The old condominum versus co-operative debate. Many believe your real estate selection reflects who you are, and when choosing between a condo and a co-op, you've got to ask yourself some pretty probing questions. Do you want to turn the key, close the door, and have your domain be solely yours? Or do you see yourself as part of a larger community and want to be be able to say 'yeah' or 'nay' about possible new owners? Do you want to have the option of any mortgage lender or making tax deductions on your next tax filing? Everyone has their preferences, but we're going to break it down into the pros and cons (without getting too deep into the legalities), so you can decided where you stand in this epic battle.
Basic Structure: Just like buying a house, a condo is when a buyer purchases a part of a building. It's basically like owning an apartment, but instead of paying rent, the buyer is paying a mortgage. A condo owner also has an undivided interest in certain common elements of the building, such as the lobby, lounge, and/or gym facilities.
Pros: The assessed value of a condo is usually higher than a co-op that is of similar size, design, etc. Applying for a mortgage is typically easier than for a co-op because the owner of the condo will own it outright. It is also easier to make deductions on taxes for condo mortgage payments.
Cons: Because the assessed value is usually higher than a similar co-op, property taxes are also usually higher. Condos often cannot acquire financing as an entity for large capital improvement projects, thus making it difficult to do major remodeling projects or other similar ventures. Condo boards have little power to prevent the transfer of property to other (possibly undesirable) owners.
AKA: Housing Cooperative
Basic Structure: Without getting too deep into all the legalities, basically a co-op is when a buyer purchases a share (or shares) of a corporation that actually owns that building/residence, and the shares reflect his equity in that corporation.
Pros: Property tax is generally lower for a co-op than for a condo, and the taxes are usually included in monthly payments. The building's corporation can acquire capital for large projects, and the repayments can be spread among the many co-op residents. For celebrities, the transfer of ownership can be kept hidden because it's technically a transfer of stock and not real estate and therefore not on the public record. Co-op boards have legal power to prevent the sale of shares to others for a variety of reasons, such as concern over someone being able to make payments or celebrities who might tarnish the co-ops reputation.
Cons: First and foremost, you have to deal with co-op review boards that determine if you're a good "fit" for the residence. Because the property is really owned by a company, some financial institutions will not provide mortgages for co-ops, which leads to smaller lender selection pools and overall higher mortgage costs. Monthly fees are generally higher because they include taxes, mortgage payments, and fees for maintaining common areas and facilities. Co-ops are usually assessed at lower values than similar condos, so bragging rights usually lag compared to your condo neighbors.