Although there are differences between the two, condominiums ("condos") and cooperatives ("co-ops") are both important forms of property ownership, providing alternatives to the standard single-family home. What's unique about them is their combinations of individual and joint ownership of the living space, land, and common areas.

The main appeal of both condos and co-ops is that, owing to the partial shared ownership, they relieve residents from many of the usual hassles of maintaining a home, such as cutting and watering the lawn, painting the exterior, and shoveling snow. For young professionals with busy work schedules, or seniors who no longer need or want a big house, buying a condo or co-op can be ideal.

Of course, these properties have their down sides. Residents must abide by community rules, pay maintenance fees and other dues, and either join a board that helps oversee the community or learn to live with the board's decisions and enforcement of community rules.

In many cities, there's a good market for condos and co-ops. Newly built condo or co-op developments often add housing stock to the market, sometimes making them relatively affordable. But whether you're buying or selling a condo or co-op, you'll have to do your research and take into account various factors that you wouldn't have to in a "normal" home-sale transaction.

Condo Versus Co-op: A Comparison

In both condos and co-ops, you live in your own space, usually called a "unit," and share use of "common" areas, such as hallways, parking lots, a community hall, and recreational facilities.

The major differences between condos and co-ops lie in what you actually "own" and how they are managed.

In a condo, you ordinarily own just the space within your unit, sometimes including the walls, sometimes not. You are free to do just about anything you like to your unit, up to the limit of where your ownership rights end: paint, renovate, or replace cabinets. And you're responsible for maintenance inside the unit. So if your ceiling fan fails, it's your responsibility to fix or replace it. You typically can't do anything to the outside of a condo unit, such as paint or even landscape; and you won't likely be responsible for fixing your roof.

Condos are managed by a homeowners or community association, which collects a monthly fee from residents. It uses the funds to maintain the property and handle related administrative or legal matters. At times, for example after a lawsuit or emergency, the board may require residents to pay "special assessments" over and above the regular fees. The board also helps enforce community rules, for example by insisting that a neighbor not paint the fence purple or keep pets.

In a co-op, you don't "own" your unit. You own shares of stock in the cooperative, which allow you to lease an apartment or unit for as long as you own the stock. You're quite limited as to what you can do to the interior of your unit, but you don't have to worry about property maintenance, either. If the heat goes out, the co-op's crew will fix the problem.

Co-ops are run by a board of directors. Like in a condo, the board collects monthly maintenance fees and uses it to maintain the property. One of the biggest differences, however, is that co-op boards have the power to decide who can live in the co-op (buy the stock).

Tips on Buying or Selling a Condo or Co-op

Thinking about buying or selling a condo or co-op? Let's start with some important issues for buyers to look into:

• How much are the maintenance fees for repairs and upkeep? These fees are in addition to your mortgage payment, so you'll want to make sure you can actually afford the total. (Your lender will take these fees into account, too, before agreeing to fund the loan.)
• How much will your property taxes be? A condo's property taxes are based on the unit, while a co-op's taxes are based upon the entire complex. So there can be huge differences in the amount you'll pay.
• Is the co-op at or near full capacity, or are there a lot of vacancies? If many vacancies exist, no one is paying a share of the fees and taxes for those units, and so your property costs might go higher to make up the difference.
• Is the building old and in need of repairs? If so, your maintenance fees might be high, and increase over time, to make the repairs.
• Does the seller owe outstanding fees? Condo homeowners' associations and co-op boards of directors can usually place a lien against the unit for failing to pay monthly maintenance fees or special assessments, and so either the seller or buyer will have to pay these fees off before any sale can take place.
• What kind of property insurance does the condo or co-op carry? Usually, the coverage extends only to the building and common areas. You'll probably have to buy extra insurance to cover whatever you actually own, such as walls and improvements within a condo. And both co-op and condo owners will need their own insurance to cover personal property inside the unit, like clothes and furniture.
• Are you in an area where natural disasters are common, such as hurricanes or tornadoes? Check to see whether the condo association or cooperative's insurance covers them, and if not, look into buying that insurance yourself.
• What rules, which usually come in the form of "bylaws" or "covenants, conditions, and restrictions ("CC&Rs"), limit or restrict how residents can use the premises, like "no pets," "no renting out of your unit," or "no remodeling without approval?" Make sure you can live with the restrictions.
• How are you going to finance the purchase? Buying a condo is like buying a house, because you're actually dealing with an interest in real property that is deeded to the buyer, so conventional mortgages are possible. Co-ops, on the other hand, aren't interests in real property (there's no deed), and so mortgages are not available to you. Rather, you'll need to take out a loan to pay for the co-op stock, and your lender will hold the stock as security for repayment on the loan.

If you're planning to sell a condo or co-op, you, too have some important issues to consider:

• Have you gotten copies of all the relevant governing and other documents that buyers will want to see (and in most cases, have a legal right to see) before they finalize the purchase?
• Are the taxes or regular fees comparatively high? If so, be prepared for negative reactions from buyers.
• What will you be legally obligated to disclose about the property? The documents may not show everything that buyers need to know, such as if your neighbors are especially loud or if your unit has unaddressed repair needs. Most states' laws require written disclosures by property sellers about the property's physical condition and related issues.
• If it's a co-op unit you're selling, are there restrictions on if, when, and to whom you can sell your shares? You might not be able to sell to the potential buyer of your choice.
• If selling your shares in a co-op, will the sale be difficult because the board of directors has power to set the selling price and plans to set it high?

An experienced real estate attorney can help you analyze the financial and contractual aspects of these transactions, and peruse the bylaws and other governing documents of the community in which you are either buying or selling a unit.