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Making Sense Out of Dollars

Condos and Co-Ops, Pt. 3 of 6

Joel Lerner
Posted 10/14/22

What is needed in order to own a condo?

Every investment involves much paperwork, and you must be extremely careful to understand the many documents needed in condo ownership;

· The …

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Making Sense Out of Dollars

Condos and Co-Ops, Pt. 3 of 6

Posted

What is needed in order to own a condo?

Every investment involves much paperwork, and you must be extremely careful to understand the many documents needed in condo ownership;

· The declaration l describes the physical details of your condo ownership. The deed contains the conditions and restrictions of ownership.

· The condo association’s bylaws are also an important document for you to examine, as they contain all the rules and regulations of the condo.

· The condo management agreement (if the project is managed by a professional management company) will disclose who operates the condo, what the manager’s duties are, and what rates the management company charges.

· The title insurance commitment or an abstract certified to date, will disclose whether the seller has clear title to the condo (free of any mortgages or liens). This document is essential when you are contemplating the purchase of a condo.

· The purchase agreement offer is the most important document in your condo transactions, because once it is signed by you and accepted by the seller, it will govern every aspect of the purchase, including condition of the property, repairs to be made, construction of amenities, and simple things such as color of paint, fixtures to be included, and appliances. Verbal descriptions are not binding, and so any representations must be in writing. Therefore, you should employ experienced counsel well in advance of signing any papers. 

As you can see, condo ownership can be ideal for many people. But be sure to understand the terms of the arrangement before getting involved:

1. See that the maintenance fees are spelled out

2. Read the rules and restrictions carefully

3. Have the condition of the property checked out thoroughly

4. Above all, be sure you're dealing with a new esstablished, reputable developer. Talk to friends and ask at your bank. If anything you hear makes you doubt the reliability of the seller, back off. 

 What Is A Cooperative?

As the name implies, the cooperative, or co-op, is considered to be a coopera-tive living arrangement with people who have a common interest (union mem-bership as an example) and who run the building as a corporation. A cooperative differs from a condominium in several ways. When you buy a co--op, you buy a share or a number of shares in the corporation that owns and manages the land and the buildings. These shares entitle you to occupy a par-ticular apartment for a specified term. However, you do not own the apart-ment, as you would when buying a condo. 

As a co-op owner, you must pay a monthly maintenance fee, which includes not only your share of the cost of maintaining the building and grounds (like the condo maintenance fee) but also your share of the mortgage costs and taxes on the entire property, which are paid by the corporation as a whole. Note that you can deduct from your income, for tax purposes, the portion of your monthly maintenance fee which goes to pay for interest on the corporate mortgage and property taxes. In addition, of course, you may have to make payments on the mortgage loan you took out to purchase your shares in the co-op. If you get a co-op loan, unlike a condo loan, you will not have to pay a mortgage recording tax, because buying a co-op is not consid-ered a real estate investment, but rather is deemed ownership of shares in a corporation.

THOUGHT FOR THE WEEK

Homeowners have discovered that trees grow on money. 

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