Co-op Housing: A Comprehensive Guide for Potential Buyers

Cooperative housing or co-op housing is a type of real estate arrangement that is similar to buying a condo or a home, except that you do not actually own your unit. With this type of real estate transaction, a cooperative group owns the real estate and you purchase a share of ownership.

Cooperative Housing Basics

One of the key differences between buying into a cooperative housing arrangement and buying a house is that you are either a shareholder or an owner of property. When you buy a house, you are the owner of that property. When you get involved with a housing cooperative, you instead become a shareholder in a corporation. Each share of ownership entitles you to own a unit in the cooperative. You make monthly payments that also provide you with an opportunity to gain equity.

Loan

Another difference between regular homeownership and cooperative involvement is the way that the loan is handled. With a regular home purchase, you are in charge of getting a mortgage and you make the payment for it. With cooperative ownership, you pay for a portion of the loan on the entire property. Your portion of the loan payment is for some interest, property taxes and insurance on the building. Part of your payment also goes to the equity in the property. Some cooperatives also require buyers to get share loans, which are similar to mortgages, on their units.

Control of Property

With a cooperative living arrangement, the rules for the building are set forth by a committee. The residents of the building elect a board of directors to make important decisions for the building. The board of directors can set policies for the property, and they also set up committees for certain projects around the property. In this way, a democratic process is used to maintain the integrity of the building arrangement for everyone who lives there.

Buying and Selling

When a member of the cooperative wants to move out of the co-op, he can put his unit up for sale. In many cases, the cooperative will help the seller find a buyer for the property. Some co-ops have waiting lists set up so that sellers can easily sell their unit to the next person on the list. Once the sale is facilitated, no real estate transaction fees will be involved in the transfer property from one person to another.