What you need to know about buying a Co-Op in Arizona?
If you been searching online for condo or townhouse for sale in Phoenix area, you most probably will come by the term co-op housing. You may wondering what is co-op and how it works.
What is a co-op?
Co-op in short for “cooperative” housing. A co-op takes the concept of teamwork for homeowners. When you buy a co-op home, you don’t technically buy (or own) your property. Instead, you buy shares in a corporation that owns the property.
Co-op housing is community-owned and run by its member residents
The homes in a co-op are owned by the co-operative. A co-op is essentially a nonprofit corporation, complete with a board of directors, and each resident is a shareholder. As members of the co-op they contribute to the management of their community, electing a board of directors and often volunteering their time to co-op activities. This gives co-op members a control of and involvement in their housing and community. Housing co-ops are highly interactive, because everyone who lives in one helps govern and maintain the community.
Cost of a co-op
If you need to take out a mortgage to purchase housing in a co-op, the loan you receive will not actually be a mortgage. It will be a loan to purchase shares. In addition to the loan payments, co-op residents are responsible for paying a pro-rata share of the costs of running and maintaining the building. Known as the “maintenance”, these costs are generally paid for complex’s upkeep and operating expenses such as real estate taxes, mortgage payments, heating and air conditioning, hot water, insurance and staff wages.
The co-op approval process
In order to buy a home in a co-op, you’ll need to be approved by the co-op board. Co-ops must abide by the laws that govern fair housing, but they can be more restrictive than other housing options when it comes to ownership requirements. For example, new buyers is requires to demonstrate the ability to meet the financial obligations and their willingness to live by the terms of the association’s rules and regulations. Credit check and background check may also be required.
Advantages of co-op
The main advantage of a co-op is affordability, as it is usually cheaper than buying a condo. In most co-ops, the monthly maintenance fees include roof repair and replacement, AC, water, sewer, garbage collection, street and common area maintenance.
Disadvantages of co-op
Owning and living in a co-op are subjected by board approval. The co-op board has to approve applicants, a process that includes interviews and documentation, such as tax returns. Once they buy in, co-op owners are not allowed to make any renovations without the board’s approval. There are also a number of restrictions regarding to whom co-op owners can sell their shares or rent their place.
The bottom line
Because you’re buying shares of a company, be sure to check out the company’s financial situation and meet the company’s shareholders. Read the co-op’s articles of incorporation, bylaws, subscription agreement, rules and any other available documentation. Make sure you truly understand how the cooperative works, including how it is managed, what you will be required to pay for and how much that payment will cost. Ask about the terms of any underlying mortgage, the policy toward pets and your ability to make changes to your residence.
Swee Ng, Realtor and Phoenix East Valley resident specializing in win-win real estate transaction through great communication and fighting for his clients’ best interest. After all, this is more than real estates, this is about your life and your dreams.
If you are looking to buy or sell your home in Phoenix AZ area, we hope you will consider us. Contact us today for complimentary consultation.
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