Co-op Type of Ownership – Own shares in a corporation that owns the building. Proprietary Lease establishes occupancy terms. There is no deed or recording of sale information.Condo Type of Ownership – The deed is recorded at the county clerk. It is transferable, like any other property

Co-op Maintenance – Co-op owners pay a monthly maintenance fee that usually consists of real estate taxes, general building maintenance and loan payments on the underlying property mortgage, commonly taken when the building was converted to a Co-op from an apartment building. In most instances up to 60% of the maintenance is tax deductible.

Condo Common Charges – Condo owners pay a monthly fee that consists of basic common area building maintenance. Generally not tax deductible.

Co-op Financing – Most co-ops will have strict financing restrictions (down payment minimum, income minimum, etc.).

Condo Financing – The only restrictions are lender required.

Co-op Board Approval – The Board, usually consisting of elected residents, co-op owners, that accept or reject prospective owners or tenants. There is no appeal. Board may or may not charge an application fee, typical fees range from $200 to $500 and are non-refundable.

Condo Board Approval – Almost never required

Co-op Coop Attorney – A Lawyer will handle the closing, transfer documents and legal matters for the co-op.

Condo Condo Attorney – Usually does not exist

Co-op Sale – Requires Board approval of the buyer. Most Co-ops have a transfer fee or flip tax that each Co-op seller must pay when they sell.

Condo Sale – Usually no approval required or Condo fees required.

Co-op Real Estate Taxes – Usually included in monthly maintenance fee. Some Co-ops have abatements that do run out and will increase taxes later on.

Condo Real Estate Taxes – Each Condo owner pays tax on their unit.

Co-op Sublet or Renting – Co-op Boards require prior Board approval. Most Boards will not permit subletting or renting.

Condo Sublet or Renting – Usually there are no restrictions.

Recently there have been concerns and speculation voiced about a “real estate bubble“.

The media has created a buzz correlating the “real estate bubble” with rising mortgage rates. However, the housing market is determined by the job market and not rates. If people feel like they’re jobs are in jeopardy, they will be less reluctant to buy homes even with low mortgage rates. Conversely, if rates rise and people feel secure with the job market, they are more apt to buy homes even though the monthly mortgage payment might be slightly higher.

Every city has different real estate and financial trends, what is happening in New York may not be happening in Milwaukee! Before you buy any real estate you should first find a good realtor and a good mortgage broker to help guide you down your path to ownership!

Even buying in a real estate bubble isn’t necessarily a bad thing. Not all real estate bubbles burst, some simply cool down and level off with no depreciation in value.

If you are considering getting cash-out equity of your home you should consult with a mortgage professional and real estate professional to consider the market-value of your home with respect to your new total mortgage balance(s). Going “upside down” on your mortgage is a real happening, and could prevent a homeowner from selling or refinancing in the future if it occurs. Make sure that if you are considering an over-equity 2nd mortgage (e.g. 125% 2nd mortgage) that you have a real long-term plan to deal with it financially so you are not stuck with misfortune.

Benefits to buying a new home: 

• One benefit to buying a new home is that everything usually will function properly, for a longer period of time -vs.- a resold home.
• New homes are much more energy efficient then older homes, thereby saving money on utilities. You can also specify that you want an environmentally safe home and the builders will use materials that are known to be healthier for your family.
• New homes are generally wired with high tech cabling which allows for a much easier home networking system and surround sound. Having your home wired for today’s technology saves you thousands in upgrades later, not to mention the comfort of knowing all wiring in your house is in great working order.
• The last homes on a specific lot are either discounted in price or given substantial upgrades. This allows the builder to complete the sale of a lot and begin developing the adjacent lot.
• Purchasing a new home also allows the homeowner to landscape the property to their own tastes. Quite often new builders will also allow for a pool or extended concrete areas or fencing. Many extras can include built in sprinklers and perhaps extra electrical for an outdoor hot tub.
• There are many benefits of buying a new home as opposed to buying an older home. Repair costs will be almost obsolete for quite a few year in a new home (you should not have to replace the water heater, furnace, central air, roof, etc… for some time in a new home). You don’t have to worry about the electric and plumbing being outdated in a new home and you can rest assured that everything should be up to code. Lastly, a new home will generally offer a more modern look, more modern appliances and have more energy efficient appliances.
• When you buy a new home, it’s just that- your new home, not someone else’s old home. It smells new. It looks new. It’s all yours!
• New homes also have no wear-and-tear like older homes. The carpets will be new and unstained, the walls will be pristine, there will be no screw holes from where there was once shelves, and everything will still be in new working condition.
• Most builders have several home styles to choose from. Buyers of new construction homes can choose among different layouts and add features to some extent. In addition, newly constructed homes often come with warranties on pumping, electrical wiring, roof, etc.
• When buying a new home buyers are often allowed to pick certain color schemes and upgrades by the builder. This will allow you to customize the house to suite your tastes.

In recent years, it’s impossible to turn on the television or read the headlines without seeing a warning of impending doom. The media claims that the housing bubble is growing too big, and it’s about to burst! This pessimism has sold a lot of news stories, but it has also created many false concerns for first-time and move-up home buyers as well as investors. We keep hearing about this horrible catastrophe, yet the real estate market continues to boom. Why is that? Because the media neglected to consider one very important factor that is driving our current economic recovery: demographics.

The real estate boom began when mortgage interest rates fell into the single digits, making housing much more affordable. While this certainly contributed to home sales, there are additional causes we can isolate. Dr. David Lereah is a best-selling author and the Chief Economist for the National Association of REALTORS® (NAR). In a recent interview, Dr. Lereah revealed, “The biggest factor that affects real estate today, and has made it immune to some cyclical changes in the economy, has been demographics.”

The most significant and frequently mentioned demographic is the “Baby Boom” generation, which refers to children born in the years following World War II. Economic forecasting expert and author, Harry Dent, has written extensively about how property buying habits occur in a predictable fashion as a generation ages. From needing an apartment in college, to buying a starter home and eventually trading up to something larger, it is all cyclical. Since the Baby Boom generation is the largest so far, their impact has been far greater than the generations that proceeded them.

Now that Boomers have moved into their top earning years, they continue to push the housing market to new levels. They are purchasing larger primary residences as well as vacation homes and investment properties. The statistics for 2004 reflect this trend, with 36% of home sales going toward second homes and 23% of sales going toward investment properties.

Demographic trends don’t end there:

• Immigration - There has been a large influx of immigrants over the past three decades. According to Lereah, it typically takes at least a generation for immigrants to become fully active in the home buying market.
• Children of Baby Boomers - This generation is now in their twenties and looking to purchase their first homes.
• Retirees - While the demand for housing is expanding, the supply is decreasing. With advancements in medicine and treatments of disease, retirees are living longer. This means that they are occupying their homes for more years, which decreases the supply of homes available for purchase.

In addition to the demographic factors listed above, real estate has been a rewarding investment. Stocks and bonds have not performed as well as investors were used to, while real estate has exceeded expectations. In an uncertain world, people are more comfortable investing their money in property which will appreciate.

So if the current boom can primarily be explained by the factors we just discussed, how do we know whether it will continue?

Dr. Lereah says, “We are in the Golden Age of Real Estate.” Even if the economy should slow and interest rates increase slightly in the coming years, the demand for houses is still strong. The biggest impact that such a change would have is to decrease the rate of price appreciation. While this may sound ominous, it really isn’t.

The media likes to refer to the real estate boom in terms of bubbles and balloons. In keeping with that analogy, Lereah indicates that local markets may react to higher interest rates by letting some air out of the balloon. The double digit price appreciation we’ve been experiencing could decrease over the next year or two to a more typical 4-6% range. This is still a higher rate of return than found in the stock market, all things considered.

So if you are looking to purchase a second home or investment property, where might be a good location to focus your attention? Ideally, where the Baby Boomers are planning to retire. The demand for housing in these areas continues to grow. Over the past year, some of the highest price appreciation took place in the resort areas of Florida.

The next time you turn on the television or read the headlines, be secure in the knowledge that the sky is not falling.

Additional Resources:
Are You Missing the Real Estate Boom?: Why Home Values and Other Real Estate Investments Will Climb Through The End of The Decade – And How to Profit From Them – by Dr. David Lereah