Condo and Co-op are they similar or not? There are many differences between the two. However, many people are still confused about condos and co-ops.
At first look, you can’t spot the difference because they’re actually somewhat similar. But if you will dig deeper into the details, you will be able to differentiate co-ops and condos.
Through this article, I will dig deeper into the details of co-ops and condos for you to determine the difference between the two. So just stick around and read the article until the end.
What is a Condo?
A condominium or condo is a building structure divided into several separately owned units and have common areas jointly owned.
You will agree to be the unit owner when you purchase a condo. And the exterior of it belongs to the association. The condo association handles and maintains the exteriors like the lawns, landscaping, and common areas. They also take care of the repair if the exterior has been damaged.
You will pay special fees, like “common charges.” The fees differ depending on where you live, unit size, and types of common areas that you access.
Condo associations’ roles are like in the homeowner associations (HOAs). They handle maintenance and formulate bylaws for the community. Moreover, they’re also implementing the rules, including pet restrictions, quiet hours, and the use of common areas.
A condo is a notable option if you don’t have more time and effort to maintain the property. They were popular in major cities like New York City, and it’s cheaper than purchasing a house, so if you’re on a tight budget condo is a good option for you.
What is a Co-Op?
A co-op is a housing that is owned and operated by a corporation. They own every part of the house, from the interior, exterior, and common areas. They’re popular in big cities with costly living, like New York City.
If you purchase a co-op, you don’t buy real property. You only purchase shares of the corporation that has the building ownership. Every shareholder has to vote on every issue that will affect tenants. Co-op typically elects a board of volunteers for the collection of fees and maintenance.
Every shareholder breaks apart maintenance fees, taxes, and any mortgage on the building. Some might do voting if they’re going to hire a property management company to handle the daily activities of the building.
Co-op associations are also very demanding in selecting prospective buyers. The co-op board must approve your application. And the co-op owners also need to know that you will obey the community rules and can afford to pay maintenance expenses and taxes. The approval process may include interviews and reviewing your financial reports.
Difference Between Condo and Co-op
Let’s dig into the several specific differences between condos and co-ops.
Condo and Co-op Ownership
When you purchase a condo, it’s like you buy a single-family home because you will also receive a deed to the new unit. However, the only thing you own is the interior, and the condo associations own the condo’s exterior. But the good thing is the association is also responsible for maintaining and repairing the exterior like your walls outside.
On the other, when you buy a co-op, the property is owned by everyone living in it. And if you hold a large percentage, you’re entitled to have a larger living space in the co-op. And the expenses are split to every shareholder.
Condo and Co-op Application Process
Before buying a condo, you will not undergo any interviews. Although the condo association has implemented strict rules on using the property, they don’t control who will move or own any unit in the association.
But in co-op will require you for an application process. You will go under interviews with board members before you purchase co-op shares. They will also review your financial documents, and you will not be able to buy a co-op until the board approves it.
It would help if you always bear in mind that co-op can’t reject your application that, is prohibited by the Fair Housing Act, which includes:
- race
- gender
- religion
- sex
- national origin
- familial status
- Disability
However, they can reject your application if you show any unpleasant attitude toward community rules to the growth of your finances.
Condo and Co-op Market Value
Setting the market value of a condo is similar to setting the market value of a house. The condo’s fair market value can affect the condition of the condo and the values of other residences near the unit. You can get the value of your condo with the help of an appraiser that can give you an estimate.
While co-op has two ways to know the market value: market rate and limited equity.
The market rate has a similar way of determining the value of a co-op, like the way a condo or home value is determined. The appraiser will get the current market conditions and assess your co-op shares’ worth. And you can sell your co-op based on the price market outcome.
While on the limited equity, there are limitations on how much equity you can gain from your shares. There are chances that you may earn nothing in equity because of the co-op rules that restrict how much you can only sell your shares.
Condo and Co-op Fees
Co-op fees are higher than condo fees. It’s because co-ops sum up all the monthly expenses in one bill, like gas, water, and taxes. And those who own 2% of the property will pay 2% of the electric bill. But some people find it more convenient because they will not be bothered paying utilities separately. After all, they could have it in one monthly bill.
And on the other hand, condo owners pay their utilities and taxes on their own. But they have HOA fees as being a member of the condo association. HOA fees depend on the amenities and services of the association. For example, if the condo has a gym and other high-end amenities, the HOA fees might be higher.
And regarding property taxes, a condo owner tax is based on the unit’s assessed value. While in co-op, the taxes are based on the percentage of the shareholder owns. If you own 10% of the property, you will have to pay 10% of the property tax.
Governance
Condos have a condo association as the co-op have a board where voting takes place when there are changes and revision on their existing rules and policies.
However, the difference in their governing group is the evaluation process for new residents. Co-ops are more strict in screening who’s going to buy the share. And they will require specific requirements.
Moreover, both the association and board set limitations on how you can modify or improve your unit. There are times when a co-op or condo owner can do some paintings on their interior for whatever color they want. Still, the owner must comply with the paint color of the exterior set by the governing bodies.
Renting or Selling
Condo owners can rent their units, but the association has restrictions regarding the number or percentage of the unit that can be rented at a time. However, in co-ops renting is not allowed.
Selling a condo is also easier because it doesn’t have a strict process. Unlike co-ops, they have more strict procedures for assessing someone interested in buying a share.
Amenities
Both condos and co-ops offer access to different amenities, like a pool or gym. But commonly, condos are well known to provide more amenities. Co-ops also provide similar amenities.
Availability
Condos are available for sale in almost every large city in the USA. However, these units also are widely available in smaller towns.
On the other hand, co-ops are less prevalent in many parts of the USA. Most of the co-ops were established before the mid-70s. They were usually found in Philadelphia, New York, Seattle, and other metro areas, according -to the National Association of Housing Cooperatives (NAHC).
So if you want to live in rural areas, there is a slight chance to find a co-op.
Final Takeaway
Knowing the difference between co-ops and condos, you will be able to figure out which one is suitable for you. At first, co-ops are cheaper, and those residents who will stay for the long term will save little money buying a condo.
The co-op also allows you to choose your neighbors. It’s because of the selection process that a potential buyer will undergo.
On the contrary, owning a condo can help you increase your investment portfolio. We all know that there are limitations regarding the number of renters, but they have an option to rent the unit. And can do an easier selling.
Moreover, you must know the association or board rules and policies. You must ensure that you’re not tied up with the regulations that might affect your goals and lifestyle.
Overall, if you decide to choose between a condo or co-op is up to you. They both have pros and cons, so you must be smart and weigh every situation affecting your decision.
