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At first a condominium complex and a co-operative might seem to be one and the same. They are both buildings that house a number of people and you pay money in order to live there. However, it's not that simple (hey, nothing ever is). Condos and co-ops are very different from each other and a careful examination should be made before you choose one over the other.
One of the biggest differences between a condo and a co-op is ownership. If you buy a condo, you own the airspace in your unit and get an actual title to your property. In a co-op, you own shares in the non-profit corporation that owns the property and are granted a proprietary lease to the unit you occupy. You do not own your unit in a co-op.
Financing can be problematic for the potential co-op investor. Since co-op shares aren't an investment in a unit of real property, many lenders won't finance them, since the stake is in the whole building rather than just the part they are financing. Loans that homeowners take as a matter of course, such as home equity, lines of credit, etc. are often unavailable or extremely hard to find for the co-op buyer.
Monthly fees are something that both condo and co-op owners have to pay. Co-op members often pay a higher monthly fee that includes their mortgage, insurance, maintenance, etc. These are the same fees that condo owners have to pay; only co-op members generally pay them all in one lump sum to the same entity - the corporation. Co-ops also have the advantage in borrowing money for major repairs or improvements, being able to use the "blanket mortgage" to finance them. Condo owners can only borrow money on their particular unit, sometimes not enough to cover unexpected assessments.
Property taxes is where a co-op can have the advantage over a condo. Since the property is taxed as a whole instead of units with individual values, the property taxes can be lower when divided among the shareholders. A condo is taxed individually and, as a result, can have a higher individual tax than that allotted to the shareholder in a co-op. A condo owner can deduct their payments on mortgage interest and property taxes from their Federal taxes if they live in the unit and for maintenance if they rent it out. A co-op owner can deduct their share of the interest on the overall mortgage and property taxes easily enough, but deductibility for other matters can be more difficult.
Co-ops have more power over your property than condos do. Despite some condo boards' claims to the contrary, a board has very little power to affect one's ownership. A condominium is considered an individual piece of property and the owner is subject only to what laws concerning real property are extant in their area. A co-op, on the other hand, can deny a sale to an individual and, in some cases, literally vote your living space out from under you. This is not a common occurrence, but it can happen and must be taken into consideration.
If you sell your condo, it is a straightforward real estate transaction, with the attendant fees, taxes, etc. A co-op sale is somewhat different. Since you are not transferring the deed to real property, there are less taxes and fees on the transfer of co-op shares. If you're trying to avoid your transactions being track able by people off the street, the buying and selling of co-op shares also have the advantage of not being tracked like real estate transactions.
Choosing a condo or a co-op is subject to the individual's personal preference. Hopefully, this article has shed some light on the basic differences between these two types of living space. No matter what you choose, research and self-education on the laws of your area and how they view co-ops and condominiums will aid you greatly in your choice. Consider engaging the services of a good Realtor® to get qualified, professional advice.
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