Condo vs Co-op

What’s the Difference Between a Co-op and a Condo?

When you buy a co-op, you’re not buying real estate traditionally. You’re purchasing shares of a corporation, and that “co-op” owns the building. The bigger your unit, the more shares in the co-op you own. 

On the other hand, a condo is a private residence in which you own the unit itself, making it real estate. Not only do condo residents own their apartments, but they also jointly own common areas that comprise the rest of the building, like the hallways, elevators, and other shared spaces. 

Price points, approval processes, down payments, homeowner restrictions, and financial requirements make up the rest of the critical differences. But none of these differences mean one is inherently “better” than the other. That’s for you to decide, based on your housing needs. 

Are Condos More Expensive Than Co-ops?

As you peruse your buying options, you’ll probably notice that condo units tend to command higher prices than co-op units — even when they’re on the same block.

So why are condos more expensive than co-ops? It’s a combination of factors. First of all, as mentioned before, condos are real estate, while co-ops are building shares. Additionally, condos are generally newer and have more amenities than co-ops. They can also attract overseas buyers, who come with deep pockets. Additionally, co-ops typically have complicated approval processes, strict rules for residents, and subleasing restrictions. 

Additionally, the sales numbers suggest the price differential is starker. On average, most condos are more significant than most co-ops in the same bedroom category. When you factor in that additional square footage, experts estimate that condos cost only about 10% more than their co-op counterparts.

What About Subletting Policies?

Most co-ops have strict regulations, including minimum periods an owner must live in an apartment before renting it out. And some co-ops don’t allow subletting, period. When subletting is permitted, co-ops usually limit how long an owner can rent their apartment to five years. 

Usually, condos have one-year minimum rental policies, but many have more flexible policies. In addition, many investors purchase condos and quickly turn them around to put them on the market as rentals.

Approval Process for Co-ops vs. Condos

Let’s say you find the perfect apartment, determine your finances, and make an offer. If that dream home is a co-op, you might need to slow down and even hit the brakes entirely. That’s because co-ops impose more significant restrictions on transactions, and potential purchasers have to be approved by the co-op’s board — a process that can be notoriously difficult.

These restrictions can determine the amount of financing a buyer can receive, and during the co-op board interview, the board will even judge the buyer’s character. Since potential home buyers can be rejected for any deviation from the board’s wishes, the process can be long and bumpy. 

On the other hand, Condo boards only have the right of first refusal when they receive an application for purchase. This means the condo has to buy the for-sale property at the contract price or sign a waiver enabling the transaction to go through. All in all, it’s a lot simpler than a co-op transaction.

Co-op vs. Condo: Which Is a Better Value?

So, which is better: co-ops or condos? It ultimately comes down to personal preference. You have to factor in what you’re looking for and consider the above differences. 

Co-ops are typically seen as the most common entry point for first-time buyers. They are often more viable than condos due to the smaller options available. Additionally, they’re great for buyers who plan to live in their homes full-time instead of renting them out. But a condo might be a better option to sublet your new digs or have more amenities available if you’re concerned.

just because a home is newer doesn’t necessarily mean it’s better.