Coops vs. Condos: The Good, The Bad, The Difference

First let me start this blog post by making this clear…condos and coops are very much a New York City thing. We like to make things complicated, but in doing so it gives buyers some flexibility. Condos and Coops are similar in many ways, and different in even more. So how are they defined? And how do you choose whats best for you?

Lets start with Coops….

  • What are they?: Shared property of the coop corporation. They are not considered real property.
  • Who owns it?: Coops are owned by a corporation so when you buy a coop you’re buying shares of the corporation. The number of shares you own is usually determined by the size of the apartment.
  • How does it work?: As a shareholder you are entitled to proprietary lease in relation to the building.
  • Availability: The majority of NYC owned apartments are co-ops. In Manhattan 75% of the market is coops.
  • Pricing: This varies depending on the market, location, etc. Since there is more inventory to choose from with coops they’re usually priced lower than condos.
  • Costs: Most coops require a minimum of 20% down. Closing costs tend to be lower than that of condos.
  • Approval: You’ve probably heard stories about crazy co-op boards, approval, and interviews…and they’re probably all true. In order to purchase in a coop building you first have to be approved by the board of members who are residents of the building. Each board is different– some are very strict while some may be very lenient. You are typically required to interview before the board and can be denied or approved without any explanation.
  • Monthly Payments: As shareholders you pay a monthly maintenance fee to cover building expenses and upkeep like heat, hot water, insurance, staff salaries, real estate taxes and the mortgage debt of the building. You may also have to pay a monthly assessment, which is an additional fee the building has to cover the cost of large repairs like an elevator, roof, etc.
  • Subletting: Many coops have strict rules on subletting because the number of non-owner occupied units has a direct impact on the underlying mortgage of the building, and the potential for new buyers to be able to get their own mortgages. I’ve seen some coop buildings allow you to sublet after just one year of buying, while some have more restrictions like requiring an owner to live in the unit for 2 years and only being able to rent for 3 years for the entire time that they own in the building.

Now for Condos…

  • What are they?: Condominium apartments differ from coops because they are considered real property.
  • Ownership: You have outright ownership of the unit.
  • How does it work: Unlike a coop where you receive a proprietary lease, with a condo you receive a deed when you purchase. Just like if you were purchasing a singly or multifamily home.
  • Availability: Also unlike coops, condos are much less available in the city, which means they are much more competitive.
  • Pricing: They are typically priced 10-15% higher than coops.
  • Costs: Some condos require as little as 10% down. Closing costs tend to be higher than that of coops.
  • Approval: Condo sales do not typically require board interviews. Each unit is individually owned and not a shared corporation as with a coop. Therefore the owners of the building or less involved in resales.
  • Monthly payments: Unlike a coop there are no shared costs for the building. Each apartment in a condo building receives a separate tax bill from the city. But similar to the maintenance in a coop, each owner pays monthly common charges, however these charges tend to be lower than in co-ops because there is no underlying mortgage for a condominium building.
  • Subletting: The subletting policy is typically more flexible and less-restrictive in a condo building. Some allow you to start renting the unit immediately after purchasing, which appeals highly to investors and foreign buyers.

Now that you know the differences between coops and condos, what do you feel is the better fit? There’s really no solid answer on what is a better value…it really just depends on what you’re looking to buy. I always encourage my clients to have a good understanding of their 2 year plan after buying, and check out a mix of the two types of properties during the search.

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