The world of senior housing can be pretty confusing. First, you have to decide if you should own or rent. Then, if you decide to own, you have to decide if it should be a cooperative, condominium or townhome! Recently, there was a gal who looked at a unit I have listed in a senior cooperative, and she received some advice from friends that she shouldn't buy into a cooperative. She couldn't tell me why, she just knew her friends thought it was a bad idea. Humph. Everybody's a real estate expert.
I thought it might be useful to go through some of the similarities and differences so you have good information to decide which one is right for you, instead of listening to friends who might have an opinion but can't give you reasons to back their opinion. Keep in mind these are general statements, they are not intended for you to have a thorough understanding of the legal mumbo jumbo involved. This is an attempt to help you start to identify the differences between types of senior housing. I guarantee, you'll find exceptions to these.
Read through these, see if any of them make you uncomfortable. If the hair on the back of your neck stands up as you're reading, then you know that a particular type of housing may not be for you. But, I'll bet you a dollar that after you read through these, you'll shrug your shoulders and say "Hmmm, I guess it doesn't really matter that much." If you're able to reach that conclusion, you'll likely spend more time comparing senior housing development on the price, location and amenities instead of getting hung up on whether it's a condominium, cooperative or townhome.
Financing Available
Cooperative
The Cooperative holds a master mortgage for the entire building and its grounds: units, common area and land. the members/owners own a share of the Cooperative but do not assume personal liability for the mortgage. When you buy a share of a cooperative, it's similar of buying a share of a corporation. Except, of course, you have the right to occupy a unit on the property once you've purchased a share.
Condominium/Townhome
Owners obtain a mortgage for their Condo/Townhome and have personal liability for the mortgage.
How does one purchase a...
Cooperative
Sometimes cooperatives are sold with the assistance of a real estate agent and the MLS-these are called market rate cooperatives (the free market determines the rate at which the units are sold), and sometimes cooperatives are sold via a waiting list held by the board of directors-these are often called limited-equity cooperatives (see "equity" below). In both of these cases a cooperative is sold when you sign a purchase agreement (often called a subscription agreement). Some cooperatives require some additional background and credit checks of the buyer. A pain when you're the buyer, but a precaution you appreciate once you are a member and live in the cooperative!
Condominium/Townhome
Hire a REALTOR(R), sign a purchase agreement.
Equity
Cooperative
"Limited Equity" cooperatives are are decided by the board of directors. Equity growth is secured (in a market when home prices are depreciating this can be a very good thing!) by the amount of time a member/owner has lived there. For example, the by-laws may state each unit shall appreciate at a rate of 3% per year, no matter what is happening with the rest of the real estate market. There are some cooperatives that are "market rate" and listed with a real estate agent just as a single family home would be.
Condominium/Townhome
Market Rate. The property is listed for sale with a real estate agent, and the free market determines the price of the property.
Control and Voting
Cooperative
Member/owners elect a Board of Directors from cooperative members (building residents). Each unit/share has one vote. Member/owners maintain control through democratic governance.
Condominium/Townhome
There is an "Owners Association" which may be made up of members of the building/development, or a management company that's been hired by the association.
Day to Day Operations
Cooperative
The Cooperative is operated under the terms of the by-laws that were voted on by the cooperative. The elected Board of Directors may hire a management company to staff the building to oversee the day to day operations and maintenance.
Condominium/Townhome
The "association" may hire a management company to take care of the day to day operations and maintenance.
Maintenance and Upkeep
Cooperative
Monthly Carrying Charges include all maintenance of the interior and exterior of the building and it's grounds. This usually includes maintenance repairs of plumbing, snow removal, lawn care, and repair or replacement of appliances in the unit.
Condominium/Townhome
Association fees usually cover external maintenance of building and grounds. The owner is responsible for internal maintenance and upkeep in their unit.
Common Areas/Comunity
Cooperative
There are often community rooms and social programs. Amenities may include; party room, guest rooms, workshops, billard rooms, libraries or computer rooms, craft room, fitness center, laundry utilities, beauty shop/barber, dining room, walking paths, gardens, transportation, and a wash bay for your car.
Condominium/Townhome
Condominiums may have the same or other amenities as cooperatives. Townhomes may have some common outdoor grounds, but generally do not have as many amenities.
Re-sale Procedures
Cooperative
With Limited Equity Cooperatives the cooperative has first option to purchase the share and market it to the wait list. There is a transfer/administrative fee (between $100-$600) that may be charged to the seller. Market Rate Cooperativs owners enlist a real estate agent to place the home on the market. The owner pays real estate agent commissions and closing costs just as a single family owner does. Even in market rate cooperatives, the cooperative still assits in the sale of the home with some marketing and open houses.
Condominium/Townhome
The owner has the sole responsibility of the sale of the property. The owner pays real estate agent commissions and closing costs just as a single family owner does.
You may also like:
Avoid these 5 mistakes when choosing senior housing
Who are renters in senior housing
Types of senior housing in Minnesota