What’s the difference between condos and coops? This is a question I get so often from home buyers because it’s confusing. A big reason why is because how they are displayed on line.
They are jumbled in together under one search category. Buyers almost always see this incorrectly. It’s either all one or almost as a competition – apartment vs condo vs townhome. Neither is right.
What’s the difference between condos and coops
To break this down simply:
- Condos are real estate while co-ops are shares in a corporation
- Financing is a loan (co-op) or mortgage (condo)
- Coop restrictions are much more invasive
- Condos cost more, have lower fees and hold value better
- Buying a coop is more involved with higher costs
Read on for a full explanation that explains the difference between condos and coops.
What Is A Condominium
A condominium is real estate. Condos are private homes within a complex where people share common area, maintenance and amenity expenses. Bergen County condos have 2 primary styles – apartment and townhouse. Additionally there are single family and office styles.
Whatever style your condo takes, you own it. You’re just sharing the upkeep with all the other owners. Because it’s real estate, there are less restrictions on your use. If you want to rent it, you can. There can be deed restrictions such as 55+ complexes.
Restrictions often come down to safety (no fire pits on the terrace) or aesthetics (no painted yellow dots on the exterior).
Since it’s real estate, financing is a mortgage. FHA works too. Even if the complex is not FHA approved, you can still get FHA financing. Your bank only has to send in a condo questionnaire for the management company to fill out.
If the answers satisfy FHA requirements, problem solved. If not, consider yourself saved from a bad purchase. This is why I advise my buyers to get the questionnaire done before spending money on a home inspection. Most Bergen County condominiums are not FHA approved although there is hope this will change.
What is a Coop
A co-op, or cooperative housing, is not real estate. You’re buying shares of stock in a corporation that’s the structure.
Imagine an apartment building converted into a corporation. Just like Wall Street except that it’s non profit. Each apartment is worth so many shares of stock depending on size and how high up it is. Your number of shares determines how much of the building’s mortgage and taxes are included in your monthly maintenance fee.
This is why co-op maintenance fees are so high. In addition to normal maintenance expenses, your share of the building’s mortgage and property taxes are added. The good news is that coops cost a lot less. Sometimes half of what it would be as a condo. More good news for you – your portion of taxes and mortgage is a write off for you.
Here’s the bad news. It’s difficult to buy a co-op. Because you pay part of taxes and mortgage, not paying your monthly fee can throw a building into default. Realistically this doesn’t happen Buildings have reserves but they want to be guaranteed you’re a safe bet. Once your offer is accepted by the seller, then you have to be approved by the coop association.
This can take several months. You must fill out a lengthy application, wait for that to be okayed and be interviewed by the admittance committee. Once approved, the co-op’s attorney (who you pay for) will schedule the closing where you receive your stock certificates. Co-op fees are higher and admittance is not assured.
What’s the difference between condos and coops?
By now you should be able to answer this question. If not, call me for more help at 201-741-8490. What you are really buying whether a condominium or cooperative housing is a lifestyle. While you don’t have the privacy of a single family home (nor the backyard), you don’t have the maintenance to deal with either.