Co-ops v. Condos: Do You Know the Difference?

Maryland Communities Like Annapolis, Greenbelt & Laurel Offer Both

3 Eastway Road #A in Greenbelt, Maryland, sold in May 2014 for $98,500. Though it appears as a small cottage, the one-bedroom, one-bathroom home is a co-op, with a monthly co-op fee of $376.

3 Eastway Road #A in Greenbelt, Maryland, sold in May 2014 for $98,500. Though it appears as a small cottage, the one-bedroom, one-bathroom home is a co-op, with a monthly co-op fee of $376.

 

 

 

 

 

 

 

 

3433 Lindenwood Drive in Laurel, Maryland, sold in January 2014 for $230,000. It appears as a traditional townhome, but this three-bedroom, two and half-bath unit is a co-op, with a monthly co-op fee of $63.

3433 Lindenwood Drive in Laurel, Maryland, sold in January 2014 for $230,000. It appears as a traditional townhome, but this three-bedroom, two and half-bath unit is a co-op, with a monthly co-op fee of $63.

 

 

 

 

 

 

 

 

 

7101 Bay Front Drive #207, located in this luxury waterfront building in Annapolis, Maryland, sold in July 2014 for $270,000. The two-bedroom, two-bath unit is a co-op, with a monthly co-op fee of . . .  $3,932.

7101 Bay Front Drive #207, located in this luxury waterfront building in Annapolis, Maryland, sold in July 2014 for $270,000. The two-bedroom, two-bath unit is a co-op, with a monthly co-op fee of . . . $3,932.

 

 

 

 

 

 

 

 

Take a look at the three photos above.

From the property line, 3 Eastway Road #A in Greenbelt, Maryland, looks like a typical white, brick cottage.

The second, 3433 Lindenwood Drive in Laurel, Maryland, looks like a run-of-the-mill townhouse.

And the third, 7101 Bay Front Drive #207, is a snappy, two-bedroom unit in a luxury resort.

Despite their dramatically different appearances, however, these three properties share one important trait. All are what’s known as “co-ops.”

Whether or not a property qualifies as a co-op has nothing to do with the unit’s size, floor plan, exterior or any other physical factor. A property is a co-op because of the way it’s owned.

Cooperatives as a form of homeownership differ greatly from the more traditional “fee simple” or “condominium” properties. What exactly are co-ops and what are the advantages and disadvantages of owning one?

Forms of Homeownership

The fee simple form of property ownership grants the highest interest a person can have in real estate. With fee simple, the owner is entitled to all of the rights of the property.

Condominium ownership, on the other hand, provides the owner title to an individual unit, plus an undivided interest in the ownership of the common areas associated with the unit.

Co-ops, a third form of ownership, are different from both. In fact, many home buyers are surprised to learn that co-op owners do not actually own the units they live in. Instead, a corporation owns the units.

When a buyer buys into a co-op, they’re actually purchasing shares of stock in the corporation that owns the units. A co-op member receives a proprietary lease to a unit that entitles him or her to occupy it. Co-op owners do not, however, receive conventional deeds.

The leases granted to co-op owners are valid for the life of the corporation. Through their control of the corporation, shareholders of the co-op control the properties.

Co-ops: Factors to Focus On

One important factor to consider when purchasing a co-op is how shares of the corporation may be transferred to new owners. These rules differ, depending on the co-op at issue.

Another key factor to consider is that, even when a buyer submits a satisfactory bid for the property, the co-op board controlling the unit must approve the buyer as the purchaser. In practice, co-op boards sometimes reject buyers. Most boards are not required to give a reason why.

There’s a famous story about how Richard Nixon, after his presidency, sought to buy into a swanky New York City co-op. The co-op board rejected him, however, citing a fear of Nixon’s notoriety. If Nixon could be rejected by a co-op board, anyone probably can.

Co-op Boards Focus on Buyer Finances

One thing that most co-op boards will do when weighing a purchase offer is to dig deeply into the buyer’s finances. Some boards will require the buyer to use a certain lender for the purchase, and some boards will require that the buyer put down a certain percentage of the purchase price — sometimes 10 percent or even more.

Co-ops pay a lot of attention to buyer finances for an important reason: If the buyer defaults on the purchase – or the buyer experiences another sort of financial setback — the other members of the co-op can suffer from those problems.

Condo associations have the authority to place a lien on one of their member properties if a condo owner fails to make their monthly condo payments or pay the special assessments levied by the association. That’s the condo association’s method for recouping the lost funds. This practice protects the fellow condo owners from having to cover the missing payments of a deadbeat owner.

Co-ops do not work this way. Because co-ops cannot place liens, each shareholder is directly affected by the financial ability of the others to pay.

Thus, if one member of a co-op cannot pay his or her monthly fees or other assessments, the remaining co-op members may have to make good on those debts of the deadbeat owner. This is a risky proposition for some co-op buyers, particularly when the co-op they’re targeting is located in an area where there are lots of distressed properties, like REOs, foreclosures and short sales.

Other Factors Buyers Should Consider

There are other factors to consider when purchasing a co-op. For example, when a member resells his/her unit, some co-ops require the member to sell the stock back to the corporation at the original price they purchased it. This means that it’s the corporation that realizes any profits when the shares are re-sold, not the co-op seller. In contrast, with condos and fee simple properties, the property owner receives any profits (or losses).

Another factor to consider is the monthly fee that co-op members are required to pay. These fees can be considerably greater than the fees charged by homeowner associations and condo associations for similar types of units.

With 3 Eastway Rd. #A, above, for example, the monthly co-op fee is $445. Given that the property sold for $98,500, that fee is relatively high. And, of course, it is not tax deductible.

Still, the $445 monthly fee for Eastway Road is only a drop in the bucket compared to what some co-ops charge. At the ultra-swanky Chesapeake Bay-front co-op at 7101 Bayfront Drive in Annapolis, for instance, the co-op fee for the two-bedroom, two-bathroom unit is – gulp! — $3,932 per month. This property includes every imaginable amenity, however, including water views, a pool, a fitness center, maid service, one meal a day and more.

When weighing monthly fees, co-op buyers should keep in mind that the benefits of buying real estate include the tax deductions that owners can claim. In this respect, homebuyers who pay high HOA/condo/co-op fees may not be maximizing their investment potential.

Advantages of Owning a Co-op

There are several advantages to owning co-ops, however, and co-ops are very popular in certain areas of the country.

Mortgage companies usually view co-op shares as collateral for obtaining the financing needed to purchase. Plus, a co-op owner has more control over their property than a renter would.

Co-op owners do not have to perform their own maintenance. And, for income tax purposes, the Internal Revenue Service does recognize the deductibility of mortgage interest, property taxes and home seller’s tax exclusions for co-op owners.

In summary, buyers need to do extra research when weighing whether to purchase co-ops. Many realtors are not familiar with these types of properties, and there are many potential complications that can arise.

 

Jerry Kline is a Realtor with the Odenton, Md., office of Keller Williams Flagship Realty (1216 Annapolis Rd., Odenton.) For more information on the local real estate market, contact him at (443) 924-7418, or visit his blog (www.JerryKlineRealtor.wordpress.com) or website (www.JerryKline.kwrealty.com).

 

Are You a House Flipper? Take This FREE Class in Millersville, Maryland

Learn more about flipping houses the RIGHT way at tomorrow's FREE Charter Title/Keller Williams Flagship class on the basics of financing investment properties.

Learn more about flipping houses the RIGHT way at tomorrow’s FREE Charter Title/Keller Williams Flagship class on the basics of financing investment properties.

There’s a lot more to “flipping” houses than most people realize. Unless you’re an all-cash buyer, one of the biggest hurdles to overcome is securing funding for your renovation project. If you’d like to learn more about the basics of financing for real estate investors, CHARTER TITLE and KELLER WILLIAMS FLAGSHIP OF MARYLAND are holding a FREE CLASS on the subject tomorrow, Feb. 3. The class will cover:

– finance options for investors;

– ideal property types;

– equity based loans;

– seller financing and seller second loans; and

– commercial financing options.

The class will be held in the Keller Williams Flagship office training room, 1111 Benfield Blvd., Suite 250, Millersville, Maryland, 21108. Class time is 10 am until 11:30 am, and light breakfast refreshments will be served.

 

For more information on the class, or on investment property purchases in general. contact Jerry Kline, Realtor, Keller Williams Flagship of Maryland, at (443) 924-7418.

 

Hope to see you there!

Sold in Odenton Maryland’s Lions Gate Neighborhood!

542 Greencrest Lane in Odenton Maryland

542 Greencrest Lane, located in the Lions Gate community of Odenton, Maryland, was recently sold by Jerry Kline, Realtor, Keller Williams Flagship of Maryland. The home sold in four days for $11,000 more than the asking price.

542 Greencrest Lane, located in the Lions Gate community of Odenton, Maryland, was recently sold by Jerry Kline, Realtor, Keller Williams Flagship of Maryland. The home sold in four days for $11,000 more than the asking price.

Congratulations to my seller clients, Jo Ann & Robert King, on the sale of their townhome in Odenton’s Lions Gate community, located five minutes south of Fort Meade, Maryland. The home, featuring three finished levels, a two-level deck and a quiet location in the back of the neighborhood, sold in four days for $11,000 more than the asking price. There were multiple bids submitted by interested parties.

Sold as a fixer-upper, the new owners will be replacing the carpet and appliances and repainting much of the interior. The home includes three good-sized bedrooms, two-and-a-half baths, a fenced yard and a stone patio.

Thanks for all your help and patience through the home sale process, Robert and Jo Ann!

If you or someone you know needs help buying or selling a home in the greater Annapolis/Baltimore/Washington, D.C. area, call Jerry Kline, realtor with Keller Williams Flagship of Maryland today! (443) 924-7418

A Look at New-Construction Townhomes in the Fort Meade, Maryland, Area

Nearly a Dozen New Townhome Communities Are Being Built Within Five Minutes of This Key Federal Intelligence Hub

Lennar's new Boyer's Ridge community, located less than five minutes from Fort Meade, Maryland, is one of nearly a dozen new-townhome communities in that quickly growing area.

Lennar’s new Boyer’s Ridge community, located less than five minutes from Fort Meade, Maryland, is one of nearly a dozen new-townhome communities in that quickly growing area.

Home buyers searching for new homes in the greater Fort Meade, Maryland, area have a wide array of properties to choose from at the moment. In terms of townhomes in the areas of Odenton, Severn and Hanover, there are nearly a dozen new-home construction communities underway, with several of the big national home builders fighting for market share.

In Severn, just east of Fort Meade and adjacent to the installation’s Rockenbach gate, there are four major new construction townhome communities being built. All are less than a five-minute drive from Fort Meade. They are:

Community Built by Price Range
Millstone Village D.R. Horton $302K – $404K
Boyer’s Ridge Lennar $308K – $404K
Jacob’s Forest M/I Homes $289K – $319K
Jacob’s Forest Beazer $292K – $334K
Arundel Forest Toll Brothers $435K – $500K

 

In Hanover, just north of Fort Meade, there’s also lots of new construction activity. The building boom there is being fueled by continued job growth at the Fort Meade installation as well as by the recently opened Maryland Live Casino at Hanover’s Arundel Mills Mall. The Hanover new-construction townhome communities include:

Community Built by Price Range
Park Side Ryan Homes $327K – $402K
Park Side NV Homes $399K – $422K
Oxford Square Lennar $400K – $461K
Enclave at Arundel Preserve Toll Brothers $417K – $447K

 

Several other new townhome communities also are being built around Fort Meade. Adjacent to Fort Meade to the south is Odenton, a very popular location for military and civilian employees working at the base. The Town Center Commons community, being built by Ryan Homes, is less than a mile from the base and sits on Maryland’s MARC commuter rail line. The Odenton MARC Station provides direct access to the Penn Line, a heavily used commuter line for workers and students travelling to Baltimore and Washington, D.C., each day. The MARC system connects directly to AMTRAK, providing easy train access to the entire northeastern U.S. corridor.

Finally, in Elkridge, Maryland, a few miles northwest of Fort Meade, Ryan Homes is building its Howard Square luxury townhome community. The community is located near the intersections of Interstate 95 (with direct access to Baltimore and Washington), Rt. 1 and Rt. 175. New townhomes in that community range from $309K to $393K.

Given the wide variety of new townhome choices in the greater Fort Meade, Maryland, area, home buyers are best served by a realtor familiar with these specific projects. Jerry Kline of Keller Williams Flagship of Maryland, based in Odenton, has helped many buyers compare and contrast these communities, builders, home models and amenities. Contact him today for more help choosing just the right home near Fort Meade.

Jerry Kline is a Realtor with the Odenton, Md., office of Keller Williams Flagship Realty (1216 Annapolis Rd., Odenton.) For more information on the local real estate market, contact him at (443) 924-7418, or visit his blog (www.JerryKlineRealtor.wordpress.com) or website (www.JerryKline.kwrealty.com).

 

A Closer Look at Recent Home Sales in Odenton’s Piney Station Neighborhood

Piney Station is one of many smaller neighborhoods that comprise the large and popular Piney Orchard community in Odenton, Maryland.

Piney Station is one of many smaller neighborhoods that comprise the large and popular Piney Orchard community in Odenton, Maryland.

Piney Station is one of many smaller neighborhoods comprising the large and popular Piney Orchard section of Odenton, Maryland. The charming group of 200+ townhomes that makes up Piney Station is directly adjacent to the well-used and multifaceted GORC Park.

I recently took an in-depth look at the real estate microclimate of Piney Station townhomes without garages. Overall, 2014 was a worse year for these Piney Station home sellers than 2013.

Based on MLS data for these homes sold over the past two years, here’s what I found:
– 8 Piney Station townhomes without garages sold in 2013;
– 7 such homes sold in Piney Station in 2014;
– In 2014, the average sale price of these homes was $328,285;
– In 2013, the average sale price of these homes was $329,875;
– The average amount of closing assistance provided by the sellers of these homes to their buyers in 2014 was $7,024 (2.13%);
– The average amount of closing assistance provided by the sellers of these homes to their buyers in 2013 was $5,964 (1.8%);
– The average “closing price minus seller help” amount netted by sellers in 2014 was $321,261;
– The average “closing price minus seller help” amount netted by sellers in 2013 was $323,911;
– The average number of days these sold homes stayed on the market in 2014 was 65 days; and
– The average number of days these sold homes stayed on the market in 2013 was 29 days.

As 2015 began, 2507 Black Oak Way and 2480 Ivy Landing Way were the only Piney Station homes for sale without garages.

For more information on the Piney Orchard community and other homes in the greater Odenton and Fort Meade areas, contact Jerry Kline, Realtor, Keller Williams Flagship of Maryland, at (443) 924-7418.

 

 

2014 in review

The WordPress.com stats helper monkeys prepared a 2014 annual report for this blog.

Here’s an excerpt:

A San Francisco cable car holds 60 people. This blog was viewed about 1,300 times in 2014. If it were a cable car, it would take about 22 trips to carry that many people.

Click here to see the complete report.

The Cliftons Complete Their Pasadena, Md., Home Purchase

Jerry Kline (left), realtor with Keller Williams Flagship of Maryland, celebrates with Alicia & Robert Clifton, following the purchase of their new home in Pasadena, Md.

Jerry Kline (left), realtor with Keller Williams Flagship of Maryland, celebrates with Alicia & Robert Clifton, following the purchase of their new home in Pasadena, Md.

Robert and Alicia Clifton completed the purchase of their new Pasadena, Md., home Dec. 22, just in time to move in for Christmas. The Cliftons relocated to the central Maryland area from Georgia to accommodate Robert’s new assignment with the Coast Guard.

Avid boating enthusiasts, the Cliftons selected a large single family home with a 3-acre wooded lot, just a stone’s throw from the water and a marina. Congratulations on your new home, Robert & Alicia, and thanks for allowing me to help you with the search and purchase!

If you know someone looking to buy or sell a home in the Baltimore/Washington/Annapolis area, call me at 443-924-7418. I’ll be glad to help!