Many people have a misunderstanding about cooperative ownership and how it differs from condominium ownership. There are many differences that I will go into in a later posting, but the question asked most frequently is, “Why is the co-op fee so high?”
A co-op in Kalorama that I currently have listed for $775,000 carries a fee of $1003 per month. Gasp! More than a thousand dollars a month?
But is it really a higher monthly outlay than a similar condo? Maybe, but probably not. Take a look at the property I have listed versus some recent sales.
The $1003 co-op fee at 1870 Wyoming Street NW, #202, which has 3 bedrooms, 2 baths and is approximately 1950 square feet large, includes the following items that are usually covered in a condo fee.
- General Management & Oversight
- Common Area Maintenance (CAM)
- Exterior Building Maintenance
- Custodial Services
- Master Insurance Policy (covering the building)
- Water & Sewer Expenses
- Snow & Trash Removal
- Reserve Funds
It also includes the following things that might be covered in condo fees of another building.
- 24-hour security with a front desk attendant
- Heat throughout the apartment
- Extra storage in the basement
And it includes one major thing that is NOT included in a condo fee: PROPERTY TAX.
The contrasting examples below are taken from the Metropolitan Regional Information System, our local multiple listing database and are properties listed and sold this year by my colleagues in the industry.
Unit #418 at 3881 Connecticut Avenue NW, a 2 bedroom with den, 2 bath, 1550 square feet condo was listed for a similar $779,000. The monthly condo fee was $717, which included a parking space and maintenance of a pool and exercise room (not uncommon in the newer buildings). Property taxes were listed at $6478 per year or nearly $540 each month. Added to the fee, the new owner is paying $1257 per month, excluding utility costs, even if his taxes never go up! Is a parking spot, a pool, or a mini-gym important to you? If so, this might be a great deal, depending on what you would pay for these services elsewhere.
In a building without such amenities, Unit #604, a one bedroom with den, one bath, 1283 square foot condo at 1015 33rd Street NW, sold recently for $800,000, without parking. The condo fee was $644 per month and the taxes added a monthly charge of $369 for a total of $1013 before utilities.
Some cooperative fees also include montly payments toward an underlying mortgage held by the corporation, which you assume as part of your purchase. This reduces the amount you must finance through an institutional lender. Also keep in mind that mortgage interest and property tax portions of co-op fees are tax deductible; you get no such benefit from a condo fee. Check with your accountant to see what this means to you.
Yes, there are complexities involved and each co-op building is different, but then again, so is every condo building. Before you remove a cooperative apartment from consideration as a potential home purchase based solely on the fee, be sure to add up your total living expenses to ensure you are really making a fair comparison. You might be pleasantly surprised.
