Challenges with Co-Ops

Buying and selling co-ops is usually a lot more difficult than buying and selling condos. Most cooperatives stipulate that individual owners can't sell or otherwise transfer their stock or proprietary leases without the express consent of either the board of directors or a majority of owners.

Prospective buyers generally must provide several letters of reference regarding their sterling character and creditworthiness. In addition, they may have to submit to a personal grilling by the board of directors. Given that the owners live in close proximity to one another and depend upon each other financially, having the ability to screen out party animals, deadbeats, and the like is reasonable as long as that power isn't misused to unfairly discriminate against buyers.

Even so, some buyers find the approval process extremely intrusive and strenuously object to giving strangers their financial statements. The approval process also tends to slow down the sale of co-op units on the market.

Owning a co-op is a two-edged sword. As a co-op owner, you have much more control over who your neighbors will (or won't) be than do condo owners. Unfortunately, that control cuts both ways. When you try to sell your unit, people you consider perfect buyers may be turned down by the co-op because your neighbors think that the prospective buyers would entertain too much or can't carry the load financially. Giving up the right to sell your co-op to the highest bidder may be too high a price to pay for the right to choose your neighbors.