Co-ops also require buyers to be approved by the Board of Directors of the co-op corporation. This involves preparing a purchase application which requires financial disclosures and a personal interview. Each co-op has different requirements. It is important to hire agents and attorneys that are familiar with the process or you risk substantial delays which may in turn affect your mortgage rate (expirations).

A buyer may be rejected without the Board having to disclose the reason.

The approval process also extends to leasing the unit. Some co-ops completely forbid it or limit it severely. Condos do not have this problem.

Also, co-op owners own a % responsibility for the co-op building's underlying mortgage.

There are a lot of other legal issues involved. An attorney is a necessity in my opinion.

Hi Jessica:
There is some good information already contained in the answers below. I'll try to give you a "big picture" answer to your question:

A really simple way to understand the main difference between the two is to think of owning a condo as owning real estate, and owning a co-op like owning a part of a business (corporation) who owns the real estate. Often a co-op is less expensive in price, but can be more involved (specific buyer qualifications) to buy. The co-op may also require you to use their appointed lender, and some even require that you are approved by all the other co-owners of the co-op.

With a co-op you can get more for your money in terms of having a nicer or larger space, but likewise when it comes time to sell, it does not necessarily appreciate alongside "regular" real estate.

Jessica,
To further elaborate on Michael's explanation, the definition of a stock cooperative is as follows: “Stock cooperative” means ownership of the land and buildings by a corporation, in which tenants own shares of stock and thus are entitled to an exclusive right to occupy a dwelling unit, or to lease a dwelling.

One of the original uses of stock cooperatives was for tenants to buy an apartment building together. Later it was used as a means to discriminate against certain groups of people. Of course, it is no longer legal to discriminate.

A condominium is different in that the buyer of the condo has exclusively ownership of the individual unit and holds ownership as a tenant in common in the shared spaces.

Practically speaking co-ops are harder to finance, as stated by Michael, and generally appreciate at a slower rate in our market. Most commonly co-ops are financed through east coast banks because most banks out here are not familiar with the protocol for financing something of this nature.

The main difficulty financing it is that there is a “blanket mortgage” that covers the entire property in co-ops.

Hope this helps. One additional item to note is that it is rare for a co-op to allow the units to be rented, whereas is a condo it is fairly common to have some renters.

Good Luck in your home search.

Ray

Hi Jessica, A co-op is different in that each unit owner, in addition to their unit, own an equal share of the entire property..Like shares of stock.. A condo owner, on the other hand, has ownership of their unit only. The other major difference is co-op mortgages are different and source from a limited number of underwriters. A good loan professional will likely pipe in and explain that piece more accurately than I could as I am not a loan pro! Hope that helps some. BTW..In New York City co-ops are more prevelant than California and may even be considered the norm.

Michael
http://www.MichaelRobertsHomes.com

Excellent information has been provided. As the purchase of a co-op unit is more complex, I agree with Joseph - consult a qualified real estate attorney if you are serious about buying this type of property. Also, have a solid buyer's agent on your side. Best of luck!

Risa Liebster, Realtor®
Keller Williams Realty
818.397.9188
RSLiebster@gmail.com
http://www.TolucaLakeRealEstate.net

go to Prospective Homeowners Association to read an explanation.

Ray gave the most complete answer on this subject--print this off.

Jessica, So many clients have asked that same question, I recently wrote an article on just this subject which can be found in the link below:

Jessica, I can only add to the previous answers that many co-ops (there's a few in Long Beach) and another type of ownership called own-your-own, eventually try to convert to condominium status, which is well worth it. All owners must agree to it, and it's an additional expense for the legal process. So if you consider a property like this, you should find this out about the association and what there future plans are, if any, which hopefuly their meeting minutes would reflect as well.