As the snow melts and your back has begun to recover from the shoveling, it’s time to start flexing other muscles with the yard work and exterior maintenance work on your home. The honey-do list just never seems to end (ask my husband)!
What is a cooperative?
A cooperative is a multi-unit building, much like a condominium, where each resident has an interest in the entire building, and as a share holder, has the right to occupy a particular unit in the building. If you own a condominium, you own the unit itself. With a cooperative, you own a share of the building, but don’t own the unit itself.
Cooperatives, the secret of senior housing options
If you’re wanting to purchase your next home, and if you’re working with a real estate agent, your real estate agent will rely primarily on the multiple listing service to help you search for your new home. The multiple listing service is the most comprehensive resources available to search for available homes for sale. There’s just one problem. Most cooperatives won’t list the unit (share) for sale with a real estate agent. So, you might not even know about them. There is not one comprehensive online database (as of 2014) where a consumer can search for available openings in Minnesota cooperatives. They may be one of the best kept secrets in senior housing. It’s ironic, since Minnesota has more cooperatives than anywhere else in the country.
“Don’t buy a cooperative”
When it comes to real estate, everyone is an expert. As soon as you mention to someone that there is a real estate transaction in your near future, you are sure to get all sorts of unsolicited advice. Be wary of the pundits-especially the ones that spout generalizations such as “All cooperatives are [fill in the blank with dramatic generalization here].” Someone with a good understanding of cooperatives knows you can’t make generalizations about cooperatives any more than you can any other kind of housing-whether it’s single-family homes or assisted living communities. In my humble opinion, cooperatives are the least understood, least known, senior housing available.
The language of cooperatives
When you purchase a cooperative, you actually purchase a share. The purchase of that share gives you occupancy rights to a particular unit in the building. Once you purchase a share you become a member (not a resident).
Because you are purchasing a share, and not real estate, mortgages are not used for the purchase. Often, buyers use the equity from their previous home to purchase the share.
When you purchase a share you are given a 10 day right of rescission. This means you can cancel during your 10 day review of all the documents (by-laws, rules and regulations and financial statements) you receive from the cooperative.
Instead of writing up a purchase agreement, you write up a subscription agreement.
In a condominium you pay monthly association dues, in cooperatives they are often referred to as carrying charges.
There may be a master mortgage on the building, for which each member pays a portion of the principal and interest in their monthly fees.
There is usually a board of directors elected by the membership. That board of directors may hire a management company to run the day to day operations of the building, or they may be self-directed or self-managed.
Most senior cooperatives are for 55+ owners, although some require only a certain percentages of occupants in the building to be over 55. The rules of each particular cooperative are governed by their by-laws. The membership of the cooperative can amend the by-laws.
Before you can purchase your share, there is an application process and a background check.
Why consider a cooperative?
This is usually when my clients scrunch up their nose at me and ask the question, “Lisa, why on earth would I purchase something like a cooperative when I don’t actually own the unit I live in?” “Why wouldn’t I just go rent an apartment?” Here’s why: I know it sounds wonky to not own the unit, but the upside is cooperatives offer the most maintenance-free lifestyle available with some of the same benefits of ownership. Because you don’t own the unit it is often the cooperative’s responsibility to fix the appliances if they stop working. Many cooperatives also have maintenance schedules to replace carpet in the unit every so many years.
Most cooperatives in Minnesota have some commonalities, but every community has it’s own heart beat. Cooperative housing communities are as different as neighborhoods with single-family homes. The location, amenities, finances, and member personalities will help determine if that building is a good fit for you. If you’re considering a condominium as you downsize, you owe it to yourself to see what cooperative housing has to offer. This is where YOU scrunch up your nose and say, “Lisa, you just said there wasn’t an easy way to find senior cooperative housing. Where do I look?” There are two very good printed senior housing lists available: The Senior Housing Guide and The Senior Housing Directory.
Lisa Dunn is a realtor with The Change Agents Group of RE/MAX Results. You can find her at TheSeniorHousingSearch.com.