James Cusano, Home Buyer in Washington Heights,...

What is the difference between a condo and a coop?

Asked by James Cusano, Washington Heights, New York, NY Wed Apr 11, 2012

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13
Dania Robley-Lehi’s answer
Hi James Cusano,

The first big difference between a condo (condominium) and a coop (cooperative) is that; a condo is real property. This means that when you buy it then you own it, in its entirety. On the other hand when you buy a coop you are buying shares in a corporation.

Condos usually cost more money than a coop, but the maintenance fees are lower. Coops usually cost less money than a condo, but the maintenance fees are higher.

The process can be more straight forward when dealing with a condo; less paperwork and sometimes there is no board interview. This really depends on the condo building. There are some condos where you do have to go through the full paperwork and board interview process. When dealing with a coop you usually have to go through the full paperwork and board interview process.

There are other differences, but these are the main ones.

There are many reasons why people pick one or the other. It really depends on individual needs, wants, and feelings. A good agent can help you figure out which one is the best match for you.

I hope this helps.

If you have any other questions, or know of anything I can help you or anyone you know with then Please feel free to call me.

Best,

Dania K. Robley-Lehi
Keller Williams- NYC
Licensed Real Estate Saleperson
"The Real Estate Matchmaker"
718-710-8630
dania@kwncy.com
0 votes Thank Flag Link Tue Jan 1, 2013
Hi Jim, as another Manhattan real estate broker, my opinion is the same as Jenet's below - the great preponderance of Manhattan residential real estate is in the form of co-op, therefore with relatively few exceptions, most buyers have no prejudice towards one or the other. The reasons they might include whether or not they plan to buy strictly for investment or whether there may be something about their backgrounds that could interefere with an application being approved in a co-op (this is often the case if they are stretching too far financially in attempting the purchase). The other aspect is that pricing in condos is considedrably higher than in co-ops so often the best choices for a given buyer who can meet a board's requirements IS a co-op rather than a condo. Financing issues, too, are rarely if ever a function of the building's being a co-op rather than a condo (in fact when the market was at its worst a couple years back, more of my condo deals experienced problems with financingf than my co-op deals). Last point, which is just a correction of a technical point that was raised in one of the comments below (and may be a reflection of a regional differences in the way condos are set up in NY versus other parts of the country) : in a NYC condo, the homeowner's association owns nothing on its own - the entirety of the building and its facilities, including the gym, the lobby, even the super's apartment unless it's privately owned by an individual - the whole enchilada is owned 100% by the unit owners based on their respective percentage of common interest (the % for each unit is given in the bulding's offering plan). The percentages of common interest among all unit owners will total to 100% - therefore the condo association actually owns nothing on its own. Pls let me know if I can answer any questions in more detail. Charlie Summers, Bellmarc 917-376-1648
2 votes Thank Flag Link Sun Apr 15, 2012
James,

I will answer your question about whether co-ops are harder to sell than condos, as you've gotten many answers to your first question. I've also explained the difference in detail in many earlier posts, so please feel free to browse them.

I've got to say that my pet peeve on Trulia Q&A is when someone from another part of the country attempts to answer a question about NYC. As the National Association of Realtors says "Real estate is local." The NYC market particularly is unique and quirky, so please don't think someone from Kentucky has any idea how to answer your question and has apparantly scared you totally unnecessarily.

Of apartments that can be owned in NYC, approximately 75-80% are co-ops. In the 1980s, many rental buildings went co-op. In recent years, condos have been introduced to NYC. Condos are either new construction or new conversions. Therefore, our prime most-loved neighborhoods of pre-war buildings, such as the Upper West Side and the Village have almost exclusively co-ops. There is a shortage of inventory in those two neighborhoods because of the demand, so co-ops are absolutely not hard to sell. Most people buying and selling apts. in NYC are buying and selling co-ops.

There are advantages and disadvantages to both co-ops and condos. A very major advantage to a co-op is that careful screening takes place. Though many people dread applying for board approval and going through that process, the fact is that the reason NYC was last in and first out of the housing crisis is because those co-op boards made sure people who bought were qualified to buy. That is why we have not had the foreclosure problem here. Co-op board standards are higher than bank standards and while anyone with a pulse was able to get a mortgage at one time, that did not mean by a longshot that they would pass a co-op board unless truly able to afford it. Furthermore, by the board making sublet policies that are somewhat restrictive, the plus side of that is that your building will never have transients coming and going (serial renters in a majority of units). When you buy a condo, you can sublet at will, but you will also have ever-changing rental neighbors, and if too many units are rented out, when you go to sell, the bank will not give a mortgage to your buyer if there are too many non owner-occupied apartments. Also, co-ops are less expensive than condos, so again on the question of are they hard to sell - no.

Condos are not better than coops; co-ops are not better than condos. They are different and one or the other may be more suited to you. A skilled, experienced agent can help you know what is right for you, streamline your search, and take you through all the steps of the purchase process. I would very strongly advise you use a really good buyer's agent.

Best,
Jenet Levy
Halstead Property, LLC
jlevy@halstead.com
212 381-4268
http://jenetlevy.halstead.com for all NYC listings
1 vote Thank Flag Link Sun Apr 15, 2012
Thank you Janet for your thorough explanation of co-ops vs condos! I appreciate your time and effort in articulating the two types of housing in NYC!
Flag Sun Apr 15, 2012
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.
1 vote Thank Flag Link Thu Apr 12, 2012
To put it another way - in a condo, we each own our units, and the Homeowners Association essentially owns the rest.

In a co-op, we own the entire building, as a corporation, and the corporation gives us the right to occupy and transfer the unit.

More technically: a co-op is a single piece of real estate; a condo is subdivided into separate units and common areas.

As a practical matter, co-op boards have more responsibility than condo boards - to the buyer, that means that you have to undergo a more rigorous approval process to become a partner in a co-op than you do to be a owner of a condo.

All the best,
1 vote Thank Flag Link Wed Apr 11, 2012
Hi, a coop is run through a corporation. The shareholders are the people that buy the units. You don't actually own the unit you own shares in the corporation which entitles you to a proprietary lease. You pay monthly maintenence which includes your pro rata share of the buildings property taxes. A condo is a form of actual ownership. It means there is a board of managers that govern the building. You own the unit and are responsible for what is inside only. You will pay a monthly common charge and also property taxes since you own it. The board isn't like a coop where you have to appear before them for approval.

Sincerely,

Christopher Pagli
Accredited Buyer Representative
Licensed Associate Broker
William Raveis Legends Realty Group
914 406 9023
1 vote Thank Flag Link Wed Apr 11, 2012
@James Cusano-To answer your question about the difficulty selling coops vs. condos, the most important factor in successfully selling a coop unit is that the buyer MUST use a lender that is familiar with the New York City market. Although there are coops in other cities, it is nt nearly as prevalent as it is in NY. Therefore, most mortgage brokers/loan officers here understand the uniqueness of a coop and often have a lengthy list of coops that they are already approved to lend in.
When you are looking to sell, it is important for you (or your broker) to make sure the buyer plans to use a reputable lender based in the NY area with extensive experience with coops.
0 votes Thank Flag Link Fri Apr 13, 2012
With co-ops, the purchaser receives ownership in shares of stock within the corporation that owns the property, and a proprietary lease for a particular unit. These shares constitute personal property, not real property. Prior to purchasing a buyer must receive co-op board approval. Upon selling the seller may have to pay a flip tax to the co-op board. Condominium purchasers receive a deed to their unit; their ownership consists of two elements; ownership in their unit and ownership in common area. If you are considering the purchase of a condominium it is important to inspect the health of the home owner's association. For instance; Does the association budget include money for operating expenses such as water, lights, elevator maintenance, and landscaping?
Is there extra money set aside in a reserve fund for long term maintenance?
Do the condo's expenses exceed revenues due to a high foreclosure rate or other reasons that the owner's debt's go unpaid? If there is a shortfall does the association have a plan besides cutting back on services or raising fees for making it up?
0 votes Thank Flag Link Thu Apr 12, 2012
I appreciate all your responses! Jim Simms from KY said, "Coops are harder to sell and impossible to finance in my area because the owners do not own title to real estate, they own shares in the coop. Probably not as big a problem in NY. " To answer Jim's question, are coops more difficult to sell than condos in NYC? Please be honest realtors!

Thank you,
Jim
0 votes Thank Flag Link Thu Apr 12, 2012
The Coops are owned by a Corporation and you are a shareholder of the Corporation. In Condos you own your unit. Coops Boards are more demanding in terms to approval a new buyer than Condos, and in many cases the Condo does not requiere a Board Approval. The Condos are good for investors because they can lease and the majority of the Coops does not want investors because they want the buyers to live in bulding and not to rent their units. The Coops you have maintnance and Condos you have common charges and real estate taxes. The montly costs are very important in your decision when you buy a property and also I recomend you to check the finantial of the building before you purchase anything.
Feel free to call me and I will diligently work to satisfy your needs.
Manhattan-Spaces
Vera Aricha
917-378-9673
0 votes Thank Flag Link Thu Apr 12, 2012
Hi James, this is a great question! A condo and a co-op are similar in many ways in that both are apartment units within a building that is run by a board of directors, has a managing agent, etc. From a day-to-day standpoint you'll see little difference. The real difference is the underlying legality in terms of form of ownership: in a condo, you will receive a deed with title to a piece of "real property" (similar to what you get when you buy a house). In a co-op, you will be purchasing shares of stock in a housing corporation which owns the entire building (i.e. the housing corporation holds the deed and they are the owner of record - you are a shareholder of the corp). At closing you will receive a stock certificate along with a "proprietary lease" which entitled you to live in the subject apartment in perpetuity (until both are cancelled by the managing agent at the time you sell). Both forms of ownership allow the buyer to claim a deduction for mortgage interest on a loan used to buy the apartment. Since in a condo you will pay real estate tax directly to the City of NY, you are entitled to claim that as a deduction; in co-op, the housing corporation pays this tax and reports to each shareholder the amount of their piece of the real estate tax paid (as well as their share of interest paid on the building's own mortgage if any) for tax purposes. In most co-ops, board approval is required to purchase a unit (meaning as a purchaser you will submit a large amount of information to the board for review, who will then rule on whether or not your purchase will be allowed - likewise when you sell, your purchaser will do the same). There are also rules pertaining to sublets (limits on time periods, among others). In a condo, there is often whats called "right of first refusal" meaning that to buy you must submit information to the board who then has the option only to excecise right of first refusal to purchase the unit on the same terms (rarely happens since then the board needs to come up with the funds to purchase the unit and then also to re-sell it). Rentals of condo units are relatively common as they are good vehicles for investors and there is usually an application procedure the prospective tenant must follow to get approved by the board (same deal - its right of first refusal by the board, not an "accept" or "reject" decision).
I'd be happy to go into even more of the finer poiints if you have a moment to chat. Please call me or email any time. Charlie Summers, VP, Bellmarc Realty, 917-376-1648
0 votes Thank Flag Link Thu Apr 12, 2012
Coops are harder to sell and impossible to finance in my area because the owners do not own title to real estate, they own shares in the coop. Probably not as big a problem in NY.

Jim Simms
NMLS # 6395
JSimms@cmcloans.com
Financing Kentucky One Home at a Time
0 votes Thank Flag Link Thu Apr 12, 2012
Dear James,

A Coop is a type of ownership of property. This is when the individual unit owners own shares in the cooperative building and do not own the actual property. The amount of shares owned is determined by the value and size of the apartment. The cooperative building owns all of the units and the purchaser is buying stock in the building. Most Coops have strict subletting rules. Once your offer is accepted you must submit a board package to the board and if approved by the board, you would have to be interviewed by the board before you are accepted.

A Condo is a building where individuals own individual units but share common areas with the other unit owners of the building. A more liberal type of ownership than Coops, Condos also have more lenient policies regarding subletting and pets. While you still have to submit a board package, the board reveiws your board package and grants a waiver of first rights refusal.

Hope that answers your question.

Ross Ellis
Licensed Real Estate Salesperson
Member of Real Estate Board of New York
Halstead Property, LLC
212.317.7828 direct
770 Lexington Avenue, 10th Floor
New York, NY 10065
rellis@halstead.com
0 votes Thank Flag Link Thu Apr 12, 2012
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