Friday, May 19, 2017

Co-op Apartments vs Condos | - dreamtown

REAL ESTATE: Chicago & North Shore

Co-op Apartments vs. Condos

AssessmentsCo-op monthly assessments cover the same expenses as for condos (see right) plus 1/12th of the property taxes (see Property Taxes below) and any building mortgage (see Financing Special Projects below).Condo monthly assessments cover expenses for staff, maintenance, reserves, and any utilities provided by the condo association.
FinancingDown payment requirements are higher for most co-ops in Chicago. A few require a minimum of only 20% down. Many allow 50% financing. Some are cash only.The condo associations don't set minimum down payments.
Financing Special ProjectsCo-ops are able to finance special projects via a mortgage for the building. In some circumstances, owners may be able to deduct their portion of the interest on that mortgage. Consult your accountant for details.Condo associations are not able to mortgage the common elements of the building. If there is not enough money in the association's reserves, the association can have a special assessment paid by the owners.
Form of OwnershipBuyers purchase shares of the corporation that owns the co-op apartment building. A proprietary lease gives the buyers the right to occupy a specific apartment.Buyers own their unit and become members of the condo association which owns the common elements.
Purchase ApprovalAfter signing a contract to purchase a co-op apartment, buyers must submit to the co-op's board an application including financial information and letters of reference (both professional and personal). Buyers must also be interviewed by the co-op board. The focus of the approval process is on the buyer's ability to pay their monthly assessments since an inability to do so would put a financial burden on the rest of the co-op owners. The board must abide by Fair Housing Laws.A very few condo associations reserve the right to approve buyers. Approval is much less involved than for a co-op, The association must abide by Fair Housing Laws. Some condo associations have the right of first refusal allowing them to purchase a condo, if they feel the price is too low.
Property TaxesSince there is only one property tax bill for the entire apartment building, an owner's portion is paid to the co-op through the monthly assessment.There is a property tax bill for each unit payable directly by the owner of the unit.
Renting UnitsMost co-ops in Chicago do not allow apartments to be rented out. A few allow rentals on a limited basis such as a maximum of 2 years.Many condos allow units to be rented out, but have rules such as the minimum length of leases. More condos in Chicago have been prohibiting rentals for new buyers recently.
Transfer FeesA few co-ops charge a transfer fee of 1% to 3% of the sale price. This is in addition to Chicago's buyer transfer tax which is 0.0075% of the sale price.Condos don't have transfer fees. As with co-ops Chicago's buyer transfer tax which is 0.0075% of the sale price applies.

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