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The pros and cons of purchasing a co-op The pros and cons of purchasing a co-op
Co-ops and condos may seem similar at first glance, but there are some fundamental differences. A housing cooperative–or co-op association–is a legal corporation made up of shareholders that own a residential building. Membership in the corporation is granted when you purchase a share in the cooperative by buying a unit. Rather than owning your unit the way you would a condominium, you are, in a way, becoming a tenant. Property taxes are included in monthly fees, a portion of which are tax-deductible

Members screen and select new residents via their elected representatives (the co-op board). You may be familiar with many of the better-known differences between condos and co-ops: The building’s approval process, financial requirements, and rules are usually more stringent in a co-op, but co-ops generally cost less to purchase.

Co-ops comprise a much larger percentage of the city’s owned housing units–about 75 percent, though this number is falling as many new condos and virtually no new co-ops are being constructed. Co-ops have a history of being the upper-echelon choice in highly-sought-after Manhattan neighborhoods like the Upper East Side and Upper West Side (examples below). If you’re looking for elegant old-world architectural details, know that many of the city’s classic pre-war buildings are co-ops–and rare condo conversions of pre-war apartment buildings tend to be very expensive.
The Dakota, 1 West 72nd Street
The Majestic, 115 Central Park West
River House, 435 East 52nd Street
Whether a co-op would suit your needs depends on what you’re looking for in an apartment. If you’re seeking a space with pre-war details in one of the city’s pricier neighborhoods, a co-op is where you’ll find it. If you’re looking for a place to call home and put down roots, or if it’s important that the building be intimate and that your neighbors care about their surroundings, it may be more likely that you’ll find like-minded neighbors in a co-op.

If you’re a foreign buyer, hope to buy with a very low down payment, plan to use the unit as a pied-a-terre or rental investment, or hope to sell at a profit within a short time, you may find yourself frustrated in the co-op market.
The Pros
• Co-ops are usually cheaper to purchase than condos (about 9 percent less expensive after factoring in size differences).

• There are more of them: Co-ops make up a much larger percentage of the city’s owned housing units (around 75 percent).

• There are many more pre-war co-ops available than condos.

• Co-ops have slightly lower closing costs; title insurance isn’t needed and there is no mortgage recording tax.

• A thorough vetting process and stricter financial requirements mean more financial stability, especially in market downturns.

• The vetting process and restrictions mean more owner-occupied units and less turnover, which can prevent problems like a revolving cast of renters, illegal Airbnb use, and other potential disruptions.

• A portion of monthly maintenance fees is tax deductible.

• Co-op shareholders are also considered tenants of the co-op, which gives them legal protections under New York City landlord-tenant law.
Listing #910C in the pre-war co-op 925 Park Avenue (Compass)
The Cons
• The approval process and building rules are usually stricter in a co-op, and potential buyers can be rejected without having to provide a reason; condo boards can’t legally reject potential buyers.

• Co-ops generally require buyers to make a down payment of at least 20 percent of the purchase price, sometimes as much as 50 percent or more; some exclusive buildings don’t allow financing at all. Co-ops also have liquid asset requirements and may ask buyers to meet a debt-to-income ratio and have an excellent credit score.

• Stricter financial requirements mean you’ll be asked to share more personal financial information.

• Limits on subletting, purchasing for others and pieds-a-terre mean co-ops are not a good choice for investment buyers who don’t plan to live in the building or who are looking for short-term ownership.

• Monthly maintenance fees are generally higher for co-ops than for condos, as a share of the property tax and possibly payment toward an underlying mortgage are included.

• The purchasing process generally takes longer.

• Most new developments (1980s and later) are condos; if new is what you're looking for, you’ll likely have to go condo.

• Co-ops are more difficult for foreign buyers to purchase as they often don’t have the necessary records from a U.S. bank, and co-ops do not to allow anonymous purchasing by LLCs.
830 Park Avenue, #1A (Douglas Elliman)

Additional Info About the Building

 
Contributing Writer Michelle Cohen Michelle is a New York-based writer and content strategist who has worked extensively with lifestyle brands like Seventeen, Country Living, Harper's Bazaar and iVillage. In addition to being a copywriter for a digital media agency she writes about culture, New York City neighborhoods, real estate, style, design and technology among other topics. She has lived in a number of major US cities on both coasts and in between and loves all things relating to urbanism and culture.
Spacious 1 Bedrooms with outdoor space and in-residence w/d View Property
Luxury Homes in Midtown | Newly Renovated Studio-2BR Homes View Property
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