Home Buying in Stamford>Question Details

Anna, Home Buyer in Columbia, MO

What are the advantages and disadvantages of buying a coop? I'm looking in the Sylvan Knoll Rd./ Cove area?

Asked by Anna, Columbia, MO Tue Jul 1, 2008

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Anna,

Sylvan Knoll has two of the ten coop complexes in Stamford, compared with well over 400 condominium complexes. Sylvan Knoll Sec. I has 122 units; Sylvan Knoll Sec. II has 144 units, out of just 753 total Stamford coop units. Condominiums exceed 12,000 units. In my opinion, if a coop were to re-declare itself a condominium, the individual unit market values would soar. It's the form of ownership — coop vs. condominium — that creates resale problems for coops.

Over twenty years ago, Peoples Bank promised us Realtors® that they were about to start financing coop purchases, but it didn't happen. We had to go to out-of-state mortgagors for financing . . . in states like New York or Florida where coops were common.

The problem then was described as follows: a coop is considered one piece of property, wherein unit owners buy shares in the non-profit corporation equal to the relative value of their unit to the total, and are issued a proprientary lease for their unit. Each condominium unit, however, is an individual piece of real estate, individually taxed, common charged, and deeded. If the coop has a blanket mortgage on the entire property, an application to finance the purchase of a single unit would be treated as secondary financing . . . at least by the Connecticut banks that had not had as much experience as the New York banks, for example. In other words, you would not be granted a first mortgage on the unit you were trying to buy because there was already a first mortgage on the entire property. Until the middle eighty's, you had to pay all cash for your purchase, and you could not deduct any property taxes because you were not paying those taxes directly, the corporation was. Then, a change was made to the statutes decalring an interest in a coop as an interest in real estate, allowing unit owners to deduct that portion of their common charges that represented their share of the corporation's property taxes.

Before you seriously consider a coop purchase in Connecticut, decide how long you expect to live there. Remember, Syvab Knoll was built in 1950-1951, a long time ago by our local common interest communities. This means, virtually everything else is newer, to much newer. Consider maintenance and repairs, such as the roof, the integrity of the brickwork, the relative small sizes of the rooms and storage, the vintage of the heating systems, etc. Perhaps you can do much better. And, lots of luck re-selling later.

Perhaps a small complex townhouse condominium would serve you better, now and later. It will appreciate much better, and be worth a whole lot more later than would a coop. Plus, you'll be able to re-sell it later. Try for a small enough complex so as to skip places with professional management companies. That will keep your monthly common charges lower, as common charges do affect market values.

I remain at your service.

RichardHamlin.com
0 votes Thank Flag Link Thu Jul 24, 2008
Hi Anna,

Coops are typically more affordable. In addition, coop owners are somewhat more insulated from the current foreclosure crisis due to the strict financial requirements of many coop boards. Of course, that can work against you as well, both when buying and selling. Since many coop boards limit those who might qualify to purchase a coop, it goes without saying that your buyer pool will be smaller when going to sell. Also, there is typically a lengthy approval process, meaning you might go through the whole process only to be turned down 30-45 days later. You should check into the coops financial requirements before even making an offer - income to debt ratio, reserves, etc.

If I can be of any assistance, please don't hesitate to ask.

Christopher Rich
William Raveis Real Estate
Your Fairfield County Realtor
0 votes Thank Flag Link Wed Jul 2, 2008
Anna, the advantage of buying a coop is price. They are typically less expensive than the alternative -- a condo. When you own a coop, you actually own "shares" of the cooperative. In contrast, when you own a condo, you own real estate.
As Len states in his answer, the disadvantage of buying a coop is financing. Banks in CT are not thrilled about lending for the purchase of a coop. Also, you have to be approved by a Coop Board, which can be tricky. They typically look for strong assests in a buyer, and don't need a very good reason to turn down your application -- it is sort of at the discretion of the Board.
If you are willing to look at a reasonably priced condo, I have an excellent listing in Glenbrook at 291 Hope Street for $299,000 with all the bells and whistles! Please check out the listing on Trulia or my website.
Good Luck!
0 votes Thank Flag Link Wed Jul 2, 2008
Hi Anna.
The simplest answer is financing. Because co-ops are not the standard for Stamford, there are very few lenders who will finance buyers, which means they are difficult to sell. (Not true in NY.)

I am in the middle of a co-op transaction right now and my client researched about 10 lenders before he found the one who would give him a mortgage, with 20% down. It's Washington Mutual.

If you decide to go with a co-op because they are more affordable, before making your offer, be sure to find out if they by-laws permit rentals. If they do, consider moving on. The more rentals in the building, the less likely a lender will lend. And all lenders that do offer loans for co-ops have approved buildings, so you can usually find out in advance if a loan is possible.

Good luck,
Len Schwartz
Agent for a New Age
Web Reference: http://www.LeaveItToLen.com
0 votes Thank Flag Link Tue Jul 1, 2008
You might also want to try living in the location prior to purchasing just a suggestion.
Good luck http://www.lynn911.com
0 votes Thank Flag Link Tue Jul 1, 2008
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