real estate agent, please explain

[lovegem]

While I was looking for a condo on MLS, I found a condo at our desired location, and the price seems great. But there are some thing on the ad I don't understand (see Bold). Please explain to me what they mean..

1 BEDROOM, 1 BATH, NORTH SIDE, CO-OP UNIT, Spacious 867 Sq Ft. - 24-hour Security, 24-hour Doorman, On-Site Management, On-Site Maintenance, Amazing Rooftop 25-meter Swimming Pool w/ breathtaking views, Complete Fitness Center, On-Premises VALET PARKING available for reduced rate of $80 per month, THE MONTHLY FEE INCLUDES ALMOST EVERYTHING: All Utilities including electric, heat, air conditioning, water & basic cable, All Real Estate Taxes & Maintenance Package. This unit has an abundance of closet space, Washer and Dryer in unit, & newer top-of-the-line windows. This spectacular building has NEVER HAD AN ASSESSMENT! Nominal real estate transfer tax & no title insurance required.

 

[Octavia]

I''m not an agent, but I can help out with a couple of your questions.

A co-op looks just like a condo, but is a different kind of ownership. With a condo, you own the space within the four walls of the apartment you buy. With a co-op, you own "shares" of the building, usually equal to the space in your apartment (i.e. this apartment might be worth 867 shares of the building corporation). For all day-to-day purposes, the distinction is pretty small, but there are some legal and financial differences that make co-ops a little trickier for the building corporation to administer. For that reason, co-ops often have stricter standards about the assets a buyer must hold, their income, references, etc. than condo buildings do.

An assessment is an extra fee owners in a building sometimes get walloped with when something goes wrong or needs to be fixed building-wide, or when the reserve from the monthly ownership fees drops too low. For example, my building is installing all new windows and each owner was charged an assessment based on the number and size of the windows in the unit, to pay for the materials and installation. It''s not something you can decide you don''t want to do -- the directors of the building make the decision and the other owners must follow.

Real estate transfer tax is usually set by (and paid to) whatever municipality you''re in, and I think it''s generally a percentage of the purchase price -- from the ad, it sounds like the tax there is pretty low. Title insurance protects you in case there''s a glitch in the chain of title somewhere...unfortunately I can''t figure out how to explain it very well, but if it''s not required, what the listing agent means to say is that it''s something you don''t have to pay for if you buy this co-op.

I hope that helps, and that any RE agents or more experienced buyers correct me if I''m wrong about anything!

 

[Dee*Jay]

Octavia is absolutely right about the distinction between a condo and a co-op. The reason your transfer tax is nominal and there is not title insurance is because you're not buying a piece of real estate, you're purchasing shares in the coporation that entitle you to a perpetual lease on the unit. Really, it's kind of ridiculous that they are even saying that because you would never have a high transfer tax or title insurance requirement on a co-op.

A couple more things about the assessments. It's great there has never BEEN a special assessment but make sure you and your lawyer read over the past year's worth of meeting minutes and review the budget carefully to see if there are any speciall assessments pending or being discussed in the near future. In Illinois we do somehting called a 22.1 disclosure (I don't know what the equivalent would be called where you are) and it specifically asks for anticipated capital expenditures over the next two years and whether those projects would require a special assessment or whether there is sufficient money in the reserves to handle the work.

However there are of course monthly assessments, which are called "maintenance" in some areas. One big difference to keep in mind between a condo and a co-op is that in a condo you pay your own real estate taxes outside of your mortgage and assesments, but in a co-op your proportionate share of the taxes are included in your monthly assessment/maintenance so co-op assessments/maintenance will be much higher on a monthly basis but you will have no separate tax bill. The reason for this is because in a condo each unit is a separate piece of real estate but in a co-op the corporation owns the entire building and therefore has to divide the tax bill itself for the units.

A final thing (and then I'll shut up--I promise!) is that the financing rate on a co-op is often higher than the rate on a mortgage for a regular piece of real estate because the lender is taking a greater risk. I.e., with a mortgage the lender is giving you a loan that is collateralized by the title to the property, but in a co-op the lender's "foreclosure" options are different becuase the loan is collateralized by the shares of the corporation. There are some areas (New York for instance) where co-ops are very common, and in those places lenders may give the same (or very close rates) just because they have to to remain competative, but just for your own information I would call and ask a couple of lenders in general what the rate would be on a co-op loan versus a condo mortgage of the same terms.

OK, I lied, one more one more thing... Prices on co-ops are often less than on comparable condos because of the high down payment requirements and the review process. Many co-ops require large downpayments, if they allow financing at all. Plus you will have to demonstarte your financial wherewithal to the co-op board. This is becuase the financial strength of the entire corporation depends on the finacial strength of all of the shareholders (owners) so they want to make sure that the people buying in have sufficient assets to cover the payments in the event circumstances change (e.g., if someone loses their job). It is also harder to sell a co-op than a condo for those same reason.

Sorry for rambling on there--hope at least some of it was helpful!

 

[movie zombie]

co-ops and condos are forms of ownership....townhouse is a type of building construction. had a real estate teacher that pounded that one into our heads.

movie zombie