Although co-ops make up roughly 80 percent of the available-for-purchase housing stock in New York City, buyers often face this common dilemma when apartment: hunting: should they seek a co-op, or a condo?
Many factors come into play in this decision. But increasingly, especially for first-time buyers, condominiums may be the preferred choice. Instead of ownership of shares in a corporation and the granting of a proprietary lease that are typical of co-ops, condominiums are real property -- and come with less financial scrutiny and requirements. Despite condo prices being roughly 20 percent higher than for equivalent co-op units, condos may also require a smaller down payment.
So before you take that plunge, here are some things to consider.
Cash requirements differ between co-op and condominium purchases in three main areas: down payments, required cash reserves, and closing costs. The down payment required for a condominium generally has more to do with the percentage permitted by bank financing than any other factor. In a co-op, though, the board may require a larger percentage down payment than an equivalent condominium unit would command.
Let’s look at a typical scenario. A two-bedroom co-op unit is listed for sale at $1,000,000. The co-op board requires a minimum down payment of 25 percent, or $250,000. An equivalent two-bedroom condominium unit is listed for sale at $1,200,000. The condominium association does not have any financing restrictions, and financing is available for up to 90 percent of the purchase price. The down payment required for purchase would be $120,000. Even at 80 percent financing, a down payment of $240,000 would be $10,000 less than that required for the less expensive co-op.