The Difference Between Condos and Co-Ops: The Ultimate Guide

Ever wonder about the difference between a condo and a co-op? That’s a great question!

Both options are typically multi-unit, and you can find in-unit laundry, a doorman, and pet-friendly policies no matter the category of the home you choose. Both co-ops and condos have boards, and you’re going to pay fees no matter where you move. So, the two are basically the same thing...right?

Nope! The differences between condos and co-ops can actually have a big impact on what your new home will be like. But don’t worry. With this comprehensive guide in hand, you’ll be fully informed and ready to choose whether a condo or a co-op is right for you. 

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So first things first, some definitions. 

What exactly is a co-op?

Co-op is short for housing cooperative. In cooperative housing, instead of owning a specific unit, you own shares in a corporation. This means that co-ops are not considered real property. However, co-ops may be treated as real property for tax purposes.

Purchasing co-op shares gives you a big say in decisions relating to the building. Whether it’s decorations for the roof or allowing a new neighbor to move in, you get a voice. The downside is, however, that as part owner, you have to help pay for those new rooftop decorations. Co-op members also split the cost of other expenses, whether it’s air conditioning repairs or a new elevator.

In large co-ops, board members are elected from among residents. Board members are responsible for collecting fees, enforcing rules, and handling some building decisions, like which plumber to hire. Larger co-ops usually hire a management company to address the day-to-day obligations of building maintenance and collection of maintenance fees. These management companies are typically selected and approved by the board.

In smaller co-ops, the building may be entirely self-managed. This means that residents shovel snow, rotate turns taking out the trash, and even handle tasks such as arranging for boiler repairs or refinancing the building mortgage.

Now, what exactly is a condo?

Unlike buying shares in a co-op, when you buy a condo, you purchase real property: the space within the four walls of your home, as well as part of the shared community amenities.

Condos and co-ops get confused sometimes because like co-op shareholders, condo owners are also required to contribute to building expenses. Think elevator repairs, landscaping (even the grass in front of your unit), and pool maintenance. Condo owners pay fees in the form of dues to a homeowners association (HOA). Members of this HOA are elected from among the condo’s residents and are often collectively referred to as a condo board.

The condo board enforces community rules and manages the upkeep of the condo’s shared amenities. Many condo boards choose to hire a property management company to handle these tasks and other day-to-day responsibilities.

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So what’s the difference between a condo and a co-op?

At first glance, condos and co-ops may appear similar. In both cases, residents pay fees towards the maintenance and repair of shared amenities. However, there are some significant differences that can impact which option is right for you. Before purchasing either a condo or a co-op, make sure you are crystal-clear on the distinctions.

So let’s break it down!

What You Own

This difference between condos and co-ops is straightforward but important. 

For co-ops:

In a co-op, you own shares in a corporation. This means that you do not own the specific unit you’re living in (or any piece of real estate, period).

For condos:

When it comes to condos, you actually own a specific piece of real estate — your condo and the space within its four walls, plus a portion of the shared amenities.

How You Get to Live There

Unlike renting an apartment, the process of purchasing condos and co-ops can get complicated fast, and we don’t just mean financially.

For co-ops:

If you’re in a rush to find a new home, a co-op probably isn’t for you. In order to purchase shares, the co-op board has to approve you. This can take some time because the stakes are high. Co-op shareholders take on financial responsibility for the whole building. For these reasons, co-ops may also require more money upfront (such as limiting the percent of the purchase price you can mortgage) than condos.

For condos:

Though you may still need to be approved by a board, condos are generally easier to secure than co-ops. Because condo owners are only responsible for their individual units, a condo board is not likely to worry about every specific of a resident’s financial situation. In contrast, co-op shareholders take on responsibility for the entire building, so the board needs to be absolutely sure prospective buyers are financially secure. This often makes the approval process for co-ops longer.

Regardless of your financial standing, you’re going to have to jump through some hoops to purchase either kind of home. The main difference in the buying process is that a co-op board has more at stake when considering who to let in, so prospective buyers will have to jump through a few more hoops than condo owners.

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What You Pay For

When offered the choice, many movers choose co-ops for the cheaper sticker price. However, when making this big decision, make sure you’re taking monthly fees and other potential charges into account.

For co-ops:

Beyond the cost of shares, co-op owners are required to pay a monthly co-op fee, called a maintenance fee. In most cases, a large part of this fee will go toward the co-op’s underlying mortgage payments. Property taxes for a co-op, also included in the monthly fee, are divided among all residents according to how many shares they have. Finally, the monthly fee covers building operating costs, which usually includes amenity, utility, and other maintenance fees. A percentage of these fees, depending on how many shares you own, is tax-deductible.

In addition to the maintenance fee, you could be charged for everything from rooftop decor to building repairs, which could even include fixing your neighbor’s window. As a co-op shareholder, you technically have an interest in the upkeep of the entire building, and thus paying for that upkeep.

In certain circumstances, you could also be required to cover the cost of special assessments. This happens when the co-op doesn’t have enough money on-hand to pay for large or unexpected repairs, such as replacement elevators or a new roof.

Co-ops usually make up for low share prices with high monthly fees. However, remember that the fees will vary among different co-ops, so it’s not impossible to find a new home with low fees.

For condos:

Condo owners also pay monthly fees, broken down a little differently from the co-op maintenance fee. Instead of splitting the cost of property taxes for the whole building, condo owners pay property taxes on their individual unit. Owners also usually pay for their own utilities and unit repairs, rather than having some of these costs covered by a monthly fee.

Condo monthly fees are called common charges or HOA fees. Like the co-op maintenance fee, this fee covers the community buildings’ operating costs, amenity upkeep, and building repairs. The common charge can increase month-to-month if the condo board decides to get new roof decorations or raise the doorman’s wages. Condo fees are not tax-deductible except in specific circumstances, like if the condo board takes a mortgage out for a repair and the interest is added to your fee, or if you use your condo as a home office. Make sure to discuss with your accountant before purchasing so that you can get the most benefit possible!

Like co-op shareholders, condo owners can also be charged for special assessments. If the condo doesn’t have enough money on-hand to pay for large or unexpected repairs, you could be asked to pay the additional, sometimes costly, price for these repairs.

Both co-op maintenance fees and condo common charges sometimes include a percentage that is set aside “in reserve.” A larger reserve makes a costly special assessment less likely, so in both cases, make sure to ask about this fund.

In the end, condo fees are usually cheaper than co-op fees, but the sticker price for a condo will almost always be higher than that of a co-op equivalent in size, location, and amenities.

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Who Makes the Rules for Co-ops and Condos

If you’re a rebel at heart, you’re probably not going to love being a condo or a co-op owner, so make sure you know what you’re getting into before signing on any dotted line. In both arrangements, you will be held accountable to your fellow residents. However, when it comes to who makes the rules, there are a few important differences between condos and co-ops.

For co-ops:

When it comes to co-op housing, you are part of the managing body of your building. In a small co-op, you have a bigger say in most decisions. You’re also held accountable to other residents for paying your fees, and often, doing building chores. In a large co-op, you elect a co-op board to enforce rules and represent you in most matters. However, even if you’re not on the board, you would still get to vote on the most important matters relating to the building, including the annual budget.  

In any co-op, you will also be subject to the underlying proprietary lease for your unit, as well as the rules and regulations of the cooperative building.  

Either way, get ready to know your neighbors and be prepared to deal with conflict face-to-face. In a co-op, you don’t get to hand off issues to higher management. You are the higher management.

Regardless of size, every co-op has unspoken rules that impact the way things are done. Your say in matters might depend a lot on the building’s culture, so ask around. Do long-standing residents get more of a say, or are all voices heard equally? Does the building tend to follow tradition just because, or are they open, for example, to hiring a less expensive plumber?

For condos:

As a condo owner, you have a say in community matters because you’re a partial owner of shared amenities. Decision making is primarily in the hands of the elected condo board. However, if they want to take a major action, such as installing a new pool, the condo board will usually need approval from the rest of the owners.

An HOA creates a lot of rules that govern everyday life. In many cases, the condo board can decide if you’re allowed to change your window trimmings, modify the exterior of your property, or park on the sidewalk. The board is responsible for enforcing these rules while handing off day-to-day operations (in most cases) to a property management company. This means you won’t have to pick up a snow shovel while you live in a condo, but it might also mean you have no say in whether or not you can paint your front door red.

Though the condo board often has a lot of power, what the group can legally do varies by the state and the condo. Make sure to ask lots of questions and read over every document you’re given before making a decision on your new home.

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What To Ask Yourself Before Choosing Between a Condo or a Co-op

Especially in large cities, you might not have much of a choice between a condo and a co-op. Many areas have a high concentration of one type of housing. For example, in New York City, the majority of buildings are co-ops. However, if you are presented with a few home options that you really love, but aren’t sure if a co-op or a condo is the best fit, ask yourself these questions.

How fast do you need to find a place?

In most cases, you can close on a condo more quickly than a co-op.

How involved do you want to be in the way the building is run?

If you want to be super involved in every decision, a co-op is for you. If you only want to vote on big-ticket issues, then go with a condo. Keep in mind, however, that either way you can be as involved or uninvolved as you want.  

Do you mind following rules others have made, or do you want to be a part of the decision-making process?

In either situation, you’ll be moving into an environment with many rules already in place, but you will have more voice about changing or adding rules if you live in a co-op. Either way, make sure you pay attention to the culture of the specific building you’re moving into before making a decision.

What can you afford?

Is it wise for you financially to take on not only your own mortgage but a co-op’s mortgage, as well? Or, should you go with a slightly pricier condo with lower fees and no double mortgage? Pay attention to all financial aspects of your new home before making a decision.

To ensure you’re fully prepared before making a decision, we recommend making an appointment to review board minutes and financial reports. This will allow you to familiarize yourself with the financial condition of the cooperative corporation or HOA (i.e. outstanding debts, reserves, annual revenues/expenses) and the frequency of assessments. Proper board minutes will also disclose issues at the premises such as infestations (such as bedbugs, cockroaches, and rodents), the condition of improvements, and how quickly applicants are considered and approved.  

We hope you now feel equipped with everything you ever needed to know about the differences between condos and co-ops (and if you’re curious about the difference between a townhouse and a condo, we’ve got a guide for that, too). Remember, no matter what you choose, Updater is here to help you manage the dozens of moving parts that come with well, moving. Now go out and find your dream home!


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