If you are considering buying your first home in Chicago, it’s important to be well-educated on your options. Many people confuse condos with co-ops, thinking they are the same but that is not the case.
Condo vs. Co-Op, the Basics
A condo is a private, specific unit within a multi-unit building. By owning a condo, you are entitled to access to common areas and shared amenities. A co-op is also a part of a multi-unit building, but that’s the only thing they have in common with condos.
Purchasing a condo is similar to purchasing a house in the suburbs, the purchaser is given a deed to the property purchased. Because you own real property rather than shares in a building, each individual condo unit will receive a separate tax bill from the city.
A co-op owner has a share in the entire building and a contract or lease that allows the owner to occupy a unit within that building. While a condo owner owns a unit, a co-op owner does not own the unit. Co-ops are collectively owned and managed by their residents, who own shares in a nonprofit corporation. which holds the title to the property and grants proprietary leases to residents.
Cost of Condo vs. Co-Op
Co-ops are often cheaper per square foot than condos. They typically offer buyers more control as an individual shareholder and have lower closing costs than condos. However, getting a mortgage for condos is often easier than co-ops and the fees are usually lower.
When it comes to monthly assessments, for condos that cost can cover everything from building staff, maintenance, building reserves and any utilities provided by the condo association. A co-op owner’s monthly fees can cover the same expenses as a condo, but they also include payments for the building’s underlying mortgage and property taxes.
As we mentioned when it comes to condos, there is a property tax bill for each individual unit that is paid by the owner of that unit.
With co-ops, since there is only one property tax bill for the entire building, if you own a co-op, your portion is paid through the monthly assessments.
Purchase Approval for Co-Ops
Perhaps the biggest difference when it comes to condos vs. co-ops, is the purchase approval. It is rare that a condo association will reserve the right to approve buyers. But once you sign a contract to purchase a co-op unit, you must then submit an application to the co-op’s board for approval. The application must include your financial information and letters of reference. Sometimes the buyers must also be interviewed by the co-op board. The purpose of this approval process is to help ensure any new buyers have 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.
If you have any additional questions on the differences between condos and co-ops, or if you are looking to Buy your first home in Chicago, contact us today to help you get started.