Condos, Co-ops & PUDs: What's the Difference?
Let's start out with a quick definition of the difference between a co-op and a condo: When you buy a condominium, your apartment and a percentage of the common areas belong to you. When you buy a coop, you don't actually “buy” your apartment; instead you are buying shares in a corporation that is your building. PUDs Are Just like a Condo with one exception you actually own the land your unit sits on, and usually a small back and front yard too
Condominiums: Owning a condo is similar to owning a house. You have a deed and mortgage and pay property taxes, but what you really own is “airspace.” Walls, floors, and ceilings are owned in common among all residents. You join the homeowners association (HOA) and pay monthly dues to cover management, hazard insurance, maintenance, garbage collection, landscaping, etc. Maintenance is shared with neighboring condo owners; your property value depends on the condition and desirability of the entire development. Condo owners usually can remodel only within the guidelines provided by covenants, conditions, and restrictions, which may specify everything from how maintenance is handled to what color curtains you can hang. It’s a good idea to understand all before buying a condo.
PUDs: Planned Unit Development (PUD)
PUD owners individually own the residential structure and a small parcel of land surrounding it. As with condo ownership, PUDs require membership in the HOA, but the land around each unit is maintained by that unit’s owner. If you’re interested in having a bit of a yard, this is the way to go.
Co-op: This is a housing complex owned by a corporation made up of all the tenants — you become a shareholder in the corporation that owns the property. The number of shares you are issued depends upon the size of the unit you own. Larger units’ owners have more power in deciding how the building is run. You also pay fees to cover your portion of the building’s property taxes, mortgage, and the costs of repairs and improvements for the common areas. Co-op owners depend on each other financially, so expect heavy scrutiny of both your financial history and personal life.
You might be thinking is insuring the property any different? When you own a house, you own everything, this includes everything inside the house, its structure and even the land on which the house sits. When you own a condo or have shares in a co-op, you are only responsible for the space within your walls. Everything else, hallways, common areas, etc., those parts are usually covered by a collective homeowners association insurance policy. Co-ops and condos have virtually the same type of insurance since the main difference between the two types of homes are how they are owned and managed.
Advantages of Common Interest Ownership
Considering all the options, what are the advantages of buying a condo, PUD, or co-op? First, prices are typically much lower than for single family homes, and landscaping and maintenance are minimal or nonexistent. Some people feel safer in a “cluster” environment, while enjoy having a common maintenance service.
The disadvantages? Homeowners’ dues are not tax-deductible. The dues are an ongoing expense that will lower the amount of mortgage you can qualify for. Documents may be long and complex; you may want to hire a real estate attorney to review them for you.
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