The Difference Between Buying a House, a Condo, a Townhouse and a Co-op
While New York City real estate is notoriously expensive and hard to come by, it isn’t impossible. There are plenty of opportunities to own a piece of property in the greatest city in the world, and entirely possible to not go bankrupt trying. This isn’t a tutorial on saving for your dream home however, so instead let’s talk about the different types of property that are out there.
A Single Family House is a free-standing, individual residential structure built on a lot larger than itself. Houses may or may not be detached and could share one or more walls with another dwelling, but they do not share utilities or other essential services and are therefore, independent. Typically, there are no management or maintenance fees and owners are free to do nearly anything with the interior of the house. Depending on local rules and ordinances, owners are free to do what they wish to the exterior as well. However, all maintenance and repairs to the house and the land on which it sits are at the owner’s expense. Owners pay property taxes on the house and the land on which it sits.
Owners of a house receive a Deed upon purchase. The Deed is a title declaring their fee simple ownership, which means permanent and absolute ownership of the dwelling and the freedom to do with it and dispose of it as they wish. The entire space in and around the house, as well as the plot of land on which it sits, are private and exclusive to the owner of the house.
A Condominium is a unit in a multiple dwelling structure. If you purchased a condo, you would own the individual unit and a specified share of undivided interest in the rest of the structure. Common areas- laundry room, roof, hallways, lobby, elevators, pools, fitness center, etc.- are shared with other unit owners. These areas are maintained by the condo’s Management Company and the cost of maintenance, called common charges, are shared too. Much like rent, these charges are paid to the condominium’s Homeowner’s Association (HOA), which is the entity that governs the condominium.
Like a House, owners pay property taxes on their individual units. Additionally, owners receive a Deed for the unit and own it in fee simple. But unlike a House, wherein the land and the structure on it are owned, condo ownership is limited to the interior walls or airspace, not the property on which it sits. The exterior walls belong to the Condominium Corporation that own the structure in which the unit resides, as do the common areas shared by owners.
A Townhouse is a single family dwelling that shares a wall with another unit but is independently owned. Like a Condo, there are common areas that are shared with other owners and are often maintained by the HOA, to whom the maintenance, known as dues, is paid monthly. The walls adjoining townhouses are considered part of the common areas that are shared by owners and are governed by the HOA, along with other common areas. Like condos, townhouse owners pay property taxes on their individual units.
The biggest difference between a townhouse and a condo, is that a townhouse owner owns the individual unit and the land underneath it, as well as the interior and exterior walls, the lawn and the roof. Unlike a traditional House however, this ownership does not include the plot of land outside of the townhouse structure. Townhouse owners receive a Deed and also own it in fee simple.
A Cooperative Apartment is an apartment building owned by a Cooperative Corporation wherein individual shares to the building are sold. With a coop apartment, what is purchased is a certain number of shares to the building designated by the individual unit- instead of owning real estate, shareholders own shares in the legal entity that owns the real estate. Like a condo, a coop apartment has common areas that are shared with other shareholders, for which a monthly maintenance is paid to the coop’s Management Company and includes the property taxes for the building, not the units.
Unlike a condo however, shareholders do not have a Deed because they do not directly own real estate. Instead, shareholders receive a Stock Certificate, which is much like the title of a car and states the names of the shareholders and the number of shares owned; as well as a Proprietary Lease or Occupancy Agreement, depending on the coop’s procedures. Additionally, shareholders elect members to a Board of Directors to govern the coop and screen and select who can and cannot live in the cooperative.
There are a multitude of advantages and disadvantages to owning each of the above types of property, and each of those is exclusive to the wants and needs of the purchaser. For example:
Houses offer more cost advantage per square foot and the most independence for owners in that usually, the owner can do what they wish in and out of the premises. With that independence however, also comes responsibility for maintenance and repairs, which fall solely on the shoulders of the owner; and because of the size of detached homes, they can be quite costly.
Condos are a great alternative to owning a house in that the responsibility for common areas is shared among unit owners, therefore individual owners need not worry about anything outside of their four walls. With a monthly common charge, everything else is taken care of. However, the common charges and taxes could be considerable. And in sharing common space similar to an apartment building, owners lose the privacy that is exclusive to owning a detached house.
Townhouses usually have HOAs deal with things like snow plowing and trash removal, which alleviates the burden from the owners. And because owners are responsible for their own exteriors, townhouses provide more independence than condos. However, this independence is limited by HOAs, who dictate certain choices, such as the visual aesthetics of the townhouses and the communities in which they sit.
Coops can be the perfect arrangement for purchasers looking to have little to no individual responsibility for maintenance while still enjoying the amenities offered. Because ownership and residency is dictated by a Board however, the application process to purchase a coop apartment can be tedious and rigorous. And because shareholders own shares and not the individual units themselves, there are often many hurdles to jump through when making modifications or alterations to a unit, including using only designated contractors.