What is a Co-op?
Co-ops are generally a misunderstood and under appreciated option for a homeowner. What IS a co-op? Am I actually purchasing the property? Is it the same as a condo? Why is the listing price so low but the assessment so high? Why do I have to be interviewed by a group of strangers? All great questions and quite easily answered! Owning a co-op is actually an extremely great option for a lot of homeowners.
What is a Co-op?
When you buy a unit in a co-op building, you are actually buying SHARES of the corporation that owns the building. These shares entitle you to a proprietary lease, which means you are considered an investor in the building (unlike a condo, where you are the outright owner of the unit you purchase). The larger the unit, the more shares you will have in the corporation you have bought into.
Unlike a condo unit which, as long as you can pay for it, you can buy…the co-op is different. Not only do you need the funds to purchase but, you must be interviewed by the co-op board of the building and they decide if you can purchase the co-op.
This may sound like it would be a horrible experience and many people think an invasion of privacy. But you have to think of this in a different light…A co-op is like a club.
When entering into a contract to purchase a unit in a co-op, you will also have to fill out an extensive and some would say intrusive application. You are basically requesting admission to an exclusive club of residents whose board is in fact an admittance committee whose purpose is to be particularly discerning. This means that, whether you are financially capable of purchasing the apartment is not the main focus, since most applicants are financially sound. The real question is whether the applicant will “fit-in” harmoniously with the rest of the co-op ‘club’ members, which is a less objective evaluation.
The co-op buying (and selling) process is tricky one, where a real estate broker will certainly come in handy.
What do co-op owners say about living in a co-op?…
“Typically, co-op neighbors are more community-minded and neighborly since we all have say in everything that happens in the building.”
“In a co-op, all your neighbors have been screened by a board. They are financially stable, they can afford their home, they have letters of reference from a variety of sources. They have agreed to abide by house rules. Rental activity is tightly controlled–not forbidden, usually, but controlled. You don’t have to worry about your owner-mostly building turning into a renter-mostly building. If a resident is being obnoxious, you can actually take action that works.”
“The equivalent of foreclosure in co-ops is rare, because of the screening process, and the co-op building is first in line when it comes to recovering funds if an owner does get into trouble.”
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