Co-Op or Condo? Know the Difference!

If you’re looking to buy a co-op or a condominium unit, it’s best to find out the difference and any problems you may encounter, as your mortgage broker (if you use one) may not know. In this past year, a friend’s daughter bought what she thought was a condo using a friend as her real estate agent and another friend as her mortgage broker. They agreed on a price and a closing date, and waived the financing condition. When she went to close, no funds were available, as it was actually a co-op, not a condominium. This is a common problem, that is often overlooked in the early stages of financing and pre-approving!

Both co-ops and condos look similar but there is one major difference. Let’s consider 50 King Street East unit 505, if you have “title” on that particular unit, then it’s a condo. Now say, next door there’s a 50-unit co-op and you want to purchase unit 505. This unit is virtually identical to the first, yet with this co-op unit, you are purchasing 1/50th of the building, with the right to live in unit 505. Co-op’s are very hard to finance and mortgages are difficult to acquire...after all, you can’t repossess 1/50th of a building, should the owner default.

Keep in mind though, if you are able to line-up financing and set up a mortgage, there are advantages to buying into a co-op. Typically, co-op units are comparable to condos, yet cost significantly less.

No matter which route you decide to take, pay close attention to the status certificate. It will give you the financial state of the building. It also wouldn’t hurt to have an inspection of the foundation, retaining walls etc., because any large repair that a corporation can’t afford will likely be passed on to you (especially if you’re in a co-op!).

Like all major purchases, I recommend to do your homework, and make smart choices based on what financially makes sense as an investment. Enjoy your new co-op or condo!

Harold Pope

Harold Pope

Sales Representative
CENTURY 21 New Age Realty Inc., Brokerage*
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