it's shareholders live. Also, a coop will require that you use their pre-approved lender and no one else. Because you are not buying real property, but stock in a business the closing costs will be much less, but you won't really own anything. Also, if you decide you want to rent it out, you will most likely be restricted in how long you can rent it out before moving back in or selling it. Also, your monthly fees will be higher than in a condo because there will be an underlying mortgage that all members are responsible for a percentage of.

A condo purchase is just between you and the owner of the unit you want to buy. You will own it, which includes everything within the 4 walls, ceiling and floor. Everything outside of that is either common area or another unit owner's responsibility. The condo fees will be determined by what amenities are offered, whether any utilities are offered and how many owners are delinquent in their fees. There are ALWAYS delinquencies, how many just depends on how well the association is managed. When you put an offer on a condo, the seller is required to give you a condo resale packet, that includes all the financials of the association, bylaws, rules & regulations, etc. If the financials and delinquencies don't look right to you, then you have 7 days to just quit the contract with no penalties.

Hope this helps!
If you are in need of an agent in the DC area, I would love the opportunity to become your Realtor®. I am licensed in DC, Maryland and Virginia. Feel free to contact me anytime!


Kelly Putz
Buyer's and Seller's REALTOR®
Keller Williams McLean
703-961-8663 - cell
2 votes Thank Flag Link Sun Mar 4, 2012

Don wrote a pretty good description of the difference. In a condo you own the walls that make-up your condo, and contribute to common areas, such as hallways, elevators, and fitness room or pool if the building has one. In a co-op, you own shares that represent the unit you live in, you do not own the 'walls' that make-up the co-op. Typically co-op fees are higher, but they do include your electricity, gas, water and taxes.

DC has a mix of both condos and co-ops, much more than any neighboring city.

Please let me know if you have any more questions or need any assistance.


1 vote Thank Flag Link Sat Jan 14, 2012
Correct. Understand the legal difference between a condo and a coop. In a condo, you OWN your own unit. There will be some common area space that all unit owners pay for--the lobby, etc. And there's the roof over the entire building. Maybe elevators. Utilities in the common area (though you'll almost certainly pay your own utilities). But you'll still pay property tax on your own unit (and often, if it's a separate piece of property, a parking space).

In a coop, a corporation owns the entire building. You, as an owner in the coop, own shares in the building that give you the right to live in a designated unit. But the corporation is the building's owner. And you're responsible for your share of the payments to the corporation.

A coop isn't inherently more expensive than a condo. But in a condo, you're paying your own property taxes (usually included in your monthly mortgage payment). In a coop, there are still property taxes, but they're in the coop fee.

So you've got to be sure you're comparing apples with apples . . . and your question suggests that you are aware of some of those distinctions. So, one way or the other, the DC government is going to be sure to collect the property taxes. And, one way or the other, you'll be paying for utilities. It's just that, in a condo, you may be paying more of those directly and in a coop you may be paying more of those through the coop fee.

Hope that helps.
1 vote Thank Flag Link Thu Jan 12, 2012
Don Tepper, Real Estate Pro in Burke, VA
The infographic below explains it well. You can often get more SF for the dollar in a co-op, but DOM may be longer when you re-sell. Deduct property taxes from fees when comparing to a condo and be sure to note whether or not the fee also includes utilities and maintenance. Co-ops have recognition agreements with lenders and Edmund J Flynn does most of the region's co-op settlements.
0 votes Thank Flag Link Thu Mar 15, 2012
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