What to know about buying a co-op apartment in Seattle

Sunny Eckerle

Homebuying is time- and energy-consuming, and for the uninitiated, co-ops can be especially confusing. The extra designation of “co-op” is another murky term on an already lengthy list of unfamiliar vocabulary words. (We’re looking at you, PMI, escrow, and rate lock.)

For Seattle homebuyers considering their options, here’s what you need to know about co-ops.

What’s a housing co-op?
The National Cooperative Bank, which supports and advocates for American co-ops, defines housing co-ops as groups of people who own or control the buildings where they live together.

When someone buys a co-op, they’re buying stock—or a membership—in a cooperative corporation that owns the building, land and common areas. Buyers don’t receive a deed to the property like they would with other housing types. “Instead, they’re issued a stock certificate and proprietary lease for their shares within the co-op,” explains Tessa Gaines, loan officer at the National Cooperative Bank.

Typically, the bigger a co-op unit is, the more shares its owner(s) hold and the higher proportion of the building’s property taxes, utilities, and insurance they pay. Cooperative corporations are governed democratically with each member getting a say in decisions—from the furnace to the roof—that will impact the community.

Who are co-ops a fit for?
From first-timers to folks looking to downsize, there’s no typical co-op buyer, says Jeff Reynolds, a real estate broker with Windermere that runs the blog Urban Condo Spaces. “I encourage buyers to keep an open mind. Know the situation you’re buying into, and if it fits your objectives—buy it!”

One characteristic most co-op denizens do share is an interest in being active within their co-op community. Every member is vetted by the board and is expected to weigh in on matters related to the cooperative.

“Co-ops are hands-on, and that’s beneficial for people who truly want to be part of a community and to build better relationships and friendships,” says Val Gaifoulline, broker and realtor with Keller Williams Realty Greater Seattle.

What are some pros and cons of co-op ownership?
Like any condo, townhouse, or single-family home, there are pros and cons to co-op ownership that prospective buyers should consider. Reynolds says that related expenses—purchase price, price per square foot, closing costs and property taxes, for example—are typically lower at co-ops. If owners maintain the co-op themselves instead of hiring a staffer, that further lowers costs. As mentioned, co-ops can create an environment ripe for community in the city. If you’re looking for that, it can be another positive aspect of choosing a co-op.

On the flip side, getting into a co-op through its board can be difficult. Rules governing everything from renovations to bike parking and pets can be more stringent at co-op buildings, too. Reynolds says that cooperatives are responsible for paying the salaries of any employees through the owner-paid monthly maintenance fees, including doormen and cleaning staff. If funds are needed elsewhere or if most owners prefer it, residents can be on the hook for a larger portion of the building’s upkeep compared to condos.

What are some common misconceptions about co-ops?
One myth is that co-ops may be harder to sell, Gaines says, “but co-op owners are able to sell their units just like any other real estate transaction.” Reynolds agrees that issues associated with co-op resales are mostly just perception. “The challenge is getting over the misconception that ‘you don’t own it,’” he says.

Like other property types, co-op owners looking to sell set a list price and entertain offers, negotiated or not, from there. There are some unique aspects to selling a co-op though, including that all prospective buyers are thoroughly vetted and ultimately approved or denied by the co-op’s board. Many prohibit subleasing, too.

“That’s good for the long-term co-op tenants cut cuts out the portion of buyers that are investors,” Gaifoulline says. Both could add time to the process, though recent data suggests that on average, co-ops in Seattle spend only slightly more days on the market compared to condos—44 days for co-ops vs. 33 days for condos.

What else do prospective homebuyers need to know?
Financing a co-op is different than financing other property types and can be tricky, Gaifoulline says. “You’re buying shares, and most banks don’t provide that type of financing—called a share loan,” he says.

Are there other types of co-ops?
The term co-op can refer to more than the residential co-ops that house more than a million people in the U.S. Member-owned and controlled business and organizations exist across industries, services, and interests, including food and agricultural enterprises, insurance companies, banks, childcare providers, and more. Seattle co-ops unrelated to housing include Verity Credit Union, the grocery store Central Co-op, and the Flying Bike Cooperative Brewery in Greenwood.

~Kelly Knickerbocker, Curbed Seattle