Real Estate Guide
Difference Between a Condominium and a Cooperative “Coop”
Buyers Purchasing Property in New York there are two main types of ownership choices:
Condominiums (Condo)
Cooperatives (Co-op)
There are advantages and disadvantages to each, but in the end it’s a matter of individual preference and financial goals.
In a condominium, a purchaser owns deed to the real property and each owner is responsible for a percentage of the common areas, amenities and building. Since ownership is direct, owners are responsible for their own property tax. Each Condominium elects a “Board” comprised of Unit Owners whose purpose is to make decisions on behalf of all the owners. The Board also hires a Management which is responsible for the overall health of the building and process rentals and sale of units in the building in exchange for a fee. Due to the ownership nature of Condominiums, they are the top choice if you an investor, foreign buyer or parents purchasing for their children.
Advantage & Disadvantages
Easier approval process:
Condominiums normally have fewer requirements on income and have a lower minimum down payment usually around 10%.
Right of First Refusal:
This is one of the most important advantages for owning, buying and selling a Condominium because in the event the Condominium Board denies and refuses a transaction they must, at the same terms of the contract with the prospective buyer or tenant, buy or rent an apartment from the owner. Since this option is very expensive it is rarely exercised and it allows the owner to sell, rent and use their property as they see fit.
Lower Monthly Common Charges, Common Elements and Services:
Condos usually are slightly less expensive to maintain over time. Owners of condominiums pay for the common elements (ie: management, staff, doormen, plumbing, roofing, common walls, etc.) in the form of common charges, and they pay their taxes separately. Owners also have more control over building maintenance and development issues. Lastly, Owners have fewer restrictions in renovation and combining multiple units.
Neighbors:
Because of fewer restrictions, neighbor composition may become less similar in nature and may have transient feeling.
Settlement Costs:
The closing costs to obtain a mortgage for a condominium are very expensive in relation to settlement costs to finance coops. The major differences are the inclusion of mortgage recording tax, title insurance and tax escrow when obtaining a mortgage for a condo, as these items are not required to close on a cooperative apartment loan.
Availability & Cost:
Typically More Expensive Per Square Feet and there are Fewer Condos vs. other types of real estate properties in New York