Laura, another difference between condos and co-ops in NY is the closing costs. Because you are buying shares in a corporation, there is only a lien search done, and a UCC1 form is filed. The total cost of that is under $500. When you buy a condo, your municipal searches alone are often over $500, then you have title insurance, which is based on the purchase price and the loan amount, the mortgage tax is 1.8% of your loan amount.
If you are taking out a mortgage, you can get a great rate with 20% down. On a condo, with 20% down, Fannie Mae and Freddie Mac have an over-lay to rate, which makes it more costly.
The most important thing to figure out, if you are planning to finance, is what you can afford, and if it is likely that you will be approved by the co-op board. There are times when we can get people approved for a mortgage easily, but their debt ratio is too high for the co-op board. Figuring all this out is like getting yourself through a maze. If you would like help in navigating this maze, feel free to contact me.

Laura,
In NYC the vast majority of apartments you can own are co-ops. Many rental buildings turned co-op in the 1980s in Manhattan, Brooklyn and to a lesser extent in the other boroughs. In recent years any new developments or conversions have been to condo rather than co-op. There are many pluses and minuses, so it is a matter of which of the differences matter most to you.
When you own a co-op you own shares in a corporation. Those shares entitle you to the proprietary lease, which allows you to occupy the apt. The board decides who can buy there and what the sublet, pet and other policies are. Your agent (and you really should use a good agent whichever type you purchase) will help you with your board application which is quite extensive and they will prepare you for an interview, as a board interview is part of the buying process. It is a lengthy process to apply to purchase after the seller has accepted your offer. In the end, the board can accept or reject you and they do not have to state their reasons.

In a condo you own the actual physical space aka real property (as in "real" estate). The application is much more streamlined and though there is a condo board, they wield much less power.
Co-ops are typically less expensive, though your monthly charges are more. Condos tend to be more expensive though your monthly charges are usually less and if it is a new development with a tax abatement your monthly charges may be very little.

In New York City, if you like pre-war buildings, you would most likely be buying a co-op. If you like more modern buildings than in NYC you will be buying a condo. If you forsee the need for a liberal sublet policy, you should be thinking of a condo. In the past another difference was co-ops required at least 20% down and condos were only 10%. These days, however, most banks will not lend 90%. However, some condos in New York City have sought and received FHA designation. That means you can put down only 5% (outside of NYC, 3.5%). These are the main differences.

Best,
Jenet Levy
Halstead Property, LLC
jlevy@halstead.com
212 381-4268
http://jenetlevy.halstead.com

Simply put, the traditional housing “co-op” involves the formation of a corporation for the purpose of acquiring title to a multi-unit building and, in turn, leasing individual units (apartments) to the shareholders of the corporation; whereas condominium ownership involves acquiring title to individual apartments or units. In fact, condominium ownership is, for most practical purposes, only one form of cooperative housing and, like the “co-op”, must include provisions for management and maintenance of the building(s) and “common” areas, usually dictated by an elected Board of Managers, in the case of a condominium, and a Board of Directors in the case of a “co-op”. 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 Directors—which can be (and often is) withheld based upon arbitrary selection criteria—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 what’s best for you.

In a condo, you own the four walls of your unit and everything inside. The rest--the roof, the foundation, the lawn, the swimming pool and exercise room--is owned by the condo association. All the condo owners are members of the condo association.

In a coop, you own shares in a corporation. The shares give you the right to occupy a specific unit. However, the corporation actually owns it all--outside your walls and inside.

I'm more comfortable with the condominium approach, but that's because it's what I'm used to. In New York, coops are quite popular, and many people like them.

Neither is "better" than the other. There are great condos and great coops, and there are horrible condos and horrible coops. Usually, it depends on how the condo or coop board is run--who's on it. That's really more important than the ownership structure.

It can--sometimes--be easier to get financing for a condo than a co-op. That's because you own a specific piece of real estate that can be borrowed against. In a co-op, you own shares in a corporation and historically lenders have been somewhat more reluctant to make loans against that. But usually, now, there are some lenders who'll lend the money for a co-op purchase. Just check into that before making an offer.

So, don't let "condo" versus "co-op" be the main factor in your decision. It's something to consider, but you can be very happy--or very unhappy--in either.

Hope that helps.

One thing not mentioned, a Coop has a Board and that Board accepts or rejects future Buyers. They can reject for any reason, I emphasize ANY, and do not have to disclose their reason. Coops also have more stringent rules regarding leasing, pets, etc. The Board can pass almost all new rules without a vote. After buying a coop in NJ, I never would do it again. We just lost our financing for no apparent reason. For years these units were not expensive and only CASH buyers could buy in. Several years ago, they acquired Wells Fargo to do the financing, but within the past year, they no longer will offer mortgages, which were put through a division of SDC. Does anyone out there know what SDC stands for and what kind of program it was. We are left hanging when we try to sell. Thank you.

A condo ...you own the unit
A co-op... you own a share of units

SIMPLE UNDERSTANDING

Laura:

You have been given comprehensive answers to which I have little to add. However, if you are in the market to purchase in Manhattan, please consider me as your agent.

Dennis

It is kind of up to you which is better. However, a major distinction is that you can sell or buy a condo pretty privately without much involvement from anyone else. With a co-op, buyers need to be approved by the board. If you wish to have less restrictions in what you want to do with your home a co-op may not be ideal. The other posts provide a lot of other additional information. It is simply a matter of what you prefer. I can tell you that in my opinion you want whatever is commonplace in your area. If there are a lot of both there should always be demand. But for instance, in NJ there are not a lot of co-ops so people tend to stick more to condos. I don't believe you ever really want to own something atypical for an area. The rest is up to you.

Looks like you got a ton of good feedback. If you have any further questions - feel free to contact me.

One point not yet mentioned is that condos are more expensive than co-ops, but condos tend to have lower monthly charges than co-ops.

There are a couple of reasons for this. Fewer people can qualify to purchase a co-op, so there are fewer buyers competing for the same property, which reduces demand and hence the price.

Condos cannot have an underlying mortgage that must be paid by residents. Many co-ops do have a mortgage on the building as a whole. If the co-op has a mortgage, part of your monthly payment goes to that payment, and your share of this is tax deductible as a mortgage expense.

Please see my blog post for my Buyer FAQ for additional information:

http://gothamcityhomes.posterous.com/faq-for-buyers-of-new-y…

Karla Harby, VP
Charles Rutenberg Realty
Manhattan and Brooklyn
kharby@crrnyc.com

Laura.
Co-Op Buildings are basically people wanting to live around "THE SAME PEOPLE." You will have to disclose all of your financial history and pass an interview. If the board does not like you, you're not getting in. That goes for when you're looking to sell as well. You may have a buyer offering above asking...if the board does not approve of the buyer, you have to start over and find another one. Condo's are the best. Flexible with financing options and also with you renting out the space. Do you want a headache..or do you want to buy an apartment YOU have control over? ;-)

Condo and Co-Op are forms of ownership. With out being overly technical, with a condominium you own your unit outright, in most states from paint surface to paint surface, and an undivided interest in the rest of the unit (apartment building, development, whatever is common area). In a co-op you own a share of the entire development (if there are 100 unit you would own 1/100th), generally it is an undivided share. So in a co-op, while you have a unit you do not really own it. You just have the right to live in it. So you have no deed, you have a share.

Generally, the lending industry prefers Condos to Co-Ops, although NYC is on of the cities where Co-Op financing is not too much of a hassle, or at least not one where it is insurmountable. You decide which is better.

Greg Semos