Buying a Co-op vs a Condo in New York City

What you actually own

With a condo, you buy real property. You receive a deed to your unit and a share of the common areas, and you pay your own property taxes plus monthly common charges to the condo association.

With a co-op, you buy shares in a corporation that owns the building. Those shares come with a proprietary lease that gives you the right to live in your apartment. Your monthly maintenance payment covers your share of the building's costs, which can include the building's property taxes and any building mortgage.

Board approval

Co-op buyers usually need approval from the co-op board. Expect a detailed application with financial records, reference letters and often an interview. Boards set their own rules, and many have requirements about down payment size and how much money you keep after closing.

Condos usually have a lighter process. Many condo associations have a right of first refusal on sales, but they rarely use it, and there is typically no interview.

Financing and down payment

• Co-op loans are share loans. Not every lender offers them, so ask early.
• Co-op boards may require a larger down payment than your lender does.
• Condo loans are regular mortgages on real property, and more lenders offer them.
• Get pre-approved by a lender who works with the type of building you are considering.

Rules for subletting, renovating and pets

Co-ops often have stricter rules on subletting, renovations and who can live in the apartment. If you might rent the apartment out later, read the sublet policy before you bid. Condos tend to allow renting more freely, though every building has its own bylaws.

Ask for the building's house rules, the most recent financial statements and the minutes of recent board meetings. Your attorney will review them as part of due diligence.

Closing costs differ too

Closing costs depend on the building type, price and loan. One example of a state rule: New York Tax Law section 1402-A sets an additional tax of 1 percent, paid by the buyer, on residential purchases of $1 million or more. That is often called the mansion tax. New York City also has its own real property transfer tax, which the NYC Department of Finance explains on its site.

Condo purchases may also include title insurance and mortgage recording costs that co-op share purchases handle differently. Ask your attorney for an estimate based on the specific apartment.

New developments and conversions

When a sponsor sells new condos or converts a building to co-ops or condos in New York, the offering plan is filed with the New York Attorney General's real estate office. The offering plan and its amendments describe the building, the sponsor's obligations and the budget. Read them with your attorney before you sign.

Which one fits you

• If you want the most flexibility to rent later or sell to a wide pool of buyers, a condo may fit better.
• If you are comfortable with a board process and want a wider range of prices, co-ops are worth a look.
• Either way, an agent who knows NYC buildings can tell you which listings fit your budget, your financing and your plans.