photo: Watergate via Wiki
From the outside, it's hard to tell whether the building is a cooperative or a condominium. There's no way you could tell the difference. The buildings look alike. You'll be surprised to find out later on that it's not a condo, but rather a coop, which has very different implications on how you treat its ownership. Because there are many differences between the two form of ownerships.
If you're attracted to co-ops, your Realtor probably would tell you this: Forget it. Let's look somewhere else. You may not get it financed. During market heyday, there were few lenders willing to finance co-op. This condition probably haven't changed much, especially with financing kinda challenging these days - not only for co-ops - but, for all types.
To help fuel the market, FHA also gets in with 203(n) mortgage insurance, to get lenders financed cooperative purchase. (it doesn't mean that FHA is going big in this, it's just to inform you that there's alternative to conventional or cash).
Like I mentioned earlier, even with FHA in the game, only a few lenders doing co-ops.
Over in DC region, DC has more co-ops than across the river, in Northern Virginia. Some of the old buildings in DC belongs to a co-op. The famous Watergate is a co-op. On the new home side, Capitol Hill Tower is a new co-op.
The easiest way to differentiate the type of ownership between the two is this. In condo, you own 'what's inside the four walls.' In coop, you own share of the company that owns the building. Therefore, as a shareholder, your co-op fee includes your portion of real estate tax, in addition to some other amenities provided for building or company owners.
More details below the fold..
Let's revisit the post I wrote a while back on condo vs. coop.
Co-op is not very common for our area. New York is THE land of co-ops. Occasionally, you'll probably see co-op listings pop up in your search. These co-ops look like condos on the outside, but they priced much lower than condos. Though, not always.
There are rather few co-ops that I know of in our area, clusters around the District of Columbia, Arlington and Falls Church. There are more co-ops in the District than in Northern Virginia. The famous "Watergate" is a co-op. River Place in Arlington is - also a co-op.
Most likely, when you tell your agent that you want to see a specific property, your agent would tell you that this is a co-op.. or cooperatives... and not a condo! Huh? So- what are the differences between the two?
There are some differences between condo and coop. The three main differences (there are more), namely:
- Form of ownership
- Property tax
In a condominium, you do own whatever within your four walls. You do have common area that you share with other condo owners, like hallways, parking, lobbies, and recreation area.
In a co-op, you own the share of the company that owns the building. What?! Yes, that's right.
In a cooperative apartment complex you don't actually own any real estate. Rather, you own shares in a not-for-profit corporation. As a shareholder you get the right to lease space in the building. The corporation owns the common areas. The effects of this are varied. Real property, for example, descends to your heirs while the co-op's tenant-stockholder's shares pass as personalty to your personal representative and may be subject to securities regulations. Generally, a condo is considered real property and a cooperative is considered intangible personal property. (bold is mine)
When you own your condo, you will pay property tax per square footage of your unit. You pay your tax directly to the tax office where you reside.
Because you are a shareholder in a co-op situation, the tax is roll into one big chunk to the corporation that owned the building. It then passes the tax bill pro-rata to shareholders in the monthly maintenance fee. Yeah, you might have one low mortgage payment. But, when you add your monthly co-op fee to your mortgage - it becomes a rather 'hefty' bill.
I think when it comes to buying a condo or co-op, there is no question that it is much easier to get financing for condos than co-ops. There are only a few lenders get their hands in co-op market. For one, the market is not as big as condo. It doesn't give the clout like financing condos. Two, it is much easier to sell condo than co-op.. because of the very same reason: financing.
A few co-op listings has this kind of remarks: OWNER FINANCING AVAILABLE FOR QUALIFIED BUYERS. If you buy this co-op, you'll be exposed to the same thing.. you might have to provide financing to your buyer.
Here is another kicker: The tax deductions on your property tax if you itemized it. It's easy to itemize it with condo. Try to figure it out with co-op your share of the pie...
Co-op also famous for its restrictions!
After reading this post, there should be no question about which one to choose. Condo should always be the first choice before co-op. Because of -- the pool of buyers and financing.
Think RESALE. Always.
Did I miss anything?