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A condominium is a type of real estate property that also goes by the moniker of condo. This type of property allows a person(s) to purchase an individual unit within a larger complex, build equity and each individual unit holder is responsible for paying their own property taxes.

Being called a condo has nothing to do with the type of structure a person lives in as apartment buildings, commercial warehouses and townhouses can all be called condos. The reason why they would end up with that title is because of the financial structure behind the property type.

Buying a condo is a similar process to buying a single-family detached home. Consumers actively seek out the properties, make a bid and secure a mortgage to finance the purchase. Mortgage payments are made directly to the lender and the homeowner technically owns everything inside their four walls.

A condo owner also has a fiduciary responsibility to the building at large as everything outside their unit is the shared responsibility of all property owners of the structure. Generally, condo owner's have to pay monthly condo association (COA) or  homeowner association (HOA)  dues to contribute to the overall maintenance of the building. If larger issue arises that requires a large sum of money to fix, the condominium may levy an assessement on the building and all condo owners will be required to pay their fair share.

While some condos are simple and only have enough space to consider hallways and entrances common areas, others have sprawling grounds, swimming pools, tennis courts and other luxury amenities. Assessment amounts and HOA dues will fluctuate due to those influences and other factors such as square footage of the property owned.

What is a Cooperative?

While on the surface, it may seem like cooperatives are just like condos, there are some major differences between the two, specifically in regards to property ownership. Those interested in buying a co-op will still go through the same process of home selection and instead of a mortgage a home loan is required to finance the deal. Once the cash exchange is done consumers become shareholders (generally in a limited liability corporation) not property owners.

Consumers interested in buying co-ops generally have to pass board approval before become approved as a shareholder. Co-op boards will conduct a background check similar to those conducted by mortgage lenders. Only upon approval by the board will the sale transaction go through and as a result, the property buyer will be invited to join the corporation and get a lease on their unit.

While shareholders cannot officially build equity in a co-op unit, they can certainly experience large gains from selling their shares to the next co-op owner. However, any potential buyer must also go through the same board approval process as well. As a shareholder, co-op owners have the legal right to vote on any changes regarding the association such as electing a president and project approval.

Monthly HOA payments and even assessments are part of the fiduciary responsibility. One great perk about being a co-op owner is that those monthly HOA dues cover the property taxes associated with living in a unit as it is the financial responsibility of the corporation, not the individual share holders.

It is vitally important that your insurance agent understands the difference with insuring your association or for an individual insurance owner.  That is why it is important to go with an agent who understands the insurance markets for Condo's HOA and Cooperatives?  Going with an agent who does not understand the  differences could cost you in the long run!

Posted 1:10 PM  View Comments

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