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Co-op vs. Condo: What's the Difference and Which One to Buy?

So, you’ve decided to purchase a property in a big city? There are a few options to choose from, and in cities such as New York or Washington D.C., the most popular dilemma you might face is whether to buy a condo or co-op.

While they share some similarities, and they both can be a great (and more affordable) alternative to buying a house in the city, there are some significant differences any real estate buyer should know. 

To make the process of purchasing real estate property a little bit easier for you, we’ve prepared this article which answers the most common questions you might face choosing between buying a co-op and a condo. 

What is a Co-Op?

So, let’s start with the concept and definition of a co-op. While it is a multi-unit building, you do not purchase a separate unit if you decide to invest in the co-op. Instead, you own shares in the corporation, which is the entire building, jointly owned by all the people who live in it. The size of the shares you hold has an impact on the size of your place.

In the case of a co-op, you’d have to sign a proprietary lease that grants you the right to live in the unit.  

What is a Condo?

If you think about the concept of buying your own place, a condo is a more customary and traditional way to look at it. If you purchase a condominium, you become an owner of your own unit, as well as some percentage of the common area. Closing the deal on your condo, you’ll receive a deed that transfers the property ownership to you. This is not the case with the co-op.

What is Cheaper — Condo or Co-Op?

If the price difference is one of the main factors for you to choose between a co-op and a condo, there are a few things you should consider.

When it comes to the price per square foot itself, co-ops are usually cheaper than condos. However, many buyers and real estate professionals agree that it might be more difficult to finance the co-op. The down payments for condominiums tend to be lower, and it is also easier to get a mortgage to finance purchasing a condo compared to the co-op. One of the main reasons the lenders are not so willing to give a loan to the co-op buyers is that you won’t actually own the place after the purchase. But, even though the down payment for the condo is lower, closing costs tend to be lower for co-op buyers. Since buying a co-op is simply purchasing shares in a building, and buying a condo means actually buying real estate, it comes with additional taxes and fees.

Which One is Easier to Buy?

If you decide to purchase a co-op, you’ll be surprised by how meticulous is the process of selection of a buyer in a cooperative. The new buyer has to be approved by the board of directors, which might seem like a headache to many people who’d like to invest in a co-op. While this might be true, being an owner of a co-op, you have a possibility to choose your future neighbors and make sure they have the same values, and you can co-exist peacefully for many years to come.

condo vs co-op

Why Should You Buy a Co-Op

Sense of Community

A co-op will be perfect for anyone who’s searching for a sense of a close-knit community in a large city. Not only do you know all your current neighbors — but you also have a direct impact on choosing your future ones. As a shareholder, you also have a say in any important decision regarding the building. All this combined will be perfect for those who value stability and know that they want to purchase a home for the long haul.

Wide Availablity

If you live in NYC, it might be simply easier to find a co-op to buy, as the majority of apartments in the city are co-ops. In fact, they constitute almost 75% of the apartment market! Most of the beautiful pre-war buildings were, in fact, turned into co-ops. Even though currently there are more and more condos in development, co-ops prevail on the New York real estate market.

Why Should You Buy a Condo

Easier to Rent Out / Sell

If you already have your family nest and search for a property that you can use as an investment, a condominium might be a more favorable option for you. You might discover that it’s challenging to rent out your co-op — sometimes, there are clauses included in your official documents that would prohibit using it as a rental. And, if there is no such stipulation, you’d have to get approval from the board to use your unit as a rental. While some HOAs can have a similar approach, it is a much more common feature of co-ops.

Similarly, when it comes to selling your condo, you don’t have to wait for the board’s approval of a new buyer, so it might be easier and faster to sell.

Lenient Rules

Usually, buying a co-op comes with a whole bunch of rules and regulations you have to abide by. HOA can be no picnic either, but overall there is a tendency for the co-op boards to be more strict and inflexible. So, if you’re looking for flexibility and value the possibility to make your own decisions, a condo might be a better option for you.

However, keep in mind that recently the situation started to change, as more and more condominiums incorporate stricter rules, so this rule of thumb becomes more of a case-by-case basis.

Summing Up

As you can see, there are certain pros and cons to both of these types of real estate. You should decide whether to buy a co-op or condo based on your intentions, plans, and overall preferences. If you value autonomy and consider purchasing real estate solely as a good investment, you might find yourself happier if you look into condos.

On the other hand, if you want to buy a place that will serve you long years as a forever home where you know your neighbors and have an influence on everything that’s happening in the building, co-op is your best bet!

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