It’s not always obvious whether a property is a condo or co-op when you’re a buyer who’s searching online for properties. You have to click in to all the details before you realize that the photos of the wonderful “flat” that seems listed kind of low is actually a co-op.
But what’s the difference between a co-op and a condo? All things being equal, couldn’t you just buy a co-op if it has the space and location you want?
There is a big difference—the way ownership is held. With a condo, you own your unit and a percentage of the common areas. You’re solely responsible for your own property taxes, and if you sell your condo, it doesn’t affect the ownership of the other units.
In a co-op, all the owners share title and own a percentage of the building (stock share), with the right to reside in a particular unit. Traditionally, owners shared an actual mortgage, too. There was one loan on a building, and if one co-op partner suddenly couldn’t pay his or her portion of the mortgage payment, the other co-op owners would also be on the hook—meaning a bank could foreclose on the property and everyone could lose their homes.
Co-op became a bit more palatable several years ago when fractional financing became available. This type of loan let borrowers get their own, individual loan. Co-op partners are responsible for their own individual mortgage payments, but still share title. (There are still only two or three lenders who will do co-op loans. So if you’re not preapproved with one of those lenders, you need to do so if you want to purchase a co-op interest.)
Sharing title leaves everyone accountable for property taxes and any liens that get placed on the building. For example, if your co-op partner remodels his or her kitchen and has a dispute with the contractor, that contractor can file a mechanic’s lien on the building which will then hold anyone on title responsible for paying the lien.
If you’re considering buying a co-op, it’s best to work with a knowledgeable, experienced Realtor who can guide you through the process. Your agent should also be able to refer you to a real estate attorney who can review the co-op agreement and answer the many questions you’ll likely have about ownership.
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