So — you’re in the market to buy a home, but you’re not sure you’re ready for the space (or mortgage) a single-family property entails. Wondering what your options are? A condo or co-op might just suit your needs perfectly.

But before you officially make moves, it’s important to know the difference between these 2 sought-after types of residences. Keeping reading to find out!

First Things First…What’s A Condo?: A condominium, or “condo” for short, is what most people refer to when they think about getting a unit in a building. When you buy a condo, you’re paying for the actual property — the four walls of the apartment as well as a share in the communal building amenities. The authoritative body in a condo setup is called the  condo homeowners association (HOA) or the condo board. The members are elected from the condo owners and they are in charge of enforcing the rules as well as collecting dues.

What’s A Co-Op?: Short for housing cooperative, a co-op is a setup wherein you purchase shares in a building instead of the actual property. While co-ops are considered to be real property for tax purposes, you don’t own any real estate that’s officially transferred to your name.

Think of getting a co-op as similar to buying stock in a company: you don’t own the company, but you are entitled to a share of the profits and given a voice in how the company is run.

For large co-ops, there is usually a board of directors that is elected from among the residents. This board will be responsible for the day-to-day management of the building, such as collecting fees and enforcing rules. In smaller co-ops, all the residents may be part of the board and are given equal responsibilities and decision-making rights.

---

➤ Are you thinking about purchasing a condo this fall? Read these other great condo resources here:

• Understanding the Resale Potential When Buying a Condo
• Stacked Townhouse Vs Condo: What’s the Difference?
• How to Avoid Overpaying for a Home in DC Today

---

Now that you know the basics let’s weigh the pros and cons of each through the lens of a few critical factors:

#1 Price: In terms of overall price, a co-op is often cheaper than buying a condo, according to the National Association of Housing Cooperatives (NAHC). However, the down payment for a co-op can be high. While condo owners can take advantage of lower-down payment mortgages, such as a 3 percent conventional loan, most co-ops require a down payment of 10 percent to 20 percent (some as low as 5% depending on the investor to owner ratio), according to the NAHC. In some cases, that requirement can be significantly higher, too.

There’s another trade-off, though: Closing costs for a co-op are likely to be lower than the final expenses on a condo, as you won’t need to pay for some fees, like title insurance.

The bottom line? If you have plenty of upfront cash, the lower price of a co-op can be appealing. If you’re in need of a loan, though, a condo might be a better move. Keep in mind that mortgage lenders are more likely to issue loans for a condo than a co-op. That’s because if a borrower defaults on a condo loan, the lender has real property to deal with rather than shares, which can be harder to sell.

#2 Fees: Co-op fees tend to be higher than condo fees because co-ops roll all the monthly expenses into one bill, including gas, water and property tax. For example, if a co-op shareholder owns 2 percent of the property, they will pay 2 percent of the electric bill. For residents who travel a lot or might not use that much electricity each month, this model could be a waste of money.

On the other hand, this might be convenient for those who don’t want to worry about paying utilities separately and prefer the simplicity of one monthly bill. Condo owners pay their utilities and tax bills on their own, so those costs are not reflected in the monthly fees.

Of course, condos have fees, too. You’ll pay HOA fees for being part of a condo association, and the cost of those fees can vary dramatically depending on what the association offers in the way of amenities and services. For example, if your condo is in a high-rise building with a gym and a doorman, your HOA fees might be higher than if you owned a small walk-up with limited amenities.

#3 Maintenance: The most important difference between the governing bodies of a condo and co-op is in the vetting process for new residents. Co-ops are notoriously more stringent when it comes to who’s allowed to buy, often requiring background checks, referrals, and other personal information. If you’re weighing the pros and cons of a co-op, this type of governance can be a significant roadblock if you want to sell your membership share, since the co-op board can turn down your buyer for any number of reasons.

#4 Renting Or Selling: If you’re weighing the pros and cons of buying a co-op, you can put the hope of selling or renting to a tenant firmly in the “con” category. While condo owners can usually sublet their units without hassle — even despite potential association restrictions — renting a co-op, however is typically not permitted whatsoever.

Not to mention the fact that it’s usually easier to sell a condo to begin with because there isn’t the necessity of an extensive interview process involved.

Ready to find the co-op or condo of your dreams? Our talented team is just a few clicks away! Check out our featured listings right now or book a consultion with our team here.