Co-ops vs Condos

I find that most first time buyers have a limited knowledge of co-ops so it’s one of the first topics I like to discuss when we meet. So lets get to it!

OWNERSHIP

A condo is considered real property. It’s just like buying a house, but inside of an apartment building. A co-op is a corporation. You are purchasing shares in that corporation and are considered a shareholder. You then sign a lease, entitling you to live in the apartment.

APPROVAL

As long as you can get a mortgage or have cash, you can purchase a condo. Anyone can purchase a condo, as long as they can afford it. Co-ops, on the other hand, require board approval. You will need to qualify financially and attend a board interview. It’s actually more difficult to qualify for a co-op than it is for a mortgage, so keep that in mind.

This is something that your real estate broker can help you figure out beforehand, so you don’t waste time looking at co-ops you will not qualify for.

OWNER OCCUPANTS & INVESTORS

Essentially ANYONE can purchase a condo.
Condos are investor friendly.
You can purchase a condo and rent it out from day 1 with very few restrictions.
Condos also appeal to foreign buyers who don’t typically have US tax returns, or the credit history required for approval. Co-ops prefer owner-occupants. They typically DO have sublet policies, but with much more restrictions and only for a limited time period.
Co-ops do NOT want investors and prefer that the apartment is your primary residence. One of the main benefits of a co-op is living in a community of like-minded owners.
You know who your neighbors are and it feels more safe and secure.
Owners typically take better care of the building, and are more respectful to their neighbors.

This is something that your real estate broker can help you figure out beforehand, so you don’t waste time looking at co-ops you will not qualify for.

AVAILIBILITY

There are a lot more co-ops than condos, especially in Manhattan where about 75% of apartments are co-ops. It does depend on where you are looking. If you are looking for a 1 bedroom under 1 million dollars in the West Village, most will be co-ops. If you are looking for the same thing in Williamsburg, most will be condos.

PRICE

Condos are more expensive than co-ops. There are less of them, anyone can purchase them including investors and foreign buyers, so they have a larger audience. So condos are priced at a premium. When financing, condos also have much higher closing costs.
Since condos are real property, you need to pay mortgage tax & title insurance which is quite expensive.

DOWN PAYMENT

Condos typically allow 90% financing, so you can put down as little as 10%. But Nowadays, 20% is the standard. Co-ops traditionally allow no more than 80% financing, so 20% down is the minimum. Many co-ops require more than 20% down payment, so pay attention to that while searching.

WRAP-UP

When it comes to co-ops, theres a lot more to know: Debt-to-income ratio, post closing liquidity, parents purchasing for children, pied-a-terres, gifting the down payment, and so on. If you want to discuss more or if you want a free buyer consultation, contact me and I would be happy to discuss.

Interested in Learning More?

Reach out and let's discuss...

Scott Rubin
Licensed Associate Real Estate Broker
Compass
90 Fifth Ave, 3rd Floor
New York, NY 10011
(646) 637-6377
scott.rubin@compass.com