There’s a good chance you would not be able to determine if a piece of property is a condominium (condo) or a cooperative (co-op) simply by looking at it. The difference between condos and co-ops has to do with what you are actually buying.
When you purchase a condo you own that single unit. In addition to the unit, you share ownership of the other areas of the property, such as the gym, parking lots and hallways. In a way, owning a condo is like owning a single-family detached home; each occupant in the complex has to pay his or her own mortgage and taxes. However, you have to pay additional homeowners association fees every month as well; these fees may include landscaping, snow removal and/or pool maintenance.
The homeowners association is also in charge of implementing the Covenants, Conditions and Restrictions (CC&Rs). CC&Rs are the rules and regulations owners must follow. One example is the restriction or allowance of pets. Furthermore, you are permitted to do renovations, such as changing the flooring, to your condo as you would be able to do in a house.
A co-op differs from a condo in that instead of purchasing an actual unit, you are purchasing stock in the real estate, making you a shareholder. By doing so, you are able to lease a unit. A corporation owns the property rather than individuals owning separate units. As a result, the monthly fees consist of the entire building’s mortgage, real estate taxes and so on; you pay your share of these expenses. The fees vary depending on how many shares you own, so you could be paying more than your neighbor. Additionally, since you are paying for the building’s expenses as opposed to individual expenses, co-ops tend to have higher monthly fees. On the other hand, the purchase prices of co-ops tend to be lower than condos.
Co-ops have a board of directors, which has the power to turn away possible buyers. For example, if you’re selling your co-op and there is someone interested in buying it, that person has to be accepted by the board before any deal is made. If the board denies said person, you have to look for another buyer. This can make moving extremely difficult. Also, you are typically prohibited from doing any updates, so re-doing your kitchen, for instance, is most likely unauthorized.
Both condos and co-ops have their pros and cons, so it’s important to learn as much as you can in order to find out which is right for you. Feel free to consult with the dedicated staff at Contour Mortgage if you have any questions.
