Since we earlier posted an entry about the blurring line between a condo and a co-op application, it probably raised some questions; so what is the difference between a condo and a co-op?
First, a little history into the matter. The co-op, or cooperative apartment complex, is by far the more common apartment in New York. There are more than three times the number of co-ops than there are condominiums in Manhattan. Outside of the city, they are rare. Co-ops became popular in the postwar period as a way for apartment dwellers to acquire home equity and have some input into the way their apartment building were being managed. Many former rent-controlled and rent-stabilized buildings were converted to co-op in the 1970s and 1980s and they are a popular and affordable way for New York City residents to have the benefits of home ownership.
Here are the basics of co-op vs condo as written by a Real Estate 101 site:
How is a co-op different from a condo?
Legal Distinction
When you buy a condominium, you are purchasing real property. When you buy a co-op you are not actually purchasing the physical apartment; you?re buying shares in the cooperative corporation that owns the building. Once the deal is closed, you will own the number of shares allocated for that apartment based on its size and location. Instead of the deed you receive when you buy a house or a condo, with a co-op you get a stock certificate and a proprietary lease, or occupancy agreement, on a specific apartment. As a shareholder, you become part owner of the building. In addition to the monthly loan payments on your individual unit, if any, you are responsible for monthly building maintenance and real estate tax payments to the co-op and you have a share of the assets and liabilities of the building.
Tax Implications
When you own a condominium, you are a property owner, and you pay real estate taxes directly to the city. In a co-op, your building is assessed as a whole and the building pays the real estate taxes. You, as a shareholder, are charged a percentage of these taxes, which are typically included in your monthly maintenance bill. Therefore, in looking at average monthly carrying costs for a condo versus a co-op, you must determine the annual real estate tax estimate on the condo, divide it by twelve, and add it to the monthly maintenance charges.Whether you are a co-op or a condo owner, real estate taxes and mortgage interest on primary residences are usually deductible on your Federal income tax return. As a co-op owner, the interest on the underlying mortgage allocated to your shares may also be deductible. The co-op annually notifies shareholders of the dollar amounts of these allocations. The value of the deduction is dependent on, among other things, your income-tax bracket and whether you itemize deductions.
Maintenance Costs and Common Charges
Common charges are the costs associated with the upkeep of the building, which are in addition to the costs of your apartment. The common charges may include payments on water and sewer fees, fuel costs, utilities for the common areas, salaries for building employees, insurance, and any other expense related to the operation of the building. These costs are apportioned to each co-op shareholder or condo unit owner as maintenance fees, usually payable via the corporation or condo association on a monthly basis. In the case of a co-op, the monthly maintenance payments usually cover local real estate taxes on the building and may also include payments on the building?s underlying mortgage.
So how do you choose which option is right for you? Talk to your realtor. Review your financial history, what purpose you are buying the apartment for, how long you intend to live there and other variables that may affect your decision.
Source: http://www.mercedesberk.com/blog/condo-vs-co-op-so-what-is-the-difference/
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