Co-op Vs. Condo – What’s the Difference?
Rebloged from Rand Site (by permission)

Co-ops and Condos are different. A Co-op is a corporation; you actually buy shares in the corporation. The monthly maintenance includes the property taxes and mortgage interest if the building has taken out a mortgage for improvements. These costs are deductible on your personal income taxes – on the listing it will tell you how much is tax deductible, usually about 50%. Co-ops have a Board of Directors and require an application with a fee and board approval for all perspective buyers. They also usually have a minimum down payment that varies from 10% to 35% depending on the building and not all Co-ops allow pets.

With a condo you actually own the unit from the outside wall in and in addition to the common charges you are also responsible for paying the property taxes as well. The taxes will be posted on the listing. Condos also have a board but there is not usually board approval or a minimum down payment requirement. Condos also usually allow all pets. There are not as many condo complexes as there are co-op complexes so the old supply and demand theory – condos are more expensive than co-ops.

The maintenance and common charges both include the maintenance of the building, heat and hot water (unless the heat is electric). Sometimes other utilities, like electric are included but then there is a monthly fee for items such as air conditioners and dishwashers. Some buildings also have temporary assessments for things such as oil costs or improvements. These charges are for a specific period of time.

Some of the Differences

Condominium

Deed ownership to unit and undivided interest in common elements.

Unit owner may finance and refinance his unit with mortgage.

Condominium cannot mortgage common elements.

Condominium Board of Managers has right of first refusal of match offer to purchase or lease unit. (Most never exercise it)

Failure of unit owner to pay common charges increases costs to other unit owners for operating expenses – no risk of foreclosure to other unit owners.

Condominium may foreclose on individual unit for failure to pay common charges.

Units separately assessed for real estate taxes – each unit owner pays his own real estate taxes and mortgage.

Each unit owner deducts real estate taxes and mortgage interest paid directly by him.

On new condos, buyer may be locked into specific bank or two. On resales, most will make a loan. Rates are comparable to a home.
Cooperative Apartment

Ownership of stock or corporation owning building with right to a lease to a designated unit.

Cooperator may finance and refinance his stock ownership and lease with loan secured by pledge of stock and lease as collateral. Called personal loan.

Failure of cooperator to pay maintenance (rent) increases costs to other unit owners for operating expenses and debt service on underlying mortgage-risk of foreclosure on entire building.

Apartment corporation foreclose on cooperator’s apartment for failure to pay maintenance.

Entire building assessed as a whole – cooperator’s maintenance used to pay portion of real estate taxes and underlying mortgage.

Each cooperator deducts his proportionate share of real estate taxes and interest on underlying mortgage paid as part of his maintenance – also, deducts interest on individual cooperative apartment loan paid directly by him.

Interest rates and sometimes points are higher because it’s a personal loan.