Co-ops Vs. Condos

What's the difference between a co-op and a condo?

Condos and co-ops are attractive alternatives to single-family home-ownership. For those who are young and starting out, these types of properties offer a taste of what it is like to own a property. For those who are older, condos and co-ops allow for an easier living lifestyle without maintenance worries.

Both co-ops and condos are considered common-interest developments. In a co-op, people technically don't own their apartments as they do with in a condominium. Instead, people own shares of the corporation that owns the building. The larger the living unit, the more shares owned in that corporation.

Typically, co-ops are less expensive per square foot than condos, and their maintenance fees - which cover building expenses like hot water, heating, air-conditioning, grounds maintenance, staff salaries, real estate taxes and insurance - are tax-deductible.

There are some co-op caveats. All prospects typically have to be approved by the co-op's board of directors, and the vetting process can be quite thorough. There are lots of demands for personal-background and personal-finance information, comprehensive employment history and background checks.

It's also harder to sublet a co-op, and in many cases that is not allowed at all. Moreover, some co-ops can require larger down payments than condos, and sometimes there are even restrictions on owning other properties. Co-ops also have requirements in regards to debt-to-income ratios, and have limits to their occupant’s percentages.

Selling a co-op can also be a little more difficult than selling a condo. Some boards assess a "flip tax", where every time the co-op is sold, a fee is paid to the corporation. The flip tax can be paid by the seller, buyer, or both depending on the rules and regulations of the corporation. It is not actually a tax however, and not deductible as a property tax. It is considered a transfer fee payable upon the sale of an apartment to the co-op.

Flip taxes are considered a method to help raise money for a co-op's overhead expenses without raising the maintenance fees or assessing charges to residents. There are several types of flip taxes in a co-op, and they can either be a flat fee, a dollar amount based on shares allocated to the subject apartment, a percentage based on the sales price, or a fee based on the duration the seller has owned the apartment.

Unlike the purchase of a co-op, buying a condo is more like buying a house because buyers own their deeds and pay their own taxes. While condos are normally more expensive than co-ops, percentage down-payment requirements can be smaller, though today's more stringent lending standards have tweaked that equation a little. Normally condos can also be sublet much more readily than co-ops.

Condo boards also wield less power than co-op boards, and entry requirements are not always as rigorous. Unlike co-ops, condo maintenance fees are not tax-deductible.

In the Village of Scarsdale, there is only one condo complex called Christie Place, and it serves as an adult-community. There are also several co-op complexes, one of the most well-known being the Chateaux.

In New York City, about 70 percent of all individual apartment units for sale are co-ops, a number that has dropped from about 85 percent a decade or so ago, as more condos have been built to replace older co-op buildings.

Scott Petricig August 25, 2012 at 12:00 AM
Co-ops certainly look enticing when you see the initial listing price, but when you add on the typically outrageous maintenance fees (almost $1000 a month for a 1 bedroom I've seen!), and the fact that you don't really own your unit, it's a lot less palatable! I for one would never purchase a co-op. I'd rather rent. It seems like New York State as a whole has an especially large amount of co-ops, while other states don't seem to follow that trend as much.
Luci Vale August 25, 2012 at 12:02 PM
Yes Scott, I owned a co-op in White Plains a few years ago, and what you are saying is very true. However, I will say it was very easy to sell. In fact , it was only on the market one day...and it was sold. I have been renting again for the past 2 years, and it gives me a sense of having more freedom. I only regret one thing, and that is not appreciating White Plains as a great little city to live. It was just reported on TV, White Plains is listed #43 on the 100 list of best places to live in the USA.
Watchdog August 25, 2012 at 12:14 PM
Co-ops contributed to the stability of the market particularly in NYC as many were not permitted to be purchased as investments.....they have to br primary residences ...and speculation owning several co-ops was not permitted.,
VinnyfromCongers August 25, 2012 at 02:19 PM
Scott, the "typically outrageous monthly fee" includes property taxes, heat, hot water and cooking gas. Some co-ops are priced affordably and the total cost might be less than renting. Also, the monthly fee is usually more than 50% tax deductible.
Clifford Blau August 25, 2012 at 03:27 PM
Maintenance fees are not tax-deductible, except the portion that represents the shareholder's portion of property taxes and mortgage interest. Co-op, condo, or rental, all apartment dwellers in White Plains should be as one in opposing the unfair water billing practice which has them paying 2-3 times as much per gallon of water as house owners pay.
Chris McHugh (Editor) August 25, 2012 at 03:32 PM
This is one of the most succinct breakdowns of condos vs. co-ops. I will be forwarding this explanation to people in the future I'm sure. Thanks Rose.
Aidan August 25, 2012 at 04:20 PM
Condos also have the right to institute a "flip tax' ... though it's not as usual as in co-ops. Condos are preferred over co-ops in this area. Be sure to examine the most recent audit every buyer is entitled to ... and to ask about any special assessments that can increase maintenance fees for a specified time period. Some are quite expensive. And be sure that your board ... co-op or condo ... has a strong reserve fund for unexpected emergencies ... or you will face an assessment.
Spunky 2 August 25, 2012 at 06:07 PM
The article did not address a flaw with coops. When you purchase a coop you purchase shares of stock and you take out a loan to buy the shares. There is also an underlying mortage on the building and land -the mortgage is isually lend by sponsor or a conventional lender. When you pay maintenance , a portion of the maintenance pays the underlying mortage. If shareholders, in sufficient quantity stop paying their maintenance, there will be a default on the underlying mortage. If the lender forecloses and it goes to a judgment, the judgment wipes out the status of the coop, owners become renters and are still responsible for the loans on their shares of stock even though it is no longer a coop. Any one buying coop should exercise due diligence and find out as much as possible about fiancnes.
IRV kLEINER August 25, 2012 at 06:16 PM
You are correct about the deductibility of only interest and taxes from the maintenance fees to the shareholder. Big mistake by the writer.
Thomas OConnell August 26, 2012 at 03:38 AM
Yes that is bad information "Maintence fees are deductable" which they are not, only taxes and mortgage interest if any... (and from a real estate agent no less)
Thomas OConnell August 26, 2012 at 03:45 AM
The flaw is in your statement....... Shareholders that fall behind in their maintenance are evicted and the apt sold.. The rule A co-op has over a condo is that the co-op collects all money owed to it before the bank or anyone else... So for a co-op to reach a default status is unlikley.. As with any major purchase, The co-ops history should be checked very carefully before commiting........
Thomas OConnell August 27, 2012 at 07:24 PM
If you had purchased a house in the last 4 or 5 years, you would face a similar problem with the drop in value in the overnflated market of 5 years ago...and the burst in the housing bubble 3 years ago..... Yes some Co-op boards are archaic, A 10 plus unit vacancy rate is a load other unit owners have to make up.... But if you believe a board is not serving the best interests of the shareholders, vote them out... ... the bottom line though is your own words, "We are underwater" Why are you underwater ?, it is not the Co-ops fault you are underwater...... I believe the majority of co-ops are sound.. and doing well... It is all a matter of doing a lot of homewok before you buy....
Spunky 2 August 27, 2012 at 07:54 PM
My statemement is not flawed. Eviction proceedings are time consuming and during the eviction proceeding , no maintenance is being paid. When the distressed shareholders face eviction, they file bankruptcy and further delays the proceedings, 4 to 6 months. Since the maintance is not being paid during that time, the cooperative must go to the reserve fund and continue paying the maintance costs during the eviction proceeding. The maintenance collected each month includes the shareholders prorated share of the underlying mortage. So when one shareholder stops paying maintenance the shareholder is not paying their share of the underlying mortgage. For example, a $1000.00 maintenance payment may include $500.00 towards the underlying mortgage on the entire coop and taxes. As for default, Freddie Mac has foreclosed on plenty of underlying cooperative in the past and the people lost their coops. A cooperative is no different from a time share, you are entering into a business venture with individuals whose financials you are not aware of.
Thomas OConnell August 27, 2012 at 11:55 PM
Spunky, Being this is a local publication, Can you tell me how many Westchester Co-ops have defaulted in the last 30 or 40 years..... Also Co-Ops are unique all back maintenence, late fees and legal fes are collected at time of sale after eviction, before any other creditor... So in reality even if the process take a year the late fees make more than interest in the bank, so it is a win win for the Co-Op... Yes if the Co-Op defaults, the shareholderes are out in the street, But Again, How many have defaulted in Westchester County in the last 4 decades. ???
A Patcher August 30, 2012 at 11:41 PM
CONDO ANYONE?...If anyone is ready to retire, or not (over 55, no children), and wants to move North where it is greener, the air is cleaner, and it is quiet....consider Jefferson Village Condo's in Yorktown Heights, off route 6. Only 35 min. to White Plains via Taconic pkway. Affordable living with many amenities: outdoor pool, tennis, gardening, community center with work out room, sauna, pool tables, entertainment, and a short walk to Jefferson Valley Mall. What could be better than this??
Liam Imondo September 05, 2012 at 03:39 AM
Cameron, I live in High Meadow and I completely understand your frustration. Although I don't always agree with the board's decisions, I believe they have little to do with why our units (particularly 2 bedrooms) are listing so low. (And I honestly don't know anything about the board declining a large number of potential buyers or the 10+ unit availability) But if anyone is to blame, it's the real estate agents who I honestly feel are looking for quick sales and convincing these owners to list well below market value. That is what can completely screw us because these sales at 70,000 or 80,000 become comps when we attempt to sale our units. The people selling these units must either be desperate to get out (no longer living there or in the process of buying something else) or mislead by their realtors and not really doing any type of research on their own to see what they could realistically get for their unit. Obviously the economy has something to do with this as well and while some complexes aren't down as much as ours, they have all taken a hit - I would guess values have dropped at least 35% in some of these other areas. I personally love High Meadow and I think the property is maintained well and the living style for many of the two bedrooms is very unique for co-ops - 2 floors, not to mention your own entrance into your unit (very rare to see with co-op complexes).
jo September 05, 2012 at 12:06 PM
love my co-op.. and the maintenance fee includes my heat..all water.. partial cable..all taxes, one parking space and great Cage style storage units.. and all outside maintenance..it also provides a good living environment.. cause folks have to go before a board.. they cannot buy with poor credit scores which ensures. most of the time.. to eliminate the deadbeats..the rules and regs in place are needed when 100's of folks are living in a condensed area.. its not for everyone..but for me as a single senior it fits the bill... and the units go rather quickly where I am.. We have an excellent credit ratings and our grounds are kept park like...my unit is garden style.. I walk right in...
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