As the housing market begins to show signs of life demand for great condos in the Arlington and Alexandria area and especially those buildings near the DC metro have started to become harder to come by. So, it wasn’t too much of a surprise when my clients started asking more about Co-ops. For the right person a Co-op is a diamond in the rough. Especially for those on a budget!

What are Coops: A housing cooperative is a legal entity—usually a corporation—that owns real estate, consisting of one or more residential buildings. Each shareholder in the legal entity is granted the right to occupy one housing unit, sometimes subject to an occupancy agreement, which is similar to a lease. The occupancy agreement specifies the co-op‘s rules. Cooperative is also used to describe a non-share capital co-op model in which fee-paying members obtain the right to occupy a bedroom and share the communal resources of a house that is owned by a cooperative organization. Such is the case with student cooperatives in some college neighborhoods in the United States.

So, what does this mean in English? For the most part instead of owning a unit like a condo or townhouse or even a single family house for that matter you own a share in the entire building or buildings and you have rights to your unit.

Why should I consider a Coop? Co-ops are (for the most part) non-profits that are managed by the shareholders (this would be the folks that are living in the building). This usually means lower condo fees and better services since the building is owned and managed by the tenants. I have personally found Co-op fees to be about 30% less on average then traditional condos. Shareholders also have much more say in how the building is managed as well as building rules and amenities.

So, why isn’t everyone living in a Co-op? Well, there are a few drawbacks just like everything else in life.

  1. Co-op fees can change depending on the needs of the building (condos fees can also change by the way).
  2. Co-op boards have a say as to who can buy into the Co-op (i.e. no investors or no pets etc…). Some Co-ops require that buyer’s interview with board members before they approve the sale.
  3. Not all lenders will do a Co-op loan. For the most part Co-op loans are not sold by banks to other banks. This means that the lender has to hold the loan (God forbid!). I have also found that lenders like to charge a little more interest and require bigger down payments.
  4. Some Co-ops are on “ground leases”. This means that the Co-op does not own the land the buildings are on. Most of these leases are long term lease (I’ve seen them as long as 50 years). As crazy as this might sound, these types of co-ops are some of the best deals EVER! I have found these units to be 20%- 40% lower in price then traditional condos! If you can stomach the fact that in 20,30, or even 50 years (or longer) the building will have to negotiate a new lease with the land owner this is the way to go!

Want to know more about Condos in the Alexandria or Arlington area? Interested in finding a Co-op? Drop me an email and let’s talk!

Chuck

Serving all of your Ashburn, Leesburg, Mclean and Loudoun County area Real Estate needs!

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