You are finally ready to buy your first place in Brooklyn and want to know which is better, a condo or co-op? They are different types of ownership and depending on your situation or inclination you may prefer one over the other.
Brooklyn is unique in that in most other places in the country, condo’s rule. However in Brooklyn, co-ops out number condo’s by about 75 percent. More recently because of the number of new developments, there are more condos on the market at any given time. The differences between the two can effect how much of a down payment you need or if you have to get permission for a washer/dryer in your apartment.
What are the different types of ownership?
With a condo, by deed, you own the parcel of property you are purchasing along with a part of the common areas. You will pay for your utilities including heat, water, and taxes, just like with home ownership. In addition there will be common charges for shared expenses and upkeep of common areas.
A co-op on the other hand, you are purchasing an interest in the property and are getting shares of the buildings corporation. In exchange for those shares, you are given a proprietary lease entitling you legal rights to occupy the unit for as long as you own those shares. This makes a co-op apartment owner a shareholder of a corporation, versus outright ownership of real property. Your maintenance fees can include property taxes, an underlying mortgage, utilities, upkeep, pest control, and any other amenities. On occasion there are special assessments for major repairs that each shareholder is responsible for.
Are their different requirements for Co-ops and Condo’s?
Typically co-ops are more difficult to purchase and can be a few months long process. They are ideal for someone who intends to live in the unit. You will need to prepare a financial package and go before the co-op board for an interview. The co-op boards requirements at times can be stringent and can go beyond what your mortgage lender requires. These include the amount of down payment you must have, money in reserves after closing, the stability of your income, and who will be living in the apartment. Some allow subletting, some do not. Some have limits on how long guests can stay, and pets most often are not allowed. Having a washer/dryer or dishwasher may also be an issue, or, in some instances an additional monthly cost. For many co-ops there is also a flip tax. The flip tax is not really a tax, but a fee a seller pays back to the building for their reserve funds.
The positives of co-ops is that you are living with owner occupants who are like minded and all have a vested interest in maintaining the buildings standards. Generally the pricing per sq. ft. is considerably less than a condo, which is great for affordability, but they also do not appreciate as much in value.
A condo has none of those requirements. The downside of purchasing a condo is paying a premium per sq. ft, especially for new construction. Also with new development the buyer is expected to pay the transfer taxes. Another drawback is that the building will only be as nice as the managing agent is on top of it.
With a condo you can sublet, have pets, a washer/dryer, and not have your financials scrutinized. Condo’s tend to be in newer buildings and have more affordable common fee’s. Condo’s also tend to offer more sought after amenities like parking, a concierge, or a gym. You may even be lucky enough to find a condo with a tax abatement program still in place. The value of a condo tends to be much higher than a co-op over time. This makes condo’s all the more attractive for living and investment purposes.
The bottom line
If you plan to occupy the unit and want to live among owner occupants, appreciate the splendor of older buildings, and pay less per sq. ft. then co-ops are for you. If you want an apartment as an investment, use as a pied-à-terre, or buy for a relative, a condo would be the best choice.
Most important is to have an experienced agent represent you in your purchase or sale of a co-op or condo. Your agent should know all the ins and outs and be able to walk you through the process. By arming yourself with knowledge and getting answers to your important questions, the agent you choose should make your real estate transaction a smooth and successful one.