Why buy a co-op vs condo?

you basically answered the question yourself. "IF you can... ", i think affordability is the #1 factor for vast majority of folks in nyc.

" If you can afford it, why would anyone buy a co-op compared to a slightly smaller condo."

Youre being naive.

Condos will have higher values than coops but the spread has a natural equilibrium, say 10-20%. if the spread goes outside that range, market forces bring it back. Long term, the spread may fall if the supply of condos increases.

There are huge differences between blocks in valuation. If something that is a pain to others doesnt bother you, then you can take advantage of it by buying cheaper but dont expect the crowd to agree and narrow the spread over time.

Because A) 85% of owner-occupied housing in NYC is co-op, and B) the best buildings are co-ops.

AND, as has been covered many times just as you point out, some of us actually PREFER coops and their restrictions. I get to live almost entirely with people who have a stake in the building, there are no transients to worry about, it is a more cohesive "community" which enhances my experience in the building containing my residence. I do not want to sublet my unit, nor do I want my neighbors to do so--there is zero advantage to me of a liberal sublet policy and there is very real downside. In addition, I like that my neighbors are means-tested before living here and that during down economies, I have less to be concerned about in terms of building finances. And money always matters. If you like the benefits of coop ownership, why spend money on a condo that can be invested or spent elsewhere? Coops in my area (GV) are and basically always have appreciated in value over time at the same rate as condos. Coop's are selling like hotcakes in GV. Clearly, the market is speaking and many many people (the ones who tend not to fill these forums) are making pretty clear statements about the acceptability (indeed, preferability for some) of coop ownership through their continuing purchases.

I doubt anything new is going to be said on this thread. What is the point of it given that the OP already said s/he has read the other threads? (just search "coop versus condo")

I think you buy a coop because the building you like is a coop first and foremost. some very unique properties exist only as coops. Secondly coops can have more stability than condos due to their more restrictive requirements for approving buyers, which also serve to protect the building.

Besides on a practical level, most of the rules that coops enact, could technically be put in place by condos.

<--- price not a factor, will never buy a NYC condo. Even when I attend open houses "just for sport", I omit condos from the list. Before I knew anything, I was all for condos. Once I became educated, it was co-ops or nothing.

Your mileage clearly varies. If you're set on one over the other, your "must-have" list has been made. It's personal preference. Move on.

<--- price not a factor, will never buy a NYC condo. Even when I attend open houses "just for sport", I omit condos from the list. Before I knew anything, I was all for condos. Once I became educated, it was co-ops or nothing.

Your mileage clearly varies. If you're set on one over the other, your "must-have" list has been made. It's personal preference. Move on.

<--- price not a factor, will never buy a NYC condo. Even when I attend open houses "just for sport", I omit condos from the list. Before I knew anything, I was all for condos. Once I became educated, it was co-ops or nothing.

Your mileage clearly varies. If you're set on one over the other, your "must-have" list has been made. It's personal preference. Move on.

Sorry about that. Here's what I actually typed:

<--- price not a factor, will never buy a NYC condo. Even when I attend open houses "just for sport", I omit condos from the list. Before I knew anything, I was all for condos. Once I became educated, it was co-ops or nothing.

Your mileage clearly varies. If you're set on one over the other, your "must-have" list has been made. It's personal preference. Move on.

Pyrex, Besides your flawed assumption that condo coop price differential with continue to widen, the key decision should be based on whether you want to rent your property out at some point of time. If so, you do not buy a coop. If you want to buy and live there for 10 plus years, why pay higher mortgage assuming percentage appreciation is the same for both coop and condo. In addition, you will pay mortgage tax and title insurance when buying a condo.

> the key decision should be based on whether you want to rent your property out at some point of time.

That's the key decision?

How about location? How about apartment layout? How about your interest in your neighbors?

Coops require higher down payments and financing can be limited since some lenders won't give credit to a co-op. Aside from that, buying requires approval from the coop's Board of Directors. Getting their approval is a time consuming and difficult process, as it will require an in-depth background check on your employment, finances and personal background.

The Board of Directors can also make it difficult to sub-lease one's apartment and some may even forbid it. However, transfer of ownership is easier because it is treated as transfer of shares, which translates to lesser settlement costs and taxes since there is no appraisal or survey work to be done.

On the other hand, buying a condo is just like buying a house as your unit has its own deed, making you technically own real estate. Condominium unit prices are generally higher than coops, with also corresponding higher property taxes.

There are lower monthly maintenance fees but these are not tax-deductible unlike coops. You will also need a lesser amount to put up for down payment since you can finance a higher percentage of the price.

There is no Board of Directors that you have to seek for approval so there are no background checks, interviews or getting letters of recommendation to contend with. There are no restrictions as well on subletting since you own the unit.

>Coops require higher down payments and financing can be limited since some lenders won't give credit to a co-op.

That doesn't matter. Your primary concern should be if you want to rent the place out.

Your primary concern should be if you want to rent the place out.<<< GREENDAY

And if don't rent out what you said wouldn't matter

Hey MIBWHATEVER, read the prior comment too in order to get context: Stop being dense and shouting with all CAPS.

@ Greenday .. should I repeat myself ?? If you don't rent out DOES YOUR STATEMENT MATTER ???

Could you say it again? I couldn't hear over the insane person shouting.

So, um, does it matter if I'm thinking of renting it out or not? All this yelling is confusing me...

Yes, Matsonjones, it does.

If you're going to want to rent out your unit for more than a year at a time, forget buying a co-op.

We live in a coop but also bought a condo as an investment. In both cases we needed to complete a board package. The board package for the condo required more personal info than the co op board. Yes, we could not be turned down by the condo, but the amount of work required for the condo was greater than the co op. The condo board wanted both work and personal references, letters from the bank verifying balances, employment letters, etc. So, when one says condos don't want as much data, that's not necessarily so. The fact that we were buying the condo for an investment had no bearing on the package. This was the standard package required by the condo board. They wanted more info about us than the co op board asked for.

Most people buy an apartment to live in. Maybe in the future they might want to rent it out but that only works if they have sufficient funds to buy another place without selling or are planning to rent. Co ops are cheaper than condos but much of a premium was you willing to pay just to have the ability to rent in some distant future.

I think kylewest said it perfectly. I would add that if you like a prewar apartment on a good, established block, it is almost always going to be a co-op. As its been said, if you need the flexibility to purchase an apt as an investment and use as rental income at any point, then condos are your only option for the most part.

Regarding a condo: lovetocook says: "There are lower monthly maintenance fees but these are not tax-deductible unlike coops. You will also need a lesser amount to put up for down payment since you can finance a higher percentage of the price."

The reason is that the monthly maintenance of a cooperative already includes your share of the real estate taxes for the building. Coop boards will tell you how much you can claim for tax deductions at the end of the year. In a condo, you pay your real estate taxes yourself or as part of your mortgage.

Whether you want to rent it out is a big factor but also... whether you might want to sell it! Coops can refuse that you sell for whatever reason, for instance if the price is too low for them and are afraid it will make their apt appear cheaper. In a condo, if they refuse, they have to buy themselves... which never happens.
In a coop I would be afraid to put some music at night.. If you piss your neighbor off (which I would never do on purpose, it just be a rare side-product of me enjoying my apt), he might want to make your life miserable later down the road and that s only possible in a coop. Basically, you are not home...
Fyi, I am currently renting, but I would never buy a coop...

"Coops can refuse that you sell for whatever reason, for instance if the price is too low for them and are afraid it will make their apt appear cheaper."

This is actually an extremely rare occurrence. And vetting qualified buyers is what a broker is hired to do.

***
"In a coop I would be afraid to put some music at night.. If you piss your neighbor off (which I would never do on purpose, it just be a rare side-product of me enjoying my apt), he might want to make your life miserable later down the road and that s only possible in a coop."

How about not being a dick in the first place and being a good neighbor at night, regardless of where you live?

The most elegant pre war apartments in all of Manhattan are co-ops. That's why.

See, By having a board screen buyers, someone who acts like MIBNYC can be kept out of the building. In a condo you have to put up with that sort of person.

according

Kyle + 1

Co-ops are another form of America's worst social feature which are gated communities. I am sure that it is wonderful for many that they can choose their neighbors and avoid unsavories (like those corrupt Chinese), but this is how you end up with neighborhoods in one of the word's most diverse city that are incredibly homogenous.

Beyond that people need to realize that the world and careers have changed. The days of having one job and living in one city all of your life is a thing of the past. So having to buy a place that gives you no flexibility is terrible for a lot of younger people who might want to go work internationally for a few years and then come back to their home. That is why Condos are and will remain much more appealing for the younger generation who expect to move around and don't think living in one place with the same people for 30 years is a positive.

Thanks for the lecture on American society. When will you be returning to Canada?

Its a perspective HB. Trying adding one for once if you can. Do you think gated communities are good? Do you think co-ops are exclusionary? Do you think people should be able to express opinions without being told to leave the country?

> I am sure that it is wonderful for many that they can choose their neighbors and avoid unsavories....

So who do you think is snapping up all those units at the Trump condo on Bay St in Toronto? Middle-class, egalitarian-minded Canadians? Ha. Right.

Um, that was clearly sarcasm UWS. I think that is more an example of the contrast that I was speaking of where neighborhoods are diverse.

http://morrisonfinancial.com/news/international-buyers-undergird-torontos-condo-market/

@OTTAWA penguins. PHUK these CO-OP HUMPERS. They can't HANDLE THE TRUTH !!!

Ottawa: Thanks for the article but if you had swapped "Toronto" for "NYC" I hardly would have noticed the difference. In any case I don't necessarily think that the coop structure leads to a social balkinization that you characterize above. I've owned 3 coops over the past 20 years since I was 25 years old and they've been a melting pot of black, white, Asian, gay, straight, and multiple religions; exactly the values supported by the Toronto article.

UWS: I've never lived in a co-op - can't as I am a foreigner! - but just seems to me that neighborhoods are much more segregated in NY than in Toronto. I just note that one of the big draws sited by advocates of co-ops is to determine who is welcomed into your community and I wonder how much that contributes to homogeneity of neighborhoods. But not sure how much this has to do with co-ops v. simple economics. I live in (North) Williamsburg and while there is lots of diversity, it is still mostly white and Asian that are in the gentrified parts.

I do think though that people want to have more flexibility in their living arrangements which strongly augurs for condos. I love the fact that if I decide to go back home I can just step right back into my condo.

> UWS: I've never lived in a co-op - can't as I am a foreigner!

I became a US citizen in 2006; i bought my first two coops as a greencard holder; ie non US citizen.

If you are a greencard holder you are a permanent resident. I bought less than a year here as a non-permanent resident. For a whole host of reasons I was strictly limited to condos, as many foreigners are.

My spouse and I are south asian, neither has a greencard/US passport and we just bought in an UWS co-op in Sept 2012. Its possible some of the fancier UES Co-ops might use this as a reason to decline a buyer, but neither the bank nor the co-op board had any issues with the lack of permanent residency. Its possible we just had a good experience, but even the broker hadn't heard of it being an issue in UWS co-ops. The sense I get is they care more about job stability (in NYC) /financial qualifications, and the fact that this apt will be our primary residence than where we were born.

OttawaNYC: On two blocks on my street on the upper east side there are Coops, luxury condos, luxury rentals, walk-ups, rent control apartments, people with drivers mixed with construction workers. Very very far from the concept of a gated community. I lived in Toronto (and Montreal, Ottawa) and this simply does not exist there. I would venture the problem is that you are probably living in a condo in hipsterlandia. Cross that bridge and walk around Manhattan and you will have a very different perspective.

"See, By having a board screen buyers, someone who acts like MIBNYC can be kept out of the building. In a condo you have to put up with that sort of person."

a big +1 on that

Fruit, I did live in Manhattan and I did not witness the mix you speak of. Nor do I see it where I currently live, as I clearly stated. And the facts do not support your diversity view, unless you live on the very northern fringe of UES, aka Harlem.

http://www.city-data.com/neighborhood/Upper-East-Side-New-York-NY.html

http://www.urbanresearchmaps.org/plurality/

In any case, did not mean to deflect from the original discussion, which was more about co-ops. I was suggesting that co-ops would likely be attracted to like-minded people they are comfortable with. I would think that this would lead to a degree of homogeneity within buildings. I am sure there is a sociological study somewhere.

And I am not sure what decade you lived in TO, but that place is incredibly diverse. But I was not trying to make this a diversity competition.

Do condos often or ever try to convert to coops? Is much or any new construction coops? If they are so great, why do you see coop to condop or condo conversions and 99% of new construction being condos, but not people actively trying to build or create new coops? And why have basically no other cities emulated this fantastic coop structure?

-> NYCMatt

for the refusal by the board of your sale, I was taking the worst case scenario, everything is fine, but the board would like you to sell higher (even if you might urgently need the money). But you could also find a very reasonable buyer and for whatever reason you are prevented to sell, and this happens a lot. Sometimes for very bad reasons... My point was that it s not only about renting, but about selling too. Proof is the number of threads about that.

for the "being a dick at night"... Everyone has his own ethical code and behaves accordingly, I would consider myself a very good and quiet neighbor and would always be very reasonable. But you might once every two years throw a party, on a Saturday, giving the heads up and inviting your neighbors, and they might even pretend that it's 100% ok because these are very reasonable requests, but feel very frustrated inside and make you pay later down the road. There are so many crazy people, you never know. And if someone is crazy with noise, I guess he is much more likely to end up in a coop.

Coops make sense if you are the future Queen of England and really need a special building with lots of comfort, privacy, security for your 50M apt. But for all the "regular" folks like probably everyone reading this, I don't see much upside.

"Beyond that people need to realize that the world and careers have changed. The days of having one job and living in one city all of your life is a thing of the past. So having to buy a place that gives you no flexibility is terrible for a lot of younger people who might want to go work internationally for a few years and then come back to their home. That is why Condos are and will remain much more appealing for the younger generation who expect to move around and don't think living in one place with the same people for 30 years is a positive."

And yet, people are still buying co-ops. The world clearly hasn't changed *yet*.

***

Tourist:

"I would consider myself a very good and quiet neighbor and would always be very reasonable. But you might once every two years throw a party, on a Saturday, giving the heads up and inviting your neighbors, and they might even pretend that it's 100% ok because these are very reasonable requests, but feel very frustrated inside and make you pay later down the road."

So it's OK to be a dick just occasionally?

And some people find an apartment they want to buy (neighborhood, architecture, layout, amenities, light, space, proximity to work or parks or schools) and want to buy it regardless of whether it's a coop or a condo.

I don't understand these threads. They always become silly with some people taking absurdly fringe positions like coop values in NYC are about to plummet but condos are like gold. This evinces an almost laughable understanding of the NYC real estate market. As for whether a particular building lacks or has diversity, who cares? Maybe we should ask if every floor is a beautiful mosaic--or every apartment! Seriously? I live in a prime GV area on a block I think is pretty spectacular. Within a 1 block radius of my building there are pre and post war coops, pre and post war condos, pre and post war rentals, a land lease coop, single family and multi unit townhouses, one prewar and one postwar student dorm buildings...

The beauty is that if you've got the money you can live in any of these options representing the spectrum of housing arrangements. If one doesn't like coops, one needed ever so much as step into one. So why all the stridency? I don't like skinny jeans, but I don't spend a moment thinking about how many people share this opinion or have a different feeling toward them. Why would I care? So why on earth do some of you people seem so vested in kind of wacky-sounding over-the-top set-in-concrete pronouncements about coops? Just don't buy one. There done. You can relax and move on.

But for many other people, coops are good fits. Why does that bother you so much? I honestly couldn't care less if you want to rent or buy a condo or live in a tent in the woods. Since the vitriol makes no sense on its face, I am left wondering if maybe this is really about something else. Some (but certainly not I) might say it sounds a lot like a person who talks trash about a club that rejected him as a member--or worse that he knew he had no shot at even being able to apply to. Just sayin'...

>So it's OK to be a dick just occasionally?

I prefer more frequently. But then i like skinny jeans so I have an ulterior motive.

jason10006
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Do condos often or ever try to convert to coops? Is much or any new construction coops? If they are so great, why do you see coop to condop or condo conversions and 99% of new construction being condos, but not people actively trying to build or create new coops? And why have basically no other cities emulated this fantastic coop structure?

What a retard.
And what does other city emulation have to do with anything? Is the Rain Forest Cafe notable because it is in multiple cities?

Fwiw, too, in a coop, if you decide to re-fi, the fee is minimal compared to a condo because there is no mortgage recording tax for coops but there is for a condo.

co-op owners can also tip less for Christmas, since we are now taking about our pennies.

I thought you CO-OP ASSHOLES made sure these tenants are forbidden http://www.nypost.com/p/news/local/manhattan/the_worst_kind_of_piano_man_Si5OwAfnVTSuNkcHjBZMQK

If you like the apartment and want to live there -- buy it:
Co-op or condo.
If you want to live in it/ purchase as an investment for rental -- buy it: Condo.

kylewest: You've been here on the streeteasy long enough to understand these threads.

greensdale: Where about are you taking your pennies?

Condo lovers, How do you stop the piano player in a condo with generally less enforceable quality of life rules? NYC noise rules apply to both condo and coop.
Tourist,
No coop / neighbor will complain about occasional late night party with loud music but it can not be a weekly affair lasting past 11pm every saturday. Once in a while you get a cranky neighbor who will complain and call the police regardless of coop and condo.

Two negatives of coops - inability to rent out for extended period or at all, and potentially slightly smaller pool of buyers - are more than offset by 10-25% or so discount of coops vs comparable condo. Quality of life is actually better in a coop as residents realize that they are supposed to respect their neighbors. Financing is less of an issue as most banks require 25 percent down anyway.

I think every one has heard horror stories of 5th/ park avenue coops but the rest of coops tend be just fine. Just stay away from stuffy ones - you an tell them by high down payment, post closing liquidity requirements, old ladies in the lobby, and elevator operator.

Our coop ($2-5mm apt in prime loation) has never turned down anyone who can put down 30%, has reasonable income to carry the apt, and a couple of years of expenses as liquidity post closing.

Do not ignore the higher closing costs and mortgage tax on condo as kylewest and others pointed out.

"No coop / neighbor will complain about occasional late night party with loud music but it can not be a weekly affair lasting past 11pm every saturday." Really? I would disagree. At least as far as the co-ops I have lived in and done board service for. I like quality of life and house rule quiet hours enforced - fairly, and consistently.

Mj, I am getting too old. Late night means midnight vs 3 am 10 years back.

And as far as quality of life issues are concerned, co-op boards will ensure your new neighbors will not be college kids who've been "gifted" the apartment by their rich parents.

Believe it or not, college kids don't give a rat's ass about your work schedule, your sleep schedule, or your baby's sleep schedule. They will do whatever they damn well please because they're in a CONDO and they CAN.

-> NYCMatt

throwing a reasonable party every two years with proper heads up to everybody involved ... is not being a dick, just normally using your apt... You have what 3 or 4 neighbors ? If they each do that, it means there is a bit of noise every 6 months on a Sat until 12am or 1am.. It s not the end of the world! And I prefer that to a building full of old people... If I can't use the apt like that, which I consider very normal use, I don't feel home, and yes technically you are not home, you are just a shareholder of a company. It might work for you, I think it infringes too much on one s liberty.
Anyways, once the person is in (coop or condo), if he/she makes noise (he might have been accepted in a coop if he was not a college kid), there is no way to put him out or am I missing something ? In both cases the police is the only recourse if he makes too much noise and same rules apply to booth.
Besides, for noise disruptions, the best thing is to have a nice building with thick walls..

To answer Pyrez question, even though it s hard for me to see a lot of upside to a coop for "regular" folks, I understand that some people might prefer it for the discount you get (and I have seen from 10 to 30%, nobody sees to agree on the figure). Yes, it is a lot cheaper, probably for a reason, but that s a big advantage. You can have the extra bed or the terrace that was too pricey in a condo.

Do condos often or ever try to convert to coops? Is much or any new construction coops? If they are so great, why do you see coop to condop or condo conversions and 99% of new construction being condos, but not people actively trying to build or create new coops? And why have basically no other cities emulated this fantastic coop structure?

Tourist, I think what we are talking about it not someone who throws a party until 2 am every 2 years or even twice or three times a year. I live in a coop and wouldn't have a problem with it. But if the neighbor throws a party so often (like weekly) so that I begin to think I'm living next to "Animal House" then yes I have a problem.

I think that's what NYC Matt is talking about. Even in a condo if it's animal house, the neighbors too would complain. At this point, you are not talking about "normal use"

Tourist, I'm not sure what kind of people you think buy and live in coops but I can assure you it's not a building full of old retired people. It's usually a combination of people of all different ages whether you are talking about people with babies, young couples,single people, retirees or whatever. If it's a coop with only studios and one bedrooms you usually are not talking about families. Coops have regular normal people like you. They work, they like to entertain just like you. They don't want the neighbor from "hell." No one does. If you want to play sex games that's your business as long as the neighbors don't have to hear you. So, I really don't know what you think co ops are.

Jason:

The legal distinctions between coops and condos are rarely important in NYC with one exception: It is easier to structure a building-wide mortgage for a coop than a condo. This difference is small, but it drives developers. In new construction/renovation, when commercial loans were cheaper or more available than individual apartment loans (most of the time from 1920-1985, especially before FNMA would insure apt loans), developers preferred coops. When the loan market reversed, the developers followed. (Outside of NYC, banks don't understand coops; it's easier to build condos than to educate banks).

But the distinction that matters to the posters on SE has nothing at all to do with the legal form: it is the generally looser rules of condos in NYC. That is custom, not law.

Nothing in the law requires coops to have strict rules or condos to have loose ones. Indeed, in most of the country "condo" is shorthand for a restricted gated community with strict regulations.

In NY, the custom lives on because it is extremely useful. Some people like the tight ("coop") rules; others prefer the loose ("condo") ones. By following the norm, buildings can signal in one word which group will be happier there, and thus end up with inhabitants who are more likely to agree with each other. If they violate it, they are more likely to end up with battling neighbors. Since people buy into the form they prefer, there is rarely much pressure to change.

To Jason's questions, I have not personally seen or heard of any condos converting to co-ops. I have seen over the last 5-6 years a couple new co-ops coming to the market but thats because when converting an existing building to a co-op or condo, its easier and less expensive to convert to a co-op so sometimes that is whats done. Other reasons could pertain to the property being on a land lease and so forth. That said 99% of all the new construction or new conversions are condos. Co-ops do exists in other areas but they are more rare: Boston, NJ, and a few others. Co-ops can be really great and the mix of regular tenants/owners are as diverse as anywhere in the city. Most co-ops are not as crazy as you think. They have a real interest in protecting their building and making the quality of life better for everyone living there. And as mentioned, the number one reason, in my belief, that the Manhattan market did not tank from the housing bust in 2008-2009 is precisely due to co-ops as they make up most of the inventory and the more restrictive nature of their approval process. Not to mention that when a co-op owner goes bust, the co-op, unlike a condo, will get protected. This is why you very rarely, if at all, see a foreclosure in a co-op building.

BTW, condos sell for more than coops because the loose "condo" rules are better for speculators and investors. Typical coop rules are designed to exclude those people even more than Animal House partiers.

If prices revert to levels where owning (excluding capital gains) is cheaper than renting (as every standard economic model of equilibrium pricing suggests they will), the condo premium is likely to shrink or disappear. In a non-bubble market, there would be no reason why people would have to pay extra for the right to annoy their neighbors.

Actually, absent bubble economics, coops might sell for more, especially in the boroughs. Coops, but not condos, can easily borrow to pay for unexpected repairs, paying through higher maintenance instead of one-time assessments.

The higher maintenance option probably doesn't matter to most of the buyers in new condos in NYC, who are rich enough to pay or finance an assessment on their own. However, when banks aren't handing out no- income-check second mortgages, it can be important to middle class owners.

I noticed that Condos tend to be newer with beautiful floor to ceiling windows, lots of amenities and with low tax abatements which I suspect appeal to a lot of people. Since all the buildings being built in the last few years are condos, I suspect a lot of people love living in new apartments with low taxes and that this causes the prices to be higher than in older buildings which are usually coops. Certainly developers have to charge more to recoup their costs. As to price differences, only time will tell.

My tax attorney just told me he is representing a COOP seller that was totally screwed by the board. He was selling a 2bed 2bath in his building to move to a 3bed 2 1/2 bath in another floor that he was purchasing. The immediately approved the buyer for his place but suddenly told his attorney he has to do a interview. Now this guy is LOADED and he was shocked. When he finally went to the interview they turned him DOWN. NOW he suing everyone !! Lets see how this turns out.

Converting an occupied building from coop to condo or vice versa would be hard.

For a condo to convert to a coop would probably require unanimous agreement of each owner to sell his/her/its unit.

For a coop to convert to a condo probably just requires a majority vote of the board and the shares to sell the whole building.

But in either case, it'd probably require a new offering plan, and the AG might require a coop to allow former shareholders to stay on as rent-stabilized tenants.

Also, the sale might be taxable.

In either direction, it might be easier to agree to sell the whole building to a developer and deliver it vacant or with a few holdouts for the developer to deal with.

This is totally absurd to suggest that condos are all frat houses because of "looser" rules. SImply moronic. In terms of inconvenience there are perhaps more people coming and going, meaning that maybe every few months someone moves. But so misplaced to suggest that condos are like frat houses because of the rules. And not really clear why people are so scared of people having parties. When did parties become such a bad thing.

Beyond that these are totally different form of ownership. As stated here they are essentially not "making" co-ops anymore because they are largely anachronistic due to the fact that you are not buying real property. That does not mean that there is not some nice features to them, as some have pointed out. But condos are preferable from a financing perspective because you buy tangible, real property.

One of the most common knocks on Co-ops is getting by the "ominous" board.
As usual, the few horror stories create a perception that something is more common and widespread.
THe stories are always from highbrow buildings or areas like the gold coast of central park which is a part of the world where this "game" is played in all facets of their lives anyway.

Im curious from you brokers on here, what's your percentage of failed closings due to non board approval in co-ops?

And regardless of how much co-op owner occupied there is in nyc, the selling inventory market is and has been between 40% to 60% split co-ops/condos at any time in the last at least 10 years.

Thanks financeguy and selyanow, I learned something new.

"He stories are always from highbrow buildings or areas like the gold coast of central park which is a part of the world where this "game" is played in all facets of their lives anyway."

NYMatt is from Washington Heights and on a coop board there. 9/10 posts he posts anywhere on SE make me REALLY REALLY never ever ever want to live in a coop ever. If people like him are on the board and are so snooty even in WASHINGTON HEIGHTS than I never ever ever want to deal with a coop board. I would only consider buying a condo, ever.

A Times article on converting co-ops to condos.
http://www.nytimes.com/2007/04/08/realestate/08home.html?_r=0

Jason, everyone is an exaggerated version of themselves on an anonymous board.
Odds are every board has 1 member that's a dick. But it's usually just 1 member.

One does not a quorum make.

@ Jason ... you have to forgive MATT cuz He's a successful experiment in artificial stupidity

truthskr---I do not know the percentage of co-op turn downs--it would be great to have an estimate but most good brokers are pretty good about pre-qualifying buyers before presenting to a co-op sale. I would love to hear from brokers on here but my guess would be around 2-5%. I could be totally off. It would be amazing to see a SE chart on what percentage of board rejections happen in each neighborhood including BK co-ops. One time I did have a buyer who paid over asking and the co-op rejected because the price was too low. So we came up and they approved. But thats worthy of another thread...

Why Co-ops?
Affordability: More space for the money.
Lower taxes: Old stock typically means lower tax basis (unless you buy condo w/ a 421a)
Housing stock: More pre-war buildings to choose from.
Stability: Co-ops typically require 20% down so buyers are less likely to go underwater. Buyers will be living there instead of renting their places.
Refinancing: Cost to refinance is about $3k.
Priority: Maintenance fees go ahead of co-op owner's mortgage in a foreclosure, so you're less likely to be paying for your delinquent neighbors.

>If one doesn't like coops, one needed ever so much as step into one. So why all the stridency?

Kylewest, I agree the stridency is silly, but here are some possible explanations:

Many people, Americans especially, are committed to the idea that if they make or earn or inherit enough money then it should damn well be their choice what to do with it, and things like closed communities and coop boards go against that idea in a way that infuriates them.

Others are on principle turned off by the (implied or actual) elitism of closed communities and unexplained coop-board judgments. Americans generally like to pretend class differences don't exist, or believe that these things shouldn't exist, so being asked to list the schools you went to and otherwise demonstrate something about your social circle in order to be allowed to buy a home annoys some people.

These two categories of response aren't mutually exclusive, either.

Beyond that, some people are frustrated because so many buildings they might want to live in turn out to be coops they can't afford. It's not necessarily sour grapes; sometimes it's genuine annoyance at, for example, being unable to find a nice prewar home with a decent commute. Insanely high prices also frustrate almost everyone and make everything worse.

Others are angry because buildings they could actually afford to live in probably wouldn't let them in -- either because they have a great income but not enough savings, or because they have enough savings but not the income level to satisfy some board. It's hard enough to get a mortgage, but the idea that some folks who don't even know you could decide you're a financial risk is unpleasant and, sometimes, just plain wrong.

Or people are mad that they could be rejected for some more sinister reason (like skin color) or some other arbitrary reason (like the fact that they went to Harvard, or else the fact that they didn't go to Harvard). The secrecy around these decisions doesn't make it any easier to bear, whether you're on the outside or, sometimes, even if you're on the inside.

Those are just a few reasons off the top of my head.

On another note, I've lived in both coops (fancy and plain) and rentals in Manhattan and Brooklyn for over four decades, from Park Slope and the Village to 125th Street, and all the claims around here that coops are necessarily quieter and more civilized and that renters don't care about their neighbors' quality of life because they're more transient has been, in my experience, total hogwash.

Well said Boss. I think the first point: you know freedom to do things is what I find a bit contemptible about co-ops. Isn't the US supposed to be based a lot on the idea of a right to life, liberty and property? The notion that you can only buy a place if a bunch of strangers approves you is incredibly bizarre to me. It would maybe not be such a big deal if say 20% of the RE stock was co-ops.

Beyond that the whole co-op process seems like such a pain in the ass.

Last point to REMom: when you own in a condo you own your place. That is it. You are not a shareholder and thus have no share in the problems of others. So if someone loses their place you don't pay for it. It is between the bank and that individual. I find a lot of people don't understand these basic differences.

Well, Ottawa, it's not quite as black-and-white as that with condos. As a condo owner you are still somewhat yoked to your fellows in that if there are a lot of foreclosures in the building, or even a lot of renters, lenders begin to shy away from it, which hampers your liquidity.

But in general -- unless someone is in a visa situation where one choice is nearly completely closed off -- I think potential buyers should look at each building, its location, architecture, governance, and neighbors, and then decide from there.

I currently own one condo and one co-op, and I love 'em both.

ali r
DG Neary Realty

Why I like condos ?? Its your home and if it so happens that hard times come your way you can sell it and ANSWER TO NO ONE !!!

Well, there you are ali: Happy with both options.
The available choices are there in NYC.

-> financeGuy, Boss_Tweed, lovetocook

You are so funny! You don't pay "to be able to annoy your neighbors", you pay so that you are free to rent or sell. An apt, for most people, is a huge chunk of their savings, if not more. Are you really going to put maybe 40 years of projected income into a thing which you don't know if you will be able to get income from it or resell if you have to leave the city ? Or if you just want to move ? You must trust your board a lot... Trying to rent in a coop, I would totally understand (if you didn't have to get "naked" in front of strangers at the interview), but putting and locking so much money into it... one must be very confident in mankind and our future. I am quite risk averse I admit but this is beyond my imagination.
I am European and I would not buy in a coop for these reasons: liquidity, a coop is just less liquid than a condo, there is no point arguing about it. My opinion of why it s close to 30% cheaper "all things being equal" -> lovetocook)is that it s less liquid indeed (so the pool of buyers almost totally excludes the wealthy foreigners) and, as some pointed out, it s from another age, people don't want these silly processes and privacy infringement when they buy an apt. If you really don't want noisy neighbors and want to make sure you won't pay for the guy next door, why not buy a townhome ? It is much better in all the aspects that are important to condo owners (bad neighbors for the main one).
So I don't foresee any catch up of condos vs coops. There will be always NY real estate, a few people will continue to prefer coops, but there will always be this illiquidity (vs a condo) and privacy infringements that will deter most buyers (notably international)and justify a discount for coops.

Why people want to own a residence and then become a remote landlord of a single unit is beyond me. Sell the place and move.

-> because real estate is a very nice hedge against inflation, you can get 3 to 4% tax free returns renting your place (not bad these days), you don't want to pay the closing costs and have to go through a closing in any way, and you might reuse the apt later on.

Good enough ?

Boss_Tweed - great post!

Ali, are there really that many condo foreclosures in NYC that this is a legitimate concern? And how many foreclosures would you need in a building for this to be a real concern to an individual unit. The risk sounds quite remote to me. I can see where this might have occurred in the last few years but the housing crash was an anomaly and I don't really see how this is that much of a broader concern. For me the risk in condos is that the board is useless and you get hit with assessments due to poor management or there is poor construction. In my place back in Canadia I have just been hit with a bunch of assessments due to a stupid board and a bunch of resulting litigation. My lesson learned was to buy in buildings that are a bit older and have matured a bit and discovered problems.

>Ali, are there really that many condo foreclosures in NYC that this is a legitimate concern?

It would be good to get an update from Aboutready what is happening in her condo building in Williamsburg. If you recall, she said one of the owners, as she discovered after making her purchase, was defaulting

In a city where everyone would love to have an extra 500 s.f., it's amazing no one on this board expresses the advantage that for a fixed budget, you can buy 10-20% more square feet in a co-op than a condo.

Co-ops can be exclusive to their detrimment but if you are anywhere close to being median or 'normal', you'll be approved.

I thought the consensus on that Mauritian guy with the Murray Hill apt. was that he was a whack job, not that the Board is nuts.

>In a city where everyone would love to have an extra 500 s.f., it's amazing no one on this board expresses the advantage that for a fixed budget, you can buy 10-20% more square feet in a co-op than a condo.

And if the co-op / condo price ratio remains relatively constant, you've made a better return on your money in a co-op.

A foreclosure in a condo is indeed a VERY big deal for other owners.

The legal process for foreclosure of condominiums in NYC typically takes at least two years. That's two years that the condominium is not receiving common charges. And although the culmination of the foreclosure process will lead to a new owner of the unit, in almost all cases, the condo will NOT recover the lost common charges and legal fees that accrued throughout the foreclosure process. A building's resources can thus be significantly hurt by a foreclosure in the building.

Who do you think pays for that?

TheTourist: I'm not sure, but I think you may have misunderstood my post.

I think you get a priority lien someonewhoknows. Beyond that, as I asked, how common is this? I think this is a bit of fearmongering. And not getting one units fees should not hurt a building that has proper finances.

No, the condo gets a second-priority lien, after the unit's lender is paid off, if anything's left.

You might be confusing condo with co-op. A co-op gets first dibs on proceeds of sale, before the lender.

Ottawa --

The rate of lates/defaults in my condo (a big complex with several hundred units) has run at half of what the board predicted, which I think is pretty good considering the severity of the recession, and also speaks to the high quality of our management.

I am sorry that you are having an experience with a poor board. I have been there too and it stinks.

Maybe a greater risk is a high rate of rentals. Right now in NYC one of the big mortgage lenders wants market share, and so they'll lend to anybody on anything, but in other markets the inability for would-be purchasers to get bank financing for certain condos has indeed been a problem.

ali r.
DG Neary Realty

oh, and this on defaults from our ever-fabulous NWT: http://streeteasy.com/nyc/talk/discussion/11009-perils-of-a-small-condo

Another lovely thing about a condo, you don't have board IDIOTS who most of them don't make nearly the money the applicants make telling your net worth has to be 3X TIMES THE PRICE OF A CONDO

"Converting an occupied building from coop to condo or vice versa would be hard."

Apparently it's not for lack of people preferring co-ops' strict rules.

It's interesting how once a new condo development sells out, the owners then turn around and start acting like the building is a CO-OP.

Just look at how extensive the condo "board" package has become.

"My tax attorney just told me he is representing a COOP seller that was totally screwed by the board. He was selling a 2bed 2bath in his building to move to a 3bed 2 1/2 bath in another floor that he was purchasing. The immediately approved the buyer for his place but suddenly told his attorney he has to do a interview. Now this guy is LOADED and he was shocked. When he finally went to the interview they turned him DOWN. NOW he suing everyone !! Lets see how this turns out."

***

Sounds like the building dodged a bullet.

And it only proves the point that people with money tend to be incredibly entitled and arrogant.

Yes, m'dears, it's true; there ARE some things your money really can't buy.

But thank you for thinking of us.

And it only proves the point that people with money tend to be incredibly entitled and arrogant. <<< MATT. Just like most BOARDS MEMBERS WHO DON'T HAVE NEARLY CLOSE THE MONEY THAT APPLICANTS DO.