Real Sage Advice

Senior Condominium or Senior Cooperative-What's the Difference?

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:

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Types of senior housing in Minnesota

Manufactured homes - an answer to affordable senior housing?

Today is one of those days I'm grateful for blogging. I'm grateful for the new ideas and possbilities that present themselves as a result of this effort. It may very well be the St. Paul Pioneer Press has stumbled across an answer to address the affordable housing crisis for seniors.

In today's paper the article "There's a word for folks living in trailers: solution" presents a shift in the way some are thinking about trailer parks. It seems some communities are realizing the possiblities for them and challenging the old stereotypes that the typical resident is a toothless, toe-bacca chewin, banjo-playin, cousin-marrying greazy mechanic.

The average cost of one of these manufactured homes is about $60,000 with the average lot rental rate of $367 per month. This represents a form of home ownership that is not goverment funded. In fact, Minnesota's Mobile Home Parks exceed the number of HUD subsidized rentals in Minnesota.

I'm going to take a leap and put an idea out to the blogosphere.I know many of you continue to hold the stereotypes of mobile home parks, and wouldn't mind if there were more of them, as long as they aren't in your back yard.  The fact is, we need more affordable housing for our seniors, and need to start getting creative.  This is my stab at creativity (even if you think I'm half-baked).

If I were a developer with an interest in senior housing, I would pay attention to these few numbered points, take action, and help a community while I invested in this business opprotunity:

1) There is a need for affordable senior housing in Minnesota.  We have a lot of very nice subsidized rental communities for our seniors, but there simply aren't enough of them.  There is almost always a waiting list. Perhaps there is an opportunity for seniors to take advantage of affordable-one-level-living-manufactued homes?

2) There are is a small movement in Minnesota that has some potential, just needs to get it's legs and some resources behind it. There are a growing number of seniors in Minnesota that are not interested in large senior communities. They do not want to live with other elders, they want to belong to a community with others that have similar interests. They want to belong to a community with young couples, singles, and children. With this approach, a small cohousing development could be manufactured in a location where there is land available. This would be so much more affordable than retrofitting an old building. The groups dollars could then be allocated to projects the group felt were highest in priority, perhaps such as a community building were the group can gather for meals or celebrations.

3) Today these manufactured homes aren't eligible for mortgages, but higher interest personal loans. There's an opportunity here for one of the cohousing groups in Minnesota to form a cooperative and get financing through a lender, even for a developer to sell some lots on a contract for deed.

For more information:
Manufactured and Mobile Home Parks in Minnesota
All Parks Alliance for Change
The Manufactured Home Parks Handbook

Cohousing Challenges

Cohousing is an opportunity for like-minded people to come together and form a community. They are intentional in their pursuit of a community and together they define what the community will look like. It may be a community for seniors, and inter-generational community, a community that focuses on "green living" or a group that shares similar hobbies such as music. Cohousing is something that has taken root on both of the coasts. However, it's an idea still fairly new to Minnesotans. When I teach classes and talk about cohousing, it's received with genuine interest and excitement!

Of course my interest in cohousing stems from my work with seniors. In our society aging is seen as a decline. Today we segregate our elders into age restricted "senior" communities. I see cohousing as an opportunity for our elders to live intergenerationally and to depend on others in the community for daily needs instead of having to move out of their homes into institutions (keep in mind this is a REALTOR(R) advocating for people to NOT sell their homes).

In the Twin Cities Metro, there are two groups of people that have come together with the intention for forming an intentional community. First, Homewood Cohousing is not trying to fit a group of people into one building, but rather, is trying to build a cooperative neighborhood. On the website the first sentence is "we've lost some steam." Let's hope they keep at it. Second, Community in the Cities, is actively meeting, recruiting members and searching for real estate. In both of these cases the people found each other first, and are now looking for a site. In the third case, there was a developer with a site in Fridley, however that project fizzled (much to many of our chagrin). why is it so difficult for this co-housing idea to get kick started in Minnesota?

1. Capital - If I were a member of an intentional community, I would want everyone in the group to put in the same percentage of their income or net worth as a down payment. I would want reassurances that others in the group were as serious as I, and put their money were their mouth is!

2. Logistical housing issues- If 10 families in the group need to sell their homes to have the cash for a down payment, temporary housing would need to be available between the time they sold their family home and the time the cohousing development were livable. In most cases, this would eat up some of the available cash for the down payment, depending on how long the family would have to wait to move into the co-housing development.

3. Legal structure of the unit- It Minnesota there are cooperatives, condominiums, and townhouse, but not a lot of precedent to legally define this kind of housing structure and how each of the residents take title.

While all legitimate challenges, there is a group that has overcome all of them. Monterey Cohousing development in St. Louis Park is the only existing cohousing development in the Twin Cities Area. The residents are pioneers and a model of what can be done with persistence. This movement will require visionary leaders.

If I had a crystal ball.... I think Minnesota Baby Boomers will lead the way to a new way of thinking about housing options. Cohousing will offer exciting new options to our aging population, and greatly impact the number of assisted living and nursing homes we have today. One of the many changes we'll be seeing!

Co Housing

When I work with senior housing property mangers in the Twin Cities area, they all have one thing in common, the average age of the residents is 85 and older! We are living longer and we are waiting longer to move (sometimes, too long).  So, where then, are the 55-70 year olds going to want to live when it's time for them to downsize out of their current homes? Why would they want to be segregated from younger communities?   Isn't there anything in between? 

The answer is Co housing. Have you heard of it?  There is one co-housing community in the Twin Cities. In an article featured in Good Age Newspaper, you can read about Monterey in St. Louis Park, Minnesota. I've had the chance to visit with the residents there.  It is a intergenerational community where everyone who lives there, participates in the community.  It's quite something.

There are two other efforts currently underway in Minnesota; Homeward CoHousing and Community in the Cities.

Again, looking through my crystal ball, I suspect our baby boomers are going to create housing options that don't yet exist today. These are some of my hopes for these new options:

1. Our elders are not segregated away from younger members of the community.
2.  The possibility of remaining in your home doesn't mean isolation because your neighbors and children have moved away.
3. A community that embraces intergenerational housing where the younger community members watch out for those that are aging. 

It seems I'm hoping to return to the times before TV when we had front porches and knew our neighbors.