I recently listed a co-op in the Queen Anne neighborhood of Seattle and thought this would be a perfect time to explain what makes a cooperative (co-op) different from a condominium purchase.
Here is the Seattle area, most co-op buildings are located in the Capitol Hill and Queen Anne neighborhoods. Typically built in the early 1900s, the buildings have great character.
With a co-op purchase or sale, the co-op is a corporation, so they are a third party to any sale. With a condo, the only parties involved in the transaction is the seller and the buyer. When you purchase a co-op, you receive “shares” in the co-op, whereas a condo you get a deed for the property.
When financing a co-op, you have a few choices. Only a few lenders in the Seattle area work with co-op financing. These lenders work specifically with the National Cooperative Bank, which the buyer must use in order to purchase. With a condo, you are free to use any lender you choose. Mortgage rates for co-ops are generally competitive to what other mortgage lenders offer, but there is less flexibility for down payment amounts and loan structures.
The approval process doesn’t only refer to financing, but approval from the other co-op “shareholders”. An interview is required to meet the prospective buyer and help them understand co-op life.
Homeowner’s dues cover traditional building expenses (water, sewer, garbage) and also includes property taxes. From the tax department perspective, the co-op corporation pays taxes as a whole – for the entire building. Condo owners pay property taxes specific to your unit. In either case, you can deduct interest paid on your mortgage for tax purposes.
Co-ops have many benefits. Most likely you won’t need to buy a washer/dryer or haul your laundry to the laundromat. Most co-op buildings do not allow washers/dryers in the units so neighbors share a common laundry room. Pride in ownership shows in the buildings – owners share responsibilities in and around the property, doing weekly chores to keep common areas clean and tidy.
As Huffington Post recently wrote, “The co-op buying (and selling) process is tricky one, where a real estate broker will certainly come in handy.” Over my 15 years selling real estate, I’ve helped clients buy and sell cooperatives. Give me a call if you have more questions. And check out my video on co-ops…