Condo vs. Co-op

Two common housing options in New York City and many other metropolitan areas are condominiums and cooperatives, commonly referred to as co-ops.

While similar, there are key differences between a condo and a co-op. From distinctions in ownership to varying fees, knowing the basic structure of the two entities will help in making the best choice possible.

Owning a Condominium vs. a Co-op

When you own a condominium, you own an individual unit in a multi-unit building. When you purchase a co-op, you are buying shares of the corporation which owns the building. Furthermore, you receive a lease or contract which allows you to occupy a specific unit. To buy a co-op you must be approved by the co-op board, which is comprised of fellow residents. If at any point you are looking to sell your co-op, the prospective buyer must be approved by the board.

Costs and Fees

Co-ops are often less expensive per square foot than condos. They offer the buyers more control over the management of the building. Co-op owners are responsible for paying their share of the building’s mortgage, utilities, and other costs associated with ownership as part of their monthly maintenance charges. Co-op closing costs are lower since there is no mortgage tax at closing and title fees are less. At the end of the year, the co-op owners receive notices of their portion of the tax and mortgage interest, which they can deduct that from their income taxes. Many co-ops have “flip taxes”, which the owners must pay when they sell their unit.

Usually, there are no restrictions on the re-sale of units in a condo. Condominium owners must pay monthly fees in addition to real estate taxes, which cover the maintenance of the building. If there are exceptional situations beyond the normal maintenance allocation in the budget, assessments might be incurred by all owners for repairs to the building.

Rules & Restrictions

Co-op by-laws regulate the operation of the building. As mentioned above, you must receive approval from the co-op board before purchase. A prospective purchaser must be approved before a unit can be sold. Also, sub-letting co-op units is typically not permitted. Some condo units have rules and restrictions as well, but they are usually less stringent.

What is Right for You?

There is an upside to the ownership structure of a co-op building. Since you own shares of the corporation, you get to help pick your neighbors. Because everyone has a vested interest in the building itself, it is common to have an increased sense of community in co-op buildings.

Co-ops and condominiums offer different pros and cons. If you are looking for something more cost-effective and would enjoy being engaged in a more communal building, co-ops are worth looking at closely. If you prefer not to be involved with a co-op board, want the ability to sell your unit more easily in the future, and prefer more options for secondary leasing, perhaps a condominium is the better choice.

Ready to pursue a condo or co-op? Get a free Pre-Approval on your mortgage here.


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