The Ultimate Guide Condo Vs. Co-op In NYC (Questions, Buying)

Are you looking for a modern high-rise apartment for sale in Manhattan or a fancy brownstone condo on a tree-lined street in Brooklyn?

Finding an ideally located New York City property with mortgage rates that fit your budget can be challenging.

The city has a plethora of realtors, many of whom you’ve never heard of unless you live in the area. There are also school zones, co-op boards, tax abatements, and assessments that may be unfamiliar to you.

Even if you’ve lived in NYC your whole life, going from renting to owning is probably the best and craziest thing you can do for your financial future.

This article will not go into the benefits of homeownership versus renting. And this is because I think most people will understand the difference without further explanation.

Here, I want to help you define co-op vs. condo, the two key terms and situations that knowing will be helpful in your NYC apartment search.

What Is A Condo?

Boston Condo

A condominium or condo is an individually owned apartment in a building or complex.

In these, owners can buy and sell their apartments at will. Condominium owners have their deed and title and pay only a small contribution for the maintenance and upkeep of the property.

With a condominium, you own specific property and receive a deed.

There’s usually some type of homeowners association responsible for common areas such as swimming pool, sidewalks, staircase, roofs, exterior landscaping, parking area and other grounds. The members of the association are often other owners of the complex.

The individual owners pay the costs of utilities, maintenance, and repairs from association dues and assessments.

What Is A Co-op Apartment?

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A cooperative apartment, popularly known as a co-op, is a building in which the residents own shares in a corporation that owns the building.

Many apartments in New York and other large metropolitan areas in the United States are co-ops.

Unlike condos, co-op owners only own one lease in a private corporation and a number of shares in that corporation. You still pay taxes. However, they’re billed to the corporation and then applied to your monthly maintenance payment.

With co-ops, you must obtain the approval of the cooperative’s board of directors before purchasing shares. As a shareholder, you have the right to rent an apartment in the building. However, it may be difficult for you to sell your co-op apartment because you have to wait for the board’s approval.

There are many intricacies here, a few of which I will cover in this article.

So keep reading.

Difference Between Condo And Co-op (Pros And Cons Of Co Op And Condo)

From the outside, it’s impossible to tell whether a building houses condominiums or a housing cooperative. Although both condos and co-ops offer a place to live in New York and provide convenient access to amenities such as swimming pools and fitness rooms, there are some crucial differences:

Ownership

When you buy a condo in New York, you own your living space – just as someone who owns a single-family home owns that building.

Condominiums also have several areas that are considered public and shared by all owners of the building.

The same is true for cooperatives. If you buy into a co-op, you have a place to live.

But as I said, you don’t buy the property. Instead, you buy into the corporation that owns the building in which your apartment is located. This corporation usually consists of all the residents of the building.

Fees and payments

Condo owners pay a monthly fee to their association. This money is used for several things, such as public areas maintenance and garbage collection, sewer, and water. And if they don’t pay cash, condominium owners take out a mortgage to buy their homes.

If you live in a co-op, you pay monthly for your share of utilities and other necessary maintenance. However, these amounts aren’t fixed but often fluctuate depending on consumption.

Instead of a mortgage, you can also take out a share loan. You still pay back the lender but use the money to buy “shares” in the co-op.

Residents

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Anyone can live in a condominium as long as they can mortgage their unit and abide by the homeowners association rules.

Once you can do this, the other residents of a condo have no say in whether or not you can live there.

In contrast, co-op residents determine who can buy shares and live in their building. It may be that only people with certain financial means or of a particular age group are allowed to live there.

Sub-letting

Condominium owners usually have the option of subletting their unit to others, subject to the rules of the homeowners’ association.

Again, the other owners have no say in the matter as long as the rules are followed.

Because condominiums are usually well suited for rentals, especially near colleges or universities, some people invest in them specifically for this purpose.

Cooperatives can – and often do – prohibit such activities.

Questions To Ask When Buying A Co-op

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If you’re looking to buy an apartment complex in New York and find the building you’re interested in is a co-op, you should have a few questions ready.

For example:

  • Is the building close to full occupancy?
  • When was the building built?
  • How well are the grounds maintained?
  • What’s the security like? Is it noisy?
  • Is access to the building controlled?
  • Does the co-op allow pets?
  • Will you have free access to all the building’s facilities?

And so on…

You should also find out who manages the co-op and the management (the Council of New York Co-operatives & Condominiums (CNCY) and NY better Business Bureau are good places to start).

Get financial statements from the co-op and management, or hire someone who knows real estate finance to advise you.

If possible, try to attend a meeting and ask for a copy of the minutes of the co-op’s board meetings so you can read through them. It’s a good idea to see what unit owners discussed or complained about at these meetings.

For example, if everyone complained about problems with the plumbing or maintenance of the facilities or grounds, you know that the cooperative may have management issues.

Even if there are no complaints, you can tell from the minutes what things are essential or major capital projects underway at the housing cooperative.

There’s a lot more at stake with a co-op.

If you like the apartment you’ve found and it turns out to be a co-op, you should do your homework before buying.

Steps To Buying A Co-op In NYC

Close up image of a real estate agent handing over a house key to a new tenant after receiving a rental deposit.

To buy a co-op in NYC, you must make sure you can finance it.

Sometimes, you’ll need to advance cash and prove that you have the required assets.

Most New York co-ops require a down payment of at least 20% to 30% (some allow for anywhere from 10% down though rare) and proof of liquidity after the purchase, commonly referred to as post-closing liquidity.

Generally, buying a co-op in New York City is more intensive than buying a condo. Purchasing a city condo is like buying a home anywhere in the state or country.

So, if you’ve found the co-op you’ve been dreaming of and are now ready to move in and enjoy the sights and sounds of the Big Apple, here are the most important things you need to do before making a purchase:

Get a good real estate broker/buyer’s agent

Coming up with a winning board package is one of the most critical yet challenging steps in buying a co-op in NYC.

Consulting with a good realtor is the key to success here. Some people choose to do this themselves, which may have disastrous outcomes if not done correctly.

The smallest of mistakes, such as incomplete, missing, or poorly written reference letters, can result in the board package being rejected

Get a real estate attorney

When choosing an attorney, look for an experienced, fast-track attorney who can smoothly navigate the path from accepted offer to signed contract.

Choosing an attorney with experience handling real estate transactions in New York is best. In addition, ensure that they are patient enough to explain the co-op purchase process to you.

Attorneys who serve on co-op boards, represent co-op boards, or specialize in co-op transactions are common. These attorneys are well versed in co-op transactions and can point you in the right direction to purchase a co-op apartment in NYC.

Find a financier

Whether you are a first-time or experienced buyer, the New York City mortgage market can be challenging.

Therefore, reviewing your credit report with your attorney and mortgage broker is essential. In this way, you can identify any errors, outstanding debt, balances to be reduced, or other items that can be eliminated to improve your credit score and expand your mortgage options.

Many people believe that buying a co-op starts with finding an apartment first. In truth, you should start by getting pre-qualified with a mortgage broker. Shopping for an apartment beforehand means shopping blindly without knowing what you can afford.

Make sure you talk to a broker more interested in telling you the truth than telling you what you want to hear.

In other words, don’t get your mortgage broker to tell you what you want to hear. Get them to tell you the truth. Understanding which interest rate and program are best for your situation is the most crucial aspect of obtaining a mortgage for a co-op.

A trusted mortgage broker or banker will be able to provide you with a whole range of financing options for your credit and income situation.

Once you are sure you qualify for the co-op and share loan (mortgage), you can begin the actual buying process by following these steps:

  • Make an offer to the co-op board ASAP!
  • If your offer is accepted, begin preparing the financial documents and letters of recommendation you’ll need for your board package.

Your broker and/or attorney can help you with this process.

  • Next, apply for the mortgage with the lender of your choice, relying on the advice of your mortgage broker.
  • Prepare and submit your co-op board package, and wait for the board interview.
  • Following a successful board interview, conduct a final walkthrough of the apartment to confirm everything is in order and close on your NYC co-op.

What To Consider When Buying a Condo In NYC

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Buying a condo is simpler, much like buying a house.

You still need a credit report, but it doesn’t have to be as detailed as what is required for co-op. Also, personal interviews and referrals are rarely needed.

Of course, with a condo, you don’t have as much influence over your future neighbors (as long as they meet the condo association’s requirements).

However, since financing is available, you can usually sell your condo much more quickly if you want to in the future. That is the main advantage of buying condos over co-ops.

The location (and micro location), construction quality, age, size, and views of the condominium complex should be considered when buying a condo in NYC.

Bylaws need to be reviewed as well. Check them carefully because you might find something that dissuades you from purchasing that condo. In NYC, bylaws differ greatly according to the type of building and property.

It’s also important to check a condo’s management and financial viability, which also requires some research.

Inquire about the condominium association’s budget and monthly dues.

Based on the budget and contributions, you can determine the regular monthly costs for the condominium and precisely what they’re used for. Ensure that the maintenance costs or association dues aren’t too expensive for you, or you could run into financial problems.

More importantly, take the time to ask the right questions when looking for a condo, for example:

  • What’re the monthly fees for the condo? What’s included in the cost? How do the prices compare to other condominium complexes?
  • How does the condominium association manage its finances? Does it have sufficient reserves to make repairs? Are special charges often levied?
  • How is the condo association managed? Tip: A professionally managed association should have a professional property manager unless it’s a tiny complex.
  • How does the condo management deal with owners’ complaints and requests?
  • How many tenants live in the complex compared to the owners? Tip: Avoid complexes where more than 20% of the residents are renters.
  • What’s the turnover rate among renting tenants in the complex?
  • Are dogs or cats allowed?

How Much Is A Condo In NYC

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According to Property Shark, the median price for condos in all five boroughs of New York was $1 million in the first quarter of 2022. This means that half of the condos sold for more than that and half for less.

Compared to the median price, the average cost is higher. And this is because a small percentage of million-dollar sales in New York City each year drive up the average price but aren’t relevant to the typical buyer.

The rest of the apartment housing stock in the city consists of co-ops with a median sales price of $515,000.

Is It Worth Buying A Co-op In NYC? Is A Condo Better?

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Honestly, this depends on your requirements and preference.

Here are a few essential things you should note:

First, owning a co-op in New York City means that you don’t actually own property; you just live in the co-op units by virtue of your rights as a shareholder.

Second, co-ops are relatively cheaper to “buy” in NYC compared to condos with similar features.

However, because corporations own co-ops, board directors are more stringent in vetting potential buyers than in condominiums. This can affect your ability to buy a co-op, leaving you with fewer options regarding your NYC apartment purchase.

Third, there are significant differences in property taxes.

With co-ops, the corporation that owns the building usually takes care of the property taxes and offsets them against the monthly mortgage. While with condos, they’re collected separately.

Fourth, when it comes to property maintenance and renovation, co-ops can borrow a lot of money from banks and other lending institutions. This is because they’re technically a single entity and can put up the building as collateral.

On the other hand, condos must charge a separate fee when owners request improvements and other renovations.

Fifth, some co-ops in New York are built on leased land. This means the building and all units are returned to the property owner when the lease ends.

In short, co-ops are perfect for you if you want to live in a well-maintained apartment at a low cost and don’t mind the permitting process and restrictions. But if you’re looking for a real estate investment with the ability to sublet, condos are better.

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