Q: Every query I read about co-ops in your Ask Real Estate column makes me wonder why anyone would want to buy into a co-op when condos are a similar but less restrictive option. I’m a first-time buyer, but don’t know which to choose. What are the benefits of co-op ownership? Why should someone choose one over a condo or another option?
A: Our inbox does tend to fill up with queries from unhappy co-op shareholders, but there are reasons people like cooperative living. Many of our readers’ complaints have to do with co-op boards, which must approve every buyer and exert control over building operations.
Some co-ops require that shareholders have their primary residence in the building, and often prohibit renting apartments out to others. These rules can build stability in the building and promote a sense of community. (Yes, we know renters can make good neighbors too.)
“On one hand, co-op boards have a lot of power,” said Steven D. Sladkus, partner at Schwartz Sladkus Reich Greenberg Atlas LLP. “That sometimes attracts people to co-ops because when you’re buying into a co-op, you know, at the very least, the co-op board has vetted all the people who live there.”
There’s also the simple fact of supply and demand: There are more co-op apartments than condominium units in New York City, which means they tend to be less expensive. “Many first-time buyers, because of the price point, are buying co-ops,” said Adjina Dekidjiev, a real estate broker at Coldwell Banker Warburg, who noted that about 70 percent of apartments for sale in Manhattan are co-ops.
Condos can be attractive to buyers with a bit more money, because they can typically buy (and later sell) without worrying about board approval, have greater latitude to renovate when they want and have more freedom when it comes to renting it out (this also makes them attractive to investors).
But it might be more difficult to get a bank loan for a condo, especially if it’s a new development without a track record, Ms. Dekidjiev said. Co-ops charge a monthly maintenance fee (which covers property taxes), and have stricter financial oversight, so they typically have more financial reserves to address building expenses.
“Lenders will avoid the buildings with low reserves, any active litigation,” Ms. Dekidjiev said.
It’s true that co-ops can feel more intrusive and burdensome — like the board’s investigation into buyers’ finances, and its requirements that buyers have liquid assets after closing. But this helps ensure that the residents have enough funds to meet their obligations and collectively keep the building in good working order.
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