What's the Difference Between a Condo, a Co-op, and a Regular Home?

Most people purchase regular homes (as opposed to condos and co-ops). The home's owner owns the land, the building, and the airspace. The homeowner owns all.

This usually makes a regular home more expensive, but also more valuable for re-sale. Regular homeowners also have more responsibility in maintaining the lawn and premises. Insurance prices are also highest for regular homeowners, since they own more things that require coverage.

Until recently, regular homes have been good investments. They have gone up in value consistently pretty much across the country. Home price appreciation has stopped increasing recently, but most likely will pick up in the next few years. Over the long-term, homes are generally the surest and safest investment around.

Condos

Regular homeownership is great for many, but isn't the best solution for all. Some prefer condos. With a condo, you don't actually own the building or the land. Instead, you share ownership of the building and land with all the other condo owners. However, the condo owner owns the airspace between the building's walls.

This generally makes condos cheaper than regular homes. Sadly, this also means that they are tougher to re-sell, or will re-sell for a lower price. Insurance is cheaper since you don't need to insure the building or the land. But you usually have to pay dues to a condo association. Depending on how high the condo fees are, condos might not be cheaper than a regular home. But often condos will offer amenities that most regular homeowners often won't have. Some examples include pools, exercise rooms, and recreation rooms.

Condos are a relatively new phenomenon, so it's unsure how their value increases over time. Generally they increase in value similar to regular homes. But there is also a phenomenon where new condos are built near older ones. Naturally, new buyers prefer the new condos to the old ones. Consequently, the older ones lose value.

Since condo owners do not own the land and are not responsible to maintain the land, condos are popular with senior citizens. They're also popular with people like me who don't want to mow the lawn!

Co-Ops

Finally, there are co-ops. Co-ops are generally found in larger cities. Like a condo owner, a co-op owner does not own land or building. Each member of the co-op shares ownership of the land and the building. Co-ops take this one step further though. In a co-op, you actually don't even own the airspace that you live in. That too is shared by the co-op members.

Instead, you own a share of the entire co-op, sort of like you would own shares of a corporation. Ownership of those shares entitles you to reside in a particular unit or building. You still can purchase renovations and upgrades, but you usually need approval from the co-op association first. But since the renovations make your unit more desirable to live in, they increase the value of your shares of the co-op. So even though you don't actually own the unit you live in, your shares become more valuable like a condo or a regular home.

Compared to regular homes, co-ops are just like condos with the same benefits and drawbacks. Co-ops just take things one step further. Since you don't really own anything when you purchase co-op shares, you might be more restricted in your choices. There will likely be more rules and regulations. Regular homeowners have the most freedom.

Co-op purchases are not technically home purchases, since you only own shares of the co-op. However, you can get a co-op mortgage with all the same tax benefits of a regular home mortgage. However, fewer lenders offer co-op mortgages, so you might need to shop around a bit.