Condo vs. Co-Op — Which One is Better?

“I don’t want to purchase a co-op because I am not doing the board package and I don’t want to be turned down. I am only looking at condos.”

Most of my buyer consultations begin with some form of the statement above. If you have read enough online about co-ops, the sentiment is understandable. Yet not all co-ops and condos are the same.

Let’s start with what is commonly called the Board Package. It is a dreaded exercise of gathering all of your financial documents over one month to show your total financial picture in one period of time. There will be one master sheet outlining the details of your net worth all backed up by your various bank and brokerage statements. Then there are letters of recommendation, employment letters, credit checks and more.

The reason a co-op can and will request all this information is because you are buying shares in a corporation as a fellow investor and the board determines if your application to purchase is accepted or not based on your overall financial health. After the initial review, the board will then ask for a personal interview and those are now mercifully handled via a Zoom call.

A common misperception is that you will not have to go through this process for a condominium purchase. This is not true! A condominium will require a purchase application with much of the same information a co-op will ask for although letters of recommendation may not be required and there will not be an interview.

A condo board only has the right of first refusal, which means if they decide to decline your purchase application, they are required to purchase the apartment from the owner for the exact same price you agreed to pay.  Most condominiums not only don’t have that money on hand, but they are not interested in owning additional apartments. However, you will not get out of putting together the purchase application as you do need the board of directors’ approval to proceed to closing.

Now that you know the differences you still might decide you do not want to consider purchasing a co-op in NYC but there are two reasons many buyers change their mind. The first is that co-ops typically trade at a lower price than a condo so you will get more space for your money. The second is that approximately 75-80% of the overall housing stock is comprised of co-ops, so eliminating them from your search dramatically reduces your choices.