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Question of the Day: Condos or Co-Ops?

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Curbed University delivers insider tips and non-boring advice on how to buy, sell, or rent a home or apartment. Additional questions welcomed to

News flash: Sleeping on a mattress in the cramped sunroom with curtains for doors in a rickety, mice-riddled house that you share with five buddies from college isn’t really an acceptable way to (ever) live anymore. It’s time to transcend the frat boy haze and take a shot of reality: it’s time to find a new place to live.

Before you start your hunt with the obvious choice of that overpriced, one-bedroom apartment downtown, consider investing in an alternative: condos or co-ops. With the additional square footage and the additional perks you may have access to, both can offer you more bang for your buck. But condos and co-ops are far from synonymous.

Hence, a crash course in Seattle condo and co-op acquisition is order to help you find a place that will fit your living style and personality.

Let’s start with condos. Though the Seattle housing market is still suffering, more and more Seattleites are jumping on the condo-driven bandwagon. Within the last year, condo sales in King County jumped 69.9% and only 824 condo units were listed in the NWMLS in November 2011, a 68-month low for the greater Seattle area.

Condos can be considered the happy medium between buying a house and renting an apartment. Someone who buys a unit in a condo owns the unit itself, complete with the usual run-of-the-mill responsibilities in owning real property: obtaining financing to buy the unit, paying property taxes, possibly deciding on a title insurance policy, and the like.

An elected governing board (a condo “association” of sorts) usually manages the condo and makes monthly assessments to cover maintenance costs for the common elements – areas such as the driveway, elevator, workout rooms, or any other areas that the building offers that unit owners can communally share. Because you have purchased the condo and it is real property, you’re free to rent, sell, defile, or renovate the condo however you see fit.

Co-ops operate under a similar premise but play by noticeably different rules. Well-known in New York City and other major cities across the US, co-ops are just starting to really gain some momentum on the Seattle market. Unlike condos which can be found in nearly every Seattle neighborhood, co-ops are mostly concentrated in Uptown Queen Anne, Capitol Hill, Wallingford, and the U District, but at a fraction of the cost.

These fabulous units can be hard to find for two main reasons. For one, most real estate websites don’t list available co-op units, and if they do, at least one or two of them will probably be for the local co-op produce stand. As of January 2012, NWMLS had only 31 active listings for co-ops in the Seattle area ranging from $89,900 to $295,000. But the main reason that there are so few co-ops on the market is that becoming a tenant in a co-op isn’t a temporary arrangement – once you’re in, you’re pretty much in for good.

Here’s the breakdown for how co-ops work. A single entity (usually a corporation) purchases a building and secures mortgage loans to finance the property. Co-op residents, in turn, do not own or hold title the unit that they live in, but instead, buy shares of the corporation to entitle them exclusive rights to occupy a specific unit in a building. Sounds a little hokey, but here’s the upside: Co-op residents have no personal liability in the loan because they don’t own the property; the rent they pay is a pro rata share of the mortgage, taxes, operating expenses, and other debts for the whole property.

An extra perk? The closing costs for co-op “buyers” are generally lower than that of condos. But here’s a little bad news. Because co-op tenant-shareholders are, in effect, “all in this together”, if one tenant defaults on his or her share of the mortgage payments, the other tenants are also held responsible and must find a remedy or risk having the mortgage on the entire co-op foreclosed. (Dun, dun, dun?)

While differences between condos and co-ops may sound like nitpicky semantics so far, the internal operations of co-ops are what either seal the deal or have people screaming out the door. Co-op board members are infamous for their intensive interview/screening process, asking personal questions and for references up the wazoo to ensure that you’ll be a “good fit” in the building. Because co-op residents don’t own the property or even their individual units, they are not allowed to rent, remodel, or sell to any Tom Dick or Harry without the board of directors’ approval.

At the end of the day, co-ops are a steal financially, if you’re lucky enough to find them. If you’re willing to wade through the red tape and hunt for a deal as though you were on “Extreme Couponing” – Home Edition, then co-ops in Seattle are the way to be. But if you’re looking for some hot property to own in a prime location at a relatively good price, steer clear of community living and go for capitalism manifested in real estate. It’s the condo life for you.