Key takeout
A condo means owning a share of a certain unit and a common area. A cooperative means owning shares and granting a unit lease to a company that owns a building. Stock-based ownership can make cooperative funding more complicated. Condos usually offer more freedom in terms of unit changes and rental policies.
If you are exploring homeownership, you may have come across the terms “condominium” and “cooperative.” Both offer a way to own a home in a multi-unit building, but there are clear differences in ownership structure, fundraising and lifestyle.
Understanding these differences is key to making an informed decision about your next home. This Redfin Real Estate Article will help you understand the central distinction between cooperatives and condos and decide which one best suits your needs.
What is the difference between a condo and a cooperative?
When you buy a condo, you are buying a specific property: individual units in a larger building. This means you have an act to the unit just like you own a detached house. It also owns proportional shares of the building’s common areas, including corridors, fitness centres and recreational spaces.
Cooperatives, which stand for Housing Cooperatives, operate differently. When you “buy” from a cooperative, you are not purchasing real estate. Instead, they buy shares at companies that own the entire building. These shares often offer exclusive rights to occupy a particular unit through their own leases. The company owns the land and buildings, and you own a portion of the company
The basic distinction lies in ownership. With a condo, you own a property. Cooperatives own personal property in the form of shares.
Co-op and Condo Maintenance and Repair
Apartment
The owner of the condo is responsible for the maintenance and repairs of the unit. The Homeowners Association (HOA) manages common areas and building maintenance funded by monthly HOA fees paid by all residents. These fees usually cover landscaping, external repairs, sharing utilities, amenities and more.
Coop
Co-op owners are responsible for maintenance and repair within individual units, just like condominium owners. However, Co-Op Corporation, managed by the Co-op Committee, is responsible for the overall building maintenance, structural repairs and common areas. Monthly maintenance costs paid by residents cover these costs. These costs include some of the mortgage and property taxes that underlie the building.
Funding
Funding for cooperatives and condos is a bit different. Here you will learn how and why.
Condominium
Financing a condo is as easy as getting a mortgage in a traditional home. Lenders are generally comfortable with condo mortgages as you own physical property.
Coop
Cooperatives are often known for their strict approval process for future buyers. Cooperative committees typically interview applicants and review their financial position and personal history. This ensures new residents are tailored to the value and financial stability of the community. Cooperative loans are often referred to as “stock loans,” and can include specific requirements from lenders due to the nature of the collateral.
Pros and cons of buying a cooperative
Strong Points:
In many cases, lower purchase prices: Co-ops may be more affordable than comparable condominiums in the same region. Stronger Communities: A rigorous approval process can foster a tight, financially stable community. Larger Management: Residents are getting much more information on building management and community rules through the cooperative committee. Included Costs: Maintenance costs often cover property taxes and building mortgages, simplifying some financial obligations.
Cons:
Complex approval process: Board approval can be long and intrusive. Funding Challenges: Fewer lenders offer cooperative loans and conditions may be more stringent. Limitations on Use: The rules regarding sublets, renovations and even pet ownership are very strict. Less Stock Construction: Because you don’t own real estate, gratitude can be linked to the value of the stock rather than directly to the property value.
Pros and cons of buying a condo
Strong Points:
Direct Ownership: You own the property. This can provide a clearer path to a fair building. Easier Funding: Mortgages are easier to obtain and easier to get. Less limit: Generally, unit renovations and rental policies provide greater flexibility. Managed by HOA: Common areas and building maintenance are handled by HOA.
Cons:
Potentially high purchase prices: Condos can be more expensive than cooperatives in similar locations. HOA Fee: Monthly fees may increase and special ratings may be levied for unexpected repairs. Less control over neighbors: There is no direct approval process for new residents. Limited things in construction decisions: You are bound by the HOA decision, even if you do not agree.
How to Decide on Co-ops and Condos
Choosing a cooperative or a condo will become a priority.
Consider condos.
You prefer direct property ownership. A simpler fundraising process is required. We value the flexibility to renovate and rent units. Less involvement in construction management.
Consider cooperatives if:
You are happy with the more thorough approval process. You are looking for a potentially low entry price. You want a strong sense of community and shared governance. You’re OK with more restrictions on your unit and lifestyle
Ultimately, both condos and cooperatives offer their own benefits. Researching local market conditions and consulting with real estate agents who have experienced both types of real estate can provide valuable guidance in home searches.
Frequently asked questions about cooperatives and condos:
What is the economic implications of cooperatives and condominiums?
For cooperatives, monthly payments include property taxes and maintenance fees that frequently cover the mortgages underlying the building. This means you won’t pay these individually. In the case of a condo, you pay your own property taxes, and often you will have separate mortgage payments in addition to the HOA fees in the common area.
Can I rent a unit at a cooperative or a condominium?
Condos generally have more generous rules about renting units, but there may be some restrictions and rental caps. Cooperatives have very strict rules about sublimation, or a complete prohibition.
What is the role of the board in cooperatives and condominiums?
In cooperatives, the board has great power over the finances, operations, and new residents’ approval. In condos, condo boards primarily manage common areas, with less direct control over individual unit owners or new buyers and implement ordinances.
Do cooperatives value differently than condominiums?
Co-ops include ownership of shares rather than real estate, so their appreciation can link to the value of those shares and the overall health of the co-op, which may differ from the direct real estate viewing seen in condos.
