buying a co-op? (lower-class, fit in, real estate)

[JL2010]

Does anyone own a co-op condo in the DC area? I would like to know what you think of it? I am a bit worried about the fact that everyone is responsible for everyone else, i.e., if one doesn't pay the rest have to pick up the tab.

I know it's a lot cheaper than a condo, but I don't know if it's worth it because I heard it's hard to sell. I also don't know what's a reasonable price for co-ops.

What else should I look at before making a decision? I heard I should look at the finance, is that even publicly available?

Thanks!

[The Heartbreak Kid]

I am interested in this info as well. I currently rent a unit at a co-op and I wouldn't mind possibly buying. However, I do not care for the bureaucracy here.

[DCforever]

Outside of New York City the co-op form of housing just hasn't gotten a lot of traction. There are all sorts of co-ops though even in DC. There's a world of difference between the Watergate and a limited equity co-op. In condos I think all owners are similarly responsible for joint obligation so I don't think there's a huge difference in liability. I'd pay more attention to the specific property and talk to some current owners.

[Curbed Enthusiasm]

Originally Posted by JL2010

Does anyone own a co-op condo in the DC area? I would like to know what you think of it? I am a bit worried about the fact that everyone is responsible for everyone else, i.e., if one doesn't pay the rest have to pick up the tab.

I know it's a lot cheaper than a condo, but I don't know if it's worth it because I heard it's hard to sell. I also don't know what's a reasonable price for co-ops.

What else should I look at before making a decision? I heard I should look at the finance, is that even publicly available?

Thanks!

I'm by no means an expert, but I don't think that co-ops are much less expensive than condos. While co-ops allow you to deduct part of the monthly maintenance fee (which covers the property taxes on the building), you will probably find that the maintenance fees can be very steep, and on top of that you might have to pay a proportionate share of any underlying mortgage on the building. You might be enticed by a $300,000 asking price for a small unit at the Watergate, but those units also come with a monthly maintenance fee of around $1000. Plus, co-ops can be hard to finance. I'm not sure if this is still the case, but co-ops buyers historically have not been able to get mortgages (since you're not actually buying real estate), but rather have had to rely on more expensive "share loan" arrangements, often from private lenders. Also, many co-ops have strict down payment requirements that could range from 10%-50%+. And on top of all this, co-ops are often governed by strict boards that can dictate all sorts of rules, from rental restrictions, pet bans, to even requiring you to own your home for a certain amount of time before re-selling is even an option. A co-op might provide you with a few tax advantages, but might also bring along a whole lot of headaches.

There's a lot of condo vs. co-op information online to answer any questions that you might have. Here's a good primer: www.melmanmolik.com/2005-Primer- (broken link)Co-Op.pdf

[JL2010]

Thanks RyanZ. I went to the site and found a newer edition! http://www.melmanmolik.com/publicati...imer_Co-Op.pdf

I agreed with the location aspect. The co-op I was looking at is in the location I love, and it's huge for the price. But with all the co-op rules and fewer financing options, I don't think it's for me. I would like to think I will be here forever, but who knows when I have to leave again.

Thanks for the information!

PS When I saw the fee they charge for the Watergate, I almost choked on the water I was drinking... WOW.

[chicagotodc]

The previous poster has it right. I haven't owned a co-op in DC but considered one a while back... here's what I found:

* The co-op is boss. What they say goes. They want to make your life a living hell, they can. Rules can change in buildings at a whim and it can leave owners in a pickle. I saw one co-op with right of refusal to sell: find a buyer? Co-op doesn't want them in the building - for ANY reason they determine is valid? Can't sell! That sounded like madness to me, and is, apparently, par for the course in co-op ownership.... The prior comments are also spot on: strict down payment requirements, limitations on financing, etc.
* The lower cost is totally false: most co-ops I saw had fees ranging from $1000 to $3000 a month... on top of any mortgage. The units usually LOOK like a great deal because you can get a LOT of space for what looks like a really good price.
* The maintenance fees and other costs associated with a co-op can vary quite substantially over time. If you are making $1M a year and an extra $10 or 20K is no biggie, a co-op is probably just fine. If you prefer knowing your monthly payment is $X and fairly fixed, a co-op may not be the best choice.
* Perhaps because of all of these factors, co-ops seemed much harder to unload and sit on the market a lot longer (in my experience)
* Co-ops I visited seemed to be, by and large, for the high net worth folks. It seemed quite clear to me that, spoken or not, part of the co-ops purpose was to keep the "riff-raff" lower-class out of the building. I didn't fit in. I realize thats "urban myth" stuff, but I couldn't help but get the feel that this was absolutely part of the purpose (and appeal, at least to some) of a co-op.

[The Heartbreak Kid]

Originally Posted by chicagotodc

The previous poster has it right. I haven't owned a co-op in DC but considered one a while back... here's what I found:

* The co-op is boss. What they say goes. They want to make your life a living hell, they can. Rules can change in buildings at a whim and it can leave owners in a pickle. I saw one co-op with right of refusal to sell: find a buyer? Co-op doesn't want them in the building - for ANY reason they determine is valid? Can't sell! That sounded like madness to me, and is, apparently, par for the course in co-op ownership.... The prior comments are also spot on: strict down payment requirements, limitations on financing, etc.
* The lower cost is totally false: most co-ops I saw had fees ranging from $1000 to $3000 a month... on top of any mortgage. The units usually LOOK like a great deal because you can get a LOT of space for what looks like a really good price.
* The maintenance fees and other costs associated with a co-op can vary quite substantially over time. If you are making $1M a year and an extra $10 or 20K is no biggie, a co-op is probably just fine. If you prefer knowing your monthly payment is $X and fairly fixed, a co-op may not be the best choice.
* Perhaps because of all of these factors, co-ops seemed much harder to unload and sit on the market a lot longer (in my experience)
* Co-ops I visited seemed to be, by and large, for the high net worth folks. It seemed quite clear to me that, spoken or not, part of the co-ops purpose was to keep the "riff-raff" lower-class out of the building. I didn't fit in. I realize thats "urban myth" stuff, but I couldn't help but get the feel that this was absolutely part of the purpose (and appeal, at least to some) of a co-op.

Visit the ones in SW and look at some of the legal history, it is more than a myth.

[paytonc]

Originally Posted by JL2010

Does anyone own a co-op in the DC area? I would like to know what you think of it? I am a bit worried about the fact that everyone is responsible for everyone else, i.e., if one doesn't pay the rest have to pick up the tab.

Actually, co-ops have more ways to deal with delinquents than condos do, and therefore generally have fewer problems with delinquency. A lot of this is the flip side to the generally more intrusive nature of a co-op board.

Listing agents/sellers may have a copy of the co-op's annual report available; otherwise, you might inquire with the management to see if you can look at a copy. Certainly you will get a copy of the condo/co-op docs if your contract is accepted (and will get a few days to review them and walk away if they're not to your liking).

Financing can be an issue, and this is covered in a lot of co-op primers. The rates aren't much worse than at condos, but two key differences that will affect a lot of people: (1) higher down payments [20%] are often required and (2) the lender & co-op board will usually want a lower debt-to-income ratio than a condo lender will. All of this is ultimately for your own protection: they don't want future delinquents moving in. Ask the co-op management if they have a list of preferred lenders.

Originally Posted by chicagotodc

* The lower cost is totally false: most co-ops I saw had fees ranging from $1000 to $3000 a month... on top of any mortgage. The units usually LOOK like a great deal because you can get a LOT of space for what looks like a really good price.
* The maintenance fees and other costs associated with a co-op can vary quite substantially over time. If you are making $1M a year and an extra $10 or 20K is no biggie, a co-op is probably just fine. If you prefer knowing your monthly payment is $X and fairly fixed, a co-op may not be the best choice.

The lower upfront cost is usually balanced out by the higher monthly maintenance cost, so the monthly price (what most people look at) can balance out. That said, co-ops historically sell at a lower price per square foot; part of that is because they were impossible to finance until relatively recently, and the buyer pool is smaller/more restricted.

I've looked at several co-ops with a $1000 monthly fee, which typically includes association dues, utilities, and property taxes, and pay for a higher level of amenities and services than at comparable condos. The real net difference in fees is more like $200-$300 a month, and that pays for things like much nicer on-site gyms, 24-hour doormen, on-site technicians, and more maintenance -- the co-op takes care of things like HVAC repairs and window cleaning that would otherwise be a condo owner's responsibility. It might be worth it for someone looking for a low-maintenance lifestyle.

Actually, the maintenance fees for a condo could vary even more over time. A condo board cannot incur debt and therefore must pay for big improvements either out of savings built up over years (not all boards have that discipline, nor that much foresight) or through special assessments, which are a giant and sudden whack to owners' budgets. Co-ops can take out lengthy blanket/underlying mortgages that can spread those costs out over a much longer time.