Condo v Coop: advantages & disadvantages

In New York, buyers looking to purchase apartment units have one of two choices to choose from: condominium unit or cooperative apartment. Although both condos and co-ops look similar from the outside, they cannot be more different. There are a myriad of differences between the two and the choice between purchasing either a condo or a co-op ultimately comes down to personal decision.

Below are some attributes to take into consideration when deciding between purchasing a condo or a coop:

CONDOMINIUMS:

1.     Condos are considered true real estate. A deed is transferred to the new owner at closing.

2.     Owners own their apartments and jointly own the common areas with other owners in the building.

3.     Condos are generally more expensive than coops and are generally newer constructions.

4.     Condos are generally less strict in terms of allowing owners to rent out their apartments.

5.     Condos generally have more extensive amenities.

6.     Condo associations only have a right of first refusal when an application to purchase is submitted.

7.     Condos do not generally require a substantial down payment.

8.     Condos generally have higher closing costs due to title costs and mortgage taxes.

COOPERATIVES:

1.     Co-ops are not real estate in the traditional sense. The “co-op” owns the building; the purchasers simply purchase shares of a corporation.

2.     A stock certificate is issued to the new owner at closing, not a deed.

3.     The bigger the co-op unit, the more shares the owner owns.

4.     Co-ops are generally less expensive than condos.

5.     Co-op owners give up some of their rights to the co-op board.

6.     Some co-ops do not allow subletting, and the ones that do, most have a minimum of time in which the owner must live in the apartment before renting it out, and the coops usually have limits on how long an owner can rent out their apartment within a five-year period.

7.     Co-ops impose greater restrictions on transactions and co-op board approval processes are known to be notoriously difficult. The co-op board can reject a potential buyer for a host of reasons and without any obligation to disclose why. 

8.     Co-op approval process can be long and tedious.

9.     Co-ops generally require a down payment of at least 20% and expect potential buyers to have significant amounts of money left thereafter. Many co-ops are also concerned about the potential purchaser’s debt-to-income ratio.

10.  Though coops do not have the mortgage tax or hefty title bill, a lot of co-ops charge flip taxes, a transfer fee, which is paid by a seller or buyer to the co-op at closing.