Condo vs. Coop
The real estate industry has been struggling to keep up with the surge of New Yorkers seeking to move from Manhattan to Long Island while demand far outweighs supply. With houses selling at super inflated prices, apartment dwellers from the city and beyond must contemplate whether to move to condos or coops, depending on what is available. People tend to think they are the same thing, but the differences are essential things to consider before making that decision.
Ownership /Shared lease
A condo is a private residence in a multiunit structure that includes ownership of commonly used property. The aspect of ownership is the main difference between a condo and a coop, which instead has an interest or share in the entire building and a contract or lease that allows the owner to occupy a unit.
When you buy a condominium, that apartment and a portion of the common area belong to you. Co-op residents “collectively” own and manage co-ops through shares in a non-profit organization. The title-holding corporation grants proprietary leases to residents, allowing them to live in their units and use common areas according to cooperative bylaws and regulations. Upon closing on a condo, you will be given a deed, whereas co-op members are given a proprietary lease.
Generally, condo prices tend to be higher than co-ops, but co-ops can require a larger down payment and higher monthly fees.
Co-ops tend to be cheaper per square foot. Typically, they offer buyers more control as an individual shareholder and often have lower closing costs, but can take a longer time to finance, as some lenders are hesitant to finance co-ops or require those higher down payments.
Since a co-op owner’s monthly fee can include anything from the building’s underlying mortgage to property taxes, amenities, and even security, that monthly fee tends to be higher than condo fees.
Board of Directors
Condo boards are usually less demanding than co-op boards. This is because co-op boards want to ensure that you can participate appropriately in the whole co-operative for as long as you are a shareholder. Things like finances and landlord/tenant history are scrutinized to determine if you can contribute to the whole and whether you will mesh well with other tenants/shareholders. As a result, the co-op approval process is longer and includes an interview. The board of directors then decides if a person can purchase the co-op.
“According to Warner M. Lewis of The Harkov Lewis Team at Halstead Property, “With a condo, a building can request a package on the buyer,” says Lewis, “but there is no interview, and the building only has the right of first refusal (i.e., either they have to approve it, or the condo has to buy it themselves), which means when you have a signed contract unless something happens to the buyer (or the financing) the deal is as good as done.”
Co-ops usually have more rules than condos, including restrictions on using foreign currency for sale. It is generally more difficult to sublet an apartment than condo owners. The upside of the co-op board’s process is being able to pick your neighbors once you are a member. The downside is that the same rules that allow for that also make selling or subletting the apartment subject to the board rules and approval.
Of course, these are all just generalizations. Some condo boards are stricter than others, and some co-op boards are more lenient, depending on the preferred culture of the building. So, it depends on what a prospective buyer prioritizes and whether they communicate that with their real estate professionals. Condos can provide more autonomy, while co-ops can seem restrictive but offer a greater sense of community. It's essential to know the difference between the two, so you can make an educated choice to suit your needs.