lbowie, Home Buyer in Seattle, WA

What is the difference between a coop and a condo?

Asked by lbowie, Seattle, WA Sun Aug 4, 2013

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Ken Graff’s answer
Lots of great answers here, so I will not be redundant. I would add that I am aware of a couple of lenders that will loan for co-op purchases. There is a terrific co-op on Olympic that has been sitting for awhile, (probably because many buyers are reluctant to purchase a co-op) that I believe to be a terrific value.

Call me if you need help.

Ken Graff
Coldwell Banker Bain
0 votes Thank Flag Link Thu Aug 15, 2013
Annie, California is unique, as far as I know, of having the absurd system where property taxes are based on past purchase price rather than current value. In any case, it has no application in Washington.

That said, your answer raises a good question that I don't have the answer to--whether the owners of coops in Washington have to pay some type of personal property tax. With the exception of businesses, assessors tend to ignore personal property in Washington. If there is no personal property tax then there likely would be some tax savings, in part because the total current value of a coop is likely less than the total value of a condo, and in part because the assessor would not have good access to current sales data.

Similarly, I'm pretty sure the real estate excise tax doesn't apply when you sell, but there might be some other tax applied.
1 vote Thank Flag Link Mon Aug 5, 2013
Besides the legal & ownership differences between a condo and a co-op, the two issues that stand out are financing and marketability. Co-op's, because they are unusual in Seattle, tend to be less desirable to buyers. Obtaining financing for co-op's has historically been more of a challenge. Those are two important considerations if you're contemplating purchasing a co-op.
1 vote Thank Flag Link Sun Aug 4, 2013
In a co-op you own shares in a corporation that in turns owns the building. The corporation leases the apartment back to you.

In a condominium you own everything from the surface of the walls of your apartment with title to a piece of real estate.

Lending is more specific in co-ops and you have to connect with a very specific loan officer who processes that type of loan. Most of the loans are underwritten by the National Co-op Bank. They typically require a 10% down payment.

Condominium lending is also more challenging than single family lending in that the underwriter typically wants to understand the health of the Condominium Association before they will commit to lending on the real estate. The health of the Association will determine whether the down payment requirement is 3%, 20% or 25%.

There is a requirement that the co-op board approve (without any discrimination against protected classes) any new buyers and that is done with an interview process. I see it as a benefit because it also an opportunity for the buyer to meet the board and if there are people you don't like you, as buyer, can move on. I wish Condominium Associations had such a requirement because it would save a lot of head/heart ache in the future.

If you'd like more information, email me me and I have a flier that goes into more detail.
Web Reference:
1 vote Thank Flag Link Sun Aug 4, 2013
Kary nailed it. There are differences in the structure of each, but historically the main difference is access to financing. Although, that being said they are becoming more common in Seattle whereas before it was pretty much only seen in New York City and San Francisco. Co-ops also very rarely allow for the units to be rented, or if they do, they must be occupied for 1-2 years first. So if turning your investment into a rental is an option then that is another factor to consider.
1 vote Thank Flag Link Sun Aug 4, 2013
Coops tend to be older complexes, although there are some older buildings which were converted to condo at some point in their life.

Ownership in a coop is not a specific ownership interest in real property, but instead an ownership interest in an entity which owns real property. That ownership interest gives you a right to use a specific unit and the common areas of the building. With a condo you do own a specific interest in property which is considered real property and there is generally a HOA which governs the complex and maintains the common areas.

Beyond the legal differences, the main practical difference is financing of a coop is likely to be more limited. Due to the likely older age of the building and limited financing options, coops are typically less expensive, all other things being equal.
1 vote Thank Flag Link Sun Aug 4, 2013
Kary, I find that the assessor values co-op buildings significantly lower than the combined value of the units.
0 votes Thank Flag Link Mon Aug 5, 2013
One benefit to owning a coop is that property taxes are typically lower - since the Coop Corporation technically owns the property their taxes are based on the initial loan, not on your purchase price. Usually a portion of your monthy coop dues pays the property taxes. In a condo, you will be responsible for your own property taxes in addition to the HOA dues. The property taxes on a condo will be based on your purchase price.
0 votes Thank Flag Link Sun Aug 4, 2013
To add on. While financing options aren't as good - interest rates are higher, too - property taxes for co-ops are much lower than for condos.

Here in Seattle, co-op buildings TEND to have more deferred maintenance than condos. And many co-ops are pet-free, most are dog-free. Few have indoor parking.

BUT, co-ops also tend to be cheaper than condos!
0 votes Thank Flag Link Sun Aug 4, 2013
What both of the other agents are saying is correct. I only know of a couple of lenders that will finance a Coop. Another thing to mention is that with a Coop there is usually a board that you will need to get approval from before you can live there.
0 votes Thank Flag Link Sun Aug 4, 2013
Thank you!! Very helpful information from all who posted!!!
Flag Sun Aug 4, 2013
Just a couple of things to add to the great answers below. One can expect to be more involved with one's neighbors in a coop, one might not like the arrangement if someone would rather have little involvement with their neighbors in the building. While they they tend to be some of the older buildings toward the core of downtown Seattle, they often are found in the Seattle floating home as well.
0 votes Thank Flag Link Sun Aug 4, 2013
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