Co-op or Condo: What to Do, What to Do . . .

When it comes to choosing a co-op or condo, there are many factors that you should consider before making your decision. Knowing the key differences between the two will help you down the road. The following list will get you started.

When it comes to choosing a NYC co-op or condo, you’ve got A LOT to think about. Unless they’re buying standalone buildings like brownstones or single-family houses outright, New Yorkers who buy in the city are either buying a condo or a co-op. Knowing the difference between a co-op or condo will help you decide which one will be best for your needs.

Co-op owners own shares; condo owners own real estate. When you purchase a co-op, you’re technically not buying real estate. You’re actually buying shares in a privately held corporation. How many shares you own will be based on things like how big your apartment is, where the apartment is located in the building, etc. That corporation is in charge of taking care of and running the building where your apartment is housed, but you won’t have a deed for the apartment itself. You’re basically paying for the right to lease your apartment from the corporation. When you buy a condo, on the other hand, you’re buying actual real estate, and you will receive a deed for your own apartment. In addition, you’ll be buying shares in the common areas of the building.

Condos may be easier to buy. Generally speaking, condos have a much less rigorous approval process than co-ops. Co-op boards are notoriously strict when it comes to making sure that applicants are fully qualified to be buying into the building. As a corporation, it makes sense that board will want to ensure that each co-op member can pull his or her own financial weight in maintaining the building. If you are unable to pay, you put the other member’s shares at risk. Expect to provide co-op boards with everything from several years’ worth of tax returns to bank statements and investment portfolios. Condos have rules as well, but they tend to be less stringent.

Condos are usually more expensive than co-ops. If you’re worried about the co-op application process, you may be thinking that it makes more sense for you to buy a condo, but condos often cost more than co-ops. A condo can cost as much as 40 percent more than a co-op in the same area. One key reason is because with a co-op, you’re buying shares in a corporation that owns the building, while with a condo, you’re buying the actual real estate. As a condo buyer, you’ll also end up paying more money in closing costs since those costs will include title insurance and a mortgage recording tax.

You have more flexibility when you own a condo. In addition to treating you to an extremely rigorous application process, the average co-op board has its hands in your life long after you’ve been allowed entrance into the building. If you want to rip out your old cabinets and put in a fancy new stove in your apartment kitchen, or you want to rent out the space while you spend a year climbing a mountain in Tibet, you’ll need to get the co-op board’s approval to do so. Some boards have lenient standards, while others are quite prohibitive. Some people like the strict standards that co-op boards set because they believe their investments will be better protected than in a condo building where people tend to have more leeway and freedom.

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