How to Buy a Co-op or Condo

Condos and co-ops differ from single family homes.

If you're considering buying a condominium or co-op instead of a single family home, be aware that there are distinct differences to owning each property. Single family dwellings require the homeowner to do routine maintenance and make necessary repairs. Condo and co-op owners leave the maintenance to the building's association but pay monthly maintenance and/or association fees. Condos and co-ops differ from each other in their ownership structure. A condo is a single unit that is purchased individually, while a co-op has shares of the entire building.

Instructions

1. 

   Get pre-approved for a mortgage.

   Get pre-approved for a mortgage. To estimate how much you can afford, take your total recurring debts---credit cards and loans---and divide that number by your gross monthly income. This will yield your debt-to-income ratio. Your mortgage should not exceed 28 percent of your gross monthly income; remember to include monthly fees plus mortgage and taxes.

2. 

   Locate properties that fit your needs.

   Locate potential properties that meet your needs. Co-ops, or cooperative housing projects, are typically found in the Northeast, especially in New York City. Condos can be found throughout the United States. Once these properties are identified, inquire as to monthly association and/or maintenance fees, the amount in the association's reserves, and any special assessments that may be coming in the next 12 to 18 months.

3. 

   Get a real estate agent.

   Contact a local Realtor or real estate broker that specializes in condos and/or co-ops. Realtors have extensive experience in locating properties that suit their clients. They also act on your behalf to protect your interest with such details as escrow amount and price negotiation.

4. 

   Have the unit inspected.

   Have the unit inspected. Before making an offer or as a contingency on an offer, have a licensed real estate inspector conduct an inspection of the unit and the building at large. In condos and co-ops, the homeowner's association will be responsible for all common areas, while the seller will be responsible for repairs to the unit itself.

Tips & Warnings

• Conduct a search through the Clerk of the Court's office to see how many units have liens and/or are in foreclosure---this will be an indication of how many units will devalue the other units.

• Tour the surrounding area to determine if it is residentially or commercially developed; if it undeveloped, find out what zoning is in the undeveloped area. If developed later, this area could have an impact on surrounding property values.

• If an association does not have sufficient reserves for major repairs, the additional costs are passed on to the unit owners.

References

• Bankrate: Condo Or co-op? What's The Difference?
• Repair Home: The Difference Between A Co-op and Condo

Resources

• The Motley Fool: Condo or Co-op?
• "New York Times"; Your Home; A Condo Or Co-op? Read On; Jay Romano; Feb. 13, 2000