Condos and Co-Ops: A Buyer's Guide

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Do Cinderellas live in Condos or Co-Ops?
I have had great success selling both condominium units and Co-Op units in Chicago over the years.  Recently I have been getting many questions from prospective buyers about the differences between the two.
Actually this particular Cinderella lives in a Condo (pictured here) and loves it, but who wouldn’t like to live in either one of the buildings above?
Anyway, here are some of the salient facts that will help you all sort out how Condos and Co-Ops differ in a number of important ways.

My Definition of a Condo
Typically, multi-unit dwellings, each unit is individually owned, while common areas such as hallways, elevators, grounds, parking, and recreational facilities, are owned by all the unit owners and are paid for by monthly “assessments” charged by the Condo Association to the unit owners.  Can also be single family dwellings or “detached condominiums” where homeowners do not maintain the exteriors of the dwellings, yards, etc. as in Gated Communities.  Generally, purchasing a Condo does not require any review or approval from other condo owners.

Condo Ownership Model
A homeowners or condo association or condo corporation, consisting of all the unit owners, manages the condominium through a Board of Directors.  Restrictions for condo usage are set forth in a “Declaration of Condominium”.  There may be separate Rules of Governance or By-Laws, stating items such as the amount of “assessments”, pet restrictions, and color/design choices.  Condo owners can easily rent their home to tenants, similar to renting out other real estate, although leasing rights may be limited by the Declaration, and there may be a restriction on the % of units that are rented out.

My Definition of a Co-Op
A housing cooperative is a legal entity–usually a corporation–that owns real estate, consisting of one or more residential buildings.  Each unit owner is a Shareholder, sometimes subject to an occupancy agreement, stating the Co-Op’s Rules, similar to a lease.  Monthly charges are made for the use of common areas and services, as well as the shareholder’s portion of the Property Tax on the building.  All monthly charges are normally tax deductible as expenses of the Corporation.  The number of shares may be dependent on the amount of square footage or other criteria. 

Co-Op Ownership Model
A shareholder in a Co-Op does not own real estate, but a share of the legal entity that does own real estate.  Co-Ops are governed by a Board of Directors from among the owners and may be very selective in allowing prospective owners to buy in the building. 
Financing methods are either market rate or limited equity.  With market rate, owners may sell at whatever price the market will bear when they want to move out.
Limited equity is where share price may be restricted and is not normally used in upscale Co-Op buildings.

Quirks Arising from the Arbitrary Nature of Co-Op Governance
–  Regional Differences are common
–  There may be great differences in Rules and Criteria for ownership from neighborhood to neighborhood and even between adjacent buildings
–  Historical areas versus non-historical areas
–  Buyer’s Marital Status and Income Level will be judged
–  Arbitrary decision-making more like a Private Club

Two Interesting Soundbites:
“Some experts claim that if the real estate market continues to be challenged, condos are likely to fall in value at a faster clip than Co-Ops.  In areas where Co-Ops are less common, such as Chicago market versus a Manhattan market, Co-Op lending is harder to find because Co-Op purchases aren’t secured by a deed of trust.”
 “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 come online to replace older Co-Op buildings.”


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  • So why do you think co-ops have higher monthly assessments in general - even when the co-op doesn't have a mortgage to pay off.

  • Thanks for the info Melinda! You have got to be one of the hardest working agents in Luxury Realestate!!

  • Actually I don’t have such words by which the praise can be dome. I just want to say that this is my ideal blog. Thank you so very much.
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