Summary:
This article presents the reader with ten steps to buying a cooperative (co-op) apartment. It presents the major differences between buying a condo and a co-op. Real estate sources on the internet lack information on co-ops, despite 1.2 million Americans living in them today. Add this to your site if you live in a major city like New York, Washington, San Francisco, or Boston.

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Step 4- Review the Co-op’s Finances and Board Minutes
The housing corporation is required to provide buyers with financial statements for at least the previous year, more in some states. You should carefully review the statements for evidence of impropriety or looming financial commitment. If the corporation has been operating at a loss or putting away only a small reserve, your monthly fee could rise significantly in the near future. If a major repair or upgrade is on the horizon, it could mean a special assessment--or lump payment--could be required of all owners.

Co-ops corporations are able to take out mortgages. This mortgage is repaid through an additional monthly fee charged to all shareholders. The board can take out a mortgage over a minority of the shareholder’s objection, yet everyone is required to pay their portion. As with the rules and regulations (see step 3), you can object to the financial statements and decide to back out of the sale.

Step 5- Understand How Property Taxes Work
Property taxes will work differently for a co-op than a condo. The city will charge you the same rate, but the person you pay and the method of calculating what you owe is different. Real estate taxes are almost always lower than condominiums because the building is assessed a whole instead of as individual units. Imagine there are two identical buildings, one of which is a co-op, the other a condominium. The condominium is comprised of 10 individual units whose value is $100,000. Taxes due on each unit come to $500 a year (or 5 mills). The co-op is assessed as one big piece of property worth $500,000. Using the same millage rate, the building owes taxes of $5,000. Divided among the shareholders, this is only $250 a year.
Some co-ops collect property taxes as a component of your monthly fee. Other states allow shareholders to be billed directly. Your lender may add taxes to your monthly mortgage payment and hold them in escrow. Be sure to ask the selling agent, the co-op manager, and your mortgage agent about the process for property taxes. No matter how taxes are collected and assessed, you are still eligible to deduct them from your personal income taxes.

Step 6 - Apply to Co-op Board
The all-powerful co-op board will demand that you apply to become a shareholder. You will be required to fill out an extensive application with background information, financial statements, references, and permission forms for criminal background and credit checks. The board has the power to block the sale of shares for any reason except overt discrimination. Be sure to fill out this application thoroughly and accurately. A fee (usually less than $200) will be required with your application. The review process can take up to two weeks.
On the positive side, this rigorous screening process will keep less than desirable people from becoming your neighbors. On the negative side, this process can seriously hamper—or eliminate—your ability to sublease your unit.

Step 9- Get Insurance
There are some special considerations for insurance too. The building itself is insured by the corporation, so you will only need personal property and liability insurance. There is special insurance product, known as a HO-6 policy, which meets the needs of co-op owners. In practice, this insurance policy is very similar to renter insurance.

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