While the ownership structure serves as the main distinction to keep in mind when deciding between the two properties, there are other relevant factors that set the two apart that every buyer should know. We've provided you with an overview of their key differences below:
1. Nature of the Building
As a general distinction, co-ops (short for cooperatives) are buildings built during the pre-1980s while condominiums are spaces that are established from the 1980s onwards. In most cases, this leads to a condo having a higher value than a comparably sized co-op. However, the purchase of a condo is accompanied by expenses such as closing costs for title insurance that co-op owners are not subject to.
2. Co-op and condo boards
With co-ops, shareholders elect a volunteer board that oversees the overall care and management of the building. Co-op boards enforce specific rules and have the power of evicting disruptive shareholders.
Condo boards, on the other hand, are more hands-off and practice less control over management issues since the residents actually own their apartments. At most, they can fine tenants who commit rule infractions.
3. Monthly charges and assessments
Shareholders of co-ops are expected to pay monthly maintenance fees which are used for building operations as well as property taxes relative to the number of shares assigned to a tenant. With condo owners, they are only required common charges, with property taxes charged directly to them by the government.
4. Approval to buy
Both co-op and condo buyers face the possibility of being rejected. The only difference is the way they are turned down. A co-op board can turn down a possible tenant for any lawful reason while a condo management can resort to stalling tactics.
5. Minimum down-payment and liquid assets
The majority of co-ops require a 20-25% purchase price and liquid asset requirements which can range from a few months of maintenance payments to thrice the purchase price of the unit. Meanwhile, a condo requires buyers to have an additional one to two years of common charges as insurance against possible nonpayment. The mortgage for a condo unit most often amounts to 20%.
Co-ops are typically more affordable than condos because they are often older and lack the common furnishings typical to units built in the past decade. Moreover, they are often more flexible to cost because buyers have to undergo a more stringent process of being approved by the board. A condo, on the other hand, has higher closing costs if the buyer goes for a mortgage.
Most co-ops practice stringent subletting rules, which can make them a less favorable investment for those who want the option of relocating. Other co-ops let shareholders sublet their unit for about 1-2 years in a 5-7 period, though the board will have to approve the tenant.
On the other hand, condos practice more liberal subletting policies and boards do not have the power to turn down a possible tenant.
8. Lifestyle and other considerations
Condos often offer better amenities since they are newer. However, they are also prone to higher tenant turnover since the environment is more disposed to chaotic tendencies due to lack of stringent rules from a management.
Conversely, co-ops can be prone to micro-management and adverse changes despite having a more peaceful landscape.
Before deciding on a co-op or a condo, make sure to consider the above factors and consult with a professional to discuss the particulars of your living situation.