One of the first things buyers notice when they begin their New York City home search is that many properties are listed as a condominium (condo) or a cooperative (co-op). While you might have heard of condominiums before, cooperatives are unique home-sharing communes that account for a majority of New York’s apartment inventory. So, if you’re looking to buy in the city, understanding the basics of each may give you a better idea about whether a condo or a co-op fits your situation and real estate goals.
What is a condominium?
Like a two-story house in a town or suburb, a condominium is real estate that you own when you buy it. It’s just contained within a larger building, and your ownership also happens to include shared spaces like hallways, elevators, and other common areas. When you buy a condo, you’ll receive a deed to the home and will have to pay corresponding property taxes—which the city uses to fund schools, police, and other municipal services.
What is a co-op?
A co-op is a unique residential corporation in which residents own shares rather than actual real estate. When you buy a co-op, you’re buying a stake in the non-profit corporation that represents the entire building. The more square footage you buy, the more shares you will have. Instead of a deed, you’ll receive a proprietary lease that permanently allows you to live in the home and use the cooperative’s shared spaces. And, because the building uses this shared ownership approach, you’ll be able to vote in important decisions like building upgrades. While you won’t pay property taxes, you will be responsible for a monthly maintenance fee that the building corporation uses for its underlying mortgage, taxes, utilities, etc.
What else should I know?
Price
Typically, co-ops are listed at lower prices than condos. This is because condos tend to be newer builds, have less inventory available, have modern amenities packages, attract foreign investors that can drive up their prices, and have a liquidity premium associated with them as co-ops often have numerous rules, restrictions, and board approval hurdles that make it more time consuming to buy, sell and/or rent. Monthly condo fees are usually lower than the maintenance fees that co-op owners must pay, but closing costs for condos are generally higher than those for co-ops.
Approval Process
One of the main differences between condos and co-ops comes during the purchasing process. Because co-ops invest their power in a representative body made up of current shareholders, buyers must pass a stringent board approval process that consists of a thorough review of finances and an in-person interview that may include questions about a buyer’s lifestyle, career, and family. If rejected by the board, a buyer will not be able to purchase the home. Condos, on the other hand, are much easier to buy. There is no board approval process, and condos are much more amenable to standard mortgage options.
Rules & Regulations
While every co-op is different, co-ops tend to have more restrictive rules and regulations than condos. For example, many co-ops have restrictions on sub-leasing and pied-a-terre usage, whereas condos allow owners more flexibility in those aspects. However, having specific rules and regulations might be more appealing to buyers who desire a sense of common cause and a communal atmosphere.
Which one is better?
Neither one is inherently better than the other. Some buyers prefer condos; others prefer co-ops. It depends on what you’re looking for and what aspects of homeownership matter to you. If you are looking for a larger apartment and lower $/sf and do not necessarily care about having amenities galore and the newest finishes, then a co-op may be more suitable for you. If you prefer newer finishes, better views, and want to have more flexibility in terms of potentially renting it out as an investment, then a condo may be more suitable for you. Either way, you can’t go wrong - it’s a matter of preference.