THE MILLION DOLLAR QUESTION: CO-OPS VS. CONDOS

THIS OVERVIEW WAS TAKEN FROM INVESTOPEDIA WRITTEN BY  MARJORIE A. COHEN

Condos and co-ops share similarities but also have unique characteristics that offer a variety of options for residents. In many ways, the New York City real estate market is unlike any other in the United States. One of the biggest differences is that apartments for sale in NYC are either condos or co-ops. In most places, condos are the rule, but not in the Big Apple. Although co-ops outnumber condos in NYC—by about 75%, per most estimates—more condos are on the active market at any given moment.

Let’s start with a brief examination of the difference between a co-op and a condo. When you buy a condominium, your apartment, as well as a percentage of the common areas, belong to you. When you buy a co-op, you don’t actually buy your apartment; instead, you are buying shares in a corporation that is your building. The size of your share depends on the size of your apartment; buying the shares allows you to occupy a unit in the co-op building. At the closing for a condo, you’ll be given a deed; at the closing for a co-op, you’ll get a proprietary lease.

For the most part, both condos and co-ops have a doorman and a superintendent on staff; some will add a concierge who will do everything the other two don’t. The amenities can be low-key (maybe just a storage room in the basement) or as all-encompassing, such as a landscaped terrace, a billiards room, a piano room, a screening room, a children’s playroom, and a gym.

CO-OPS

Generally speaking, the older, established residential areas have a preponderance of co-ops. As Gary Malin explains: “If you like historic properties, you are likely to end up in a co-op, as nearly all prewar buildings are organized in this way. Also, because co-op buildings tend to be older than condo developments, they are often located in more central locations. For example, nearly all the residential buildings that line Park Avenue on the Upper East Side (a prime location by any measure) are co-ops.” 

Downpayment & Price

As with a condo, the decision might come down to how much you can spend and have saved for a down payment. Although it's possible to put down just 10% of the purchase price of a condo, a co-op may require a much higher down payment in the neighborhood of 20% to 50% of the purchase price. The good news is that the purchase price of a co-op tends to be smaller than condos. Although, prices can vary depending on the neighborhood involved.

The Board

As stated earlier, most co-op boards have a rigorous and often lengthy application process that can require the buyer to hand over financial information, submit to employment verification, and possibly a personal background check.

Warner M. Lewis of The Harkov Lewis Team at Halstead Property, sums it up: “In a co-op, not only do you have to have the money to buy the apartment (or financing to do so), you also have to be approved by the board after submitting an application, which is usually very detailed and time-consuming. Then, with little to no reason, a buyer can be rejected after their interview, or even before, just because of something in their package. I have had deals and seen deals where there is zero rhyme or reason for rejections.” 

Rules

Co-op boards tend to have more rules than condos and may mandate when you can practice your trombone, whether you can put holiday decorations on your door, and whether your pet can move in with you. Most rules are meant to promote harmony, calm, and the civility of co-operative living.

But the rules that discourage some domestic buyers, and just about all international buyers, are co-op restrictions on subletting—it is rare for co-ops to allow shareholders to rent their apartments out for any extended period of time, if at all. Another rule of co-ops that makes purchases by internationals impossible is that they are unlikely to accept anyone whose funds are outside the U.S.

According to Lewis, “Co-ops are all about establishing a stable, in-for-the-long-run group of residents. Condos don’t seem quite as concerned about that."

The Buyer's Preference

Co-ops are a smart choice for those who value stability and want to plant roots in a building. Simply ask yourself, 'Am in it for the long haul?' Co-ops are much less transient than condos, so they're a great place to live if you want to get to know your neighbors. Just be prepared to be analyzed, poked, and prodded, but understand that this process is what keeps a co-op a stable and remarkably secure investment.”

KEY TAKEAWAYS

• When you buy a condominium, your apartment, as well as a percentage of the common areas, belong to you.

• When you buy a coop, you don't actually buy your apartment; instead, you are buying shares in a corporation that is your building.

• Condo prices are higher than co-ops, but co-ops require a larger downpayment, higher monthly fees, and a lengthy approval process.

• Condos allow subletting of the apartment while co-ops don't, which offer buyers a more stable, less transient community.

I’ve represented both buyers and sellers in condos and co-ops through out NYC and Brooklyn. To learn more about the buildings on my radar, please feel free to contact me.

Thank you