Should I buy a Coop or Condo in Westchester?

What is a Condominium?

A Condominium is a physical property or unit, usually part of multi-unit buildings, owned in fee simple estate. Condominiums also include an undivided interest in common elements such as common areas, swimming pools, and health facilities. Condominiums may be found in any type of building, whether it be an apartment or a townhouse development.

A Condominium is a legal form of property ownership, not a type of property such as residential or commercial. They may be mortgaged or sold individually from the rest of a building or area.

Owners are generally free to sublet their units.

Default in the payment of taxes or a mortgage loan by one unit owner may result in a foreclosure sale of that owner's unit, but does NOT affect the ownership of the other unit owners. In a Condominium individual owners are each responsible for their own taxes and pay a monthly common charge to an association which may either manage the property on its own, or may engage a property management company to handle the maintenance of the complex.

What is a Cooperative?

A cooperative is a corporation that owns a property in fee simple estate. Each member in the cooperative owns shares of the cooperative as personal property and receives a proprietary lease on a specific apartment. Members of cooperatives pay monthly maintenance charges that covers their share of building maintenance and debt service on the mortgage. Real Estate Taxes are included in these payments. Stockholders exercise control over the administration of the complex. They can approve or disapprove prospective purchasers of the apartment leases.

Owners may or may not be free to sublet their units depending on the by-laws of the corporation.

The corporation can be vulnerable to financial problems. If tenants cannot pay their monthly charges, or if the Sponsor does not meet his obligations, the owner-occupant may lose out in the event of a forced sale of the property.

Which one should I buy?
Remember the Primary Law of Real Estate?
Location ! Location ! Location !. Condominiums are more expensive to purchase because the units are treated as real property and are not subject to an underlying mortgage. However, there are fewer Condos in Westchester County than there are Co-ops.

A well run cooperative with healthy financials in a good location can be just as good an investment.

How do I go about buying? Use a Real Estate Brokerage Firm that is knowledgeable about Condos & Coops. (CS Realty Relocation)

Have them recommend you to a Bank or Mortgage Broker to make sure how much you should be spending and what you can afford. Ask for a complete estimate of bank charges and costs.

You will also need a Real Estate Attorney who will review the documents and report to you on the history and stability of the complex, whether it be Condominium or Cooperative.

What do I look for? Check the physical appearance of the complex - is it clean? Are the hallways well lit ? Is it well maintained? Talk to people who live there - ask questions!

Check on the capital improvements - how old is the roof, the boiler - will there be any major assessments imposed in the near future, and if so, how much will they be and for what. Make sure in an older building that any Asbestos has been removed. This can be a very big expense. Check the reserve fund - is money available to pay for work that may be needed?

Make sure you have a complete Offering Plan with all Amendments and the past 2 year's Financial Statements.

Check the amount and terms of the underlying mortgage if the complex is a coop. When does it expire; what are the terms of refinancing. Is there a balloon mortgage coming due soon?

Check the percentage of sold units, owner occupied units and rental units. Generally, the higher the owner-occupancy the more stable the complex. If the Sponsor still owns a significant number of units check the Sponsor Disclosure Amendment (coops) to ascertain the financial stability of the Developer. Check how much the Sponsor owes the corporation for maintenance versus revenues received from rentals. Make sure payments are current.

Check to see if there is any litigation pending against the complex.

Check the sublet policy and any fees that may be involved.

Try to get a feel for the maintenance history - is there a stable trend or have there been sudden jumps, and why? Look at the original maintenance compared to the present.

Make sure you understand all the fees and charges involved so that there are no surprises. Condominiums sometimes require a contribution of a month or two to the Capital Working Fund at closing. Cooperatives have Application Fees and Transfer Fees. Make sure you know what fees you will be responsible for when you become a seller.

There are some wonderful buys in this market - do your homework and your new home can be a secure, safe and hopefully profitable investment.