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The Difference Between Condos and Co-ops

 

Buying a home is an exciting journey, especially in the capital of the world. For first-time New York City homebuyers, however, there is typically much to learn before the search even begins. Not only do property values and local flavor differ from borough to borough, but also from neighborhood to neighborhood and block to block.

Perhaps the best example of how unique the New York City market is lies in the types of housing it sells – primarily condos and co-ops. Most people are familiar with condos and use the term to describe any apartment for sale within a multi-unit property. But co-ops can also be described this way. And while co-ops are relatively scarce worldwide, they make up 75% of homes for sale in New York City. So it’s more than likely than not that you will come across one in your apartment search. So what are they exactly? And how do they differ from condos?

Following are the key differences between condos and co-ops to help you better prepare for buying an apartment in New York City:

 

Condominiums

When you buy a condo, you become the owner of that specific property. You generally have jurisdiction over what you do with the property, so long as it is within the city’s zoning laws and condo board rules. Want to add or remove a wall? Change the flooring from carpets to hardwood? Maybe upgrade the kitchen and its appliances? These options are all available to you as the owner of the property.

Condos tend to more expensive per square foot, making them more costly overall than co-ops. But they are typically easier to finance, as banks prefer them. Both condos and co-ops typically require a 20% down payment, although some banks require 25% or more for co-ops. Condo fees are usually lower, while property taxes tend to be higher. The tax advantages of owning a condo or a co-op are about the same. All said, the overall cost is 10-40% higher for condos, but that also typically comes with a higher return on investment.

 

Cooperatives

With co-ops, you are not actually buying a piece of tangible property. Instead, you are buying shares of a corporation that owns the building. Think of it as if you’re buying stock in a company. The actual size and price of your unit determines your share, but you still don’t own it as your individual property. This has large implications for you as a buyer, as your actions as a resident are limited by the collective co-op board of the building. This means that the executive board has a say in what you do with your unit, requiring you to adhere to the building’s rules.

While this may appear to be constricting, there are actually several advantages in having a co-op board. The board is there to ensure the stability of the building. Their responsibilities include keeping turnover down, screening tenants, and taking care of simple maintenance work. This can be very appealing, as you’ll have fewer concerns about neighbors and maintenance.

Co-ops tend to be cheaper per square foot. They typically offer buyers more control as an individual shareholder and often have lower closing costs. It is typically a bit harder to obtain a mortgage for a co-op, with some lenders requiring higher down payments. Monthly fees also tend to be higher and can include payments for the building’s underlying mortgage, property taxes, amenities, maintenance, utilities and security. Property taxes are typically lower, whitle tax benefits are about the same.

 

Summary

  • While condos offer more autonomy and a better return on investment, their higher cost and lower inventory makes them less popular than co-ops.
  • It is likely that you’ll come across many more co-ops throughout your home buying search, as they make up 75% of NYC homes for sale.
  • By taking the time to understand the differences between condos and co-ops, you’ll be more prepared to work with an agent to find the apartment that’s right for you.

 

For more information on condos, co-ops or any real estate questions you may have, contact Batra Group at (646) 202-1877.

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