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Condominiums and co-ops are very different forms of housing ownership. Each offers its own set of benefits and drawbacks. What may be a buyer’s perfect apartment in a building with a condominium ownership structure may not be worth purchasing if it were a co-op. Likewise, a co-op offers owners levers of control over the future of the building that many buyers insist on.
The financial structure of the two types of buildings differ in substantial ways. A co-op has an ownership structure closer to that of a public corporation than a typical apartment building. Instead of owning a particular apartment, like in a condominium, those that live in a co-op own a certain share of the company that owns the building. The more valuable the apartment, the larger the share of the company the resident owns.
While most buildings being built in New York City today are condos, 85% of all the apartments available for purchase are still cooperatively owned. While some analysts predicted years ago that co-ops would soon begin restructurings themselves as a condominiums, the bylaws of most co-ops require a super majority, or 66%, vote of approval by the owners to allow this to happen. Many even require a super-super majority, or 80% vote. This explains why recent history has made it clear: Co-ops are here to stay for the foreseeable future.
So, which type of housing is right for which type of buyer?
Generally speaking, co-ops offer one major advantage for some buyers: A more thorough screening process of potential buyers. The screening process is an arduous task for potential buyers Often just the interview with the board of directors will take up significant amounts of time, which is to say nothing of the various credit requirements to be met and paper work to be completed.
However, once a buyer actually moves in to the co-op, the social make up of their neighbors tends to be much more stable and homogenuous. Obviously, this can be either an advantage or disadvantage, depending on what the buyer is looking for. For those looking for a place to retire or to raise a family, the knowledge that the social and phsyical environment of your building will not change for a long time offers a great feeling of security.
These same tight screening processes and regulations that make most co-ops a reliable, unchanging environment, however, also make them more difficult to sell and often quite impossible to sublet. This is particularly disadvantageous for buyers that do not plan on living in one place for an extended amount of time.
Indeed, the co-ops’ regulations give condos a relative value increase on the market: Investors and more mobile homeowners prefer condos. This additional demand for a much smaller supply makes condos the logical choice for most buyers. A recent study suggested that were the average co-op to convert to a condominium ownership structure, a net average gain in value of $15,500 would be added to each unit.
More Information: NewYork City Condos and Co-ops