The Differences Between A Co-op and Condo
Right At Home
Daily: Finding It: Making the Deal
The Differences Between A Co-op and Condo
By Barbara B. Buchholz for Right at Home Daily
A cooperative apartment (the official name for
a co-op) and condominium have the same tax advantages as a single-family home
or town house. But that's about the only similarity a co-op and condo share.
The purchase of a co-op includes
shares of stock in a corporation that owns the entire building. The shares are
a part of a lease that permits you to "rent" the apartment. Whereas
the purchase of a condo means you actually buy the apartment, as well as a proportionate
share of the property's common space.
In some cities one form of ownership may be more
commonplace than another. For example, condos are more popular in San Francisco,
while co-ops are more prevalent in New York City. This distinction will likely
affect the difficulty or ease of selling to potential buyers, who may think
one is a better investment because of its popularity.
Not all co-ops permit financing for the purchase.
If that is the case, you will have to pay all cash and show that you have other
assets equal to as much as two or three times the cost of the dwelling.
Though the assessments in many co-op buildings
seem higher than those in comparable-sized condos, they may not be since they
include real estate taxes.
Many of the grander cooperative buildings require
an extensive application process. You will have to provide a detailed credit
report, numerous letters of recommendation from business and social contacts
(sometimes more than a dozen), and pass a live interview (everything from your
conversation skills and handshake to your attire may be scrutinized).
No matter how unfair it seems a co-op board may
reject you for any reason other than your race, sex, religion or a disability.
For example, people of notoriety may be rejected (former President Richard Nixon
was rejected, as are many celebrities) or your profession may disqualify you
(traders are not always beloved because of the volatility of their earnings).
Buying a condominium is just like purchasing
a single-family house or town home. You will need to provide a credit report,
but, often, not as detailed as for a co-op. Rarely will you be required to interview
or provide letters of recommendation. It is also easier to sell your unit because
financing is allowed. A disadvantage to some, however, is that there's less
control over who will be your neighbors.
TAKE IT AND RUN
Before you borrow consider the following:
1. Ask the board for a written history of assessments
and special assessments, so you can detect a pattern of increases and know whether
you have sufficient funds for extra costs. You may want to secure copies of
board meeting minutes and correspondence to owners for such details and preferably
over a 12- or 24-month period.
2. Ask about the history of capital improvements
to learn what structural and design changes have been made and what will have
to be done during your ownership (again, so you know if you have the funds).
Capital improvements may include new windows and screens, new furnace, tuckpointing,
and plumbing risers.
3. Ask about the building's reserves. Ideally,
it will have money set aside for unexpected costs such as a leaky roof. Ask
to see a financial statement.
4. Ask about parking and confirm that it is available
without restriction, whether there's a garage on premises or not. Some buildings
have a long waiting list and buying a unit doesn't guarantee you a space.
