Co-Op Vs Condo

As opposed to a single-family home, owning a cooperative apartment (co-ops) or a condominium (condo) means sharing common areas with other owners. When real estate is expensive, these attached types of housing can be a more affordable choice.

What Exactly Do You Own?

Co-Op - Owning a co-op means owning shares of the group or company that owns the property and housing, and you then have the rights to a single apartment.

Condo - Owning a condo means owning total interest in just your unit, which is real estate, but it is the common areas in which you share ownership. Therefore, you can expect a recurring fee to cover the maintenance costs of the common areas.

Lighthouse Condominium in Alabama
Lighthouse Condominium in Alabama

Buying a Condominium

Get a hold of and read all the documents from the condo board of directors.

House Rules - Covers what activities can occur in the common areas.

Bylaws - These are the rules of the association. They spell some tasks the board is responsible for, including things such as assessing fees and hiring managers.

CC&Rs (Covenants, Conditions, and Restrictions) - This covers the private restrictions on your use of the property.

Purchasing Agreement - Covers your rights to inspect the purchasing documents, along with terms that allow you to back out of the purchase should particular inspection and financial occurrences arise.

Co-op board approval is necessary before a unit can be sold.

Buying a Cooperative

Find out the answers to these questions first should you consider buying a co-op.

  • Are there pending lawsuits against the co-op?
  • Can you see the sales records for the past year or so? You want to check for rising or falling prices.
  • What is the value per unit of the mortgage that covers the property?
  • What is the history of the property taxes paid, or at least, can they expect them to go up or down?
  • How does the co-op fund major repairs, and are there any upcoming?
  • Is there a reserve fund sufficient for repairs?

Reserve Funding

Co-op Reserve Funding

If you become an owner of a co-op, you will want to have seen the financial statements and operating expenses to see if they have enough money set aside to take care of unexpected budget items.

Condo Reserve Funding

The money collected that covers the common areas is set aside to pay for the on-going maintenance. Is there enough excess collected with that to cover emergencies? If they don't have reserve funding, a lien can be placed on your property as a special assessment. Not paying a lien can mean foreclosure for a unit. Make sure to ask if there are assessments that haven't been paid before you sign up to become an owner.

Co-op & Condo Considerations

Both of these are governed by an elected board of directors, elected by the residents. Votes can be made on a multitude of things, if the association rules allow. Sometimes the unit size gives one voter more power than another, others may have the rule where it is one unit, one vote.

For condos, rental units can be restricted or banned altogether. They do this because rentals tend to reduce the value of all units. Lenders may treat a property as an investment if 30% to 50% of the units in a building are rentals. When this happens, a buyer's financing options are restricted. Make sure to find out about the rental policies when thinking of buying a condo.

You can read my synopsis on Looking for a Home tips.

Let us know how living in a condominium or a cooperative has worked out for you. Have you found the negatives to outweigh the positive?


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