If you love the idea of a beautifully maintained building without the maintenance, you may find your home search gravitating toward some of the high rise or historic co-ops in the DC area. After all, many of the most desirable locations in area are co-ops, including The Westchester and The Watergate.
Many of these buildings have residences for sale at a variety of price points, making them a great option for house hunters of all varieties. But your pleasure at that seemingly affordable co-op might turn into sticker shock once you add in the monthly maintenance fees. The Watergate, for example, has residences priced from $220K. The fees associated with that price point start at $643 per month. At The Westchester, a $299K Unit has monthly fees of $1,139. Why so high?
The answer, of course, lies in the nature of co-ops themselves and in the differences between co-ops and other types of residences. When buying a co-op, you are not actually buying a particular unit. Unlike a condo, a co-op’s total value is retained in the building as a whole, meaning that ownership of a co-op is ownership of a share in the whole building.
Because the co-op owners own the physical building, they pay real estate taxes on the entire building. That is where part of the co-op fees go. Fortunately, just like real estate taxes on a single family home or condo, a co-op owner’s share of the real estate taxes is tax deductible. In addition, if there is a mortgage on the building itself, a portion of that is interest, which is also tax deductible just like the interest on a single family home or condo.
In addition, co-op fees will cover your share of items like a master insurance policy on the entire property, maintenance, trash removal and some or all of your utilities. Having some of these items included in your monthly co-op fees may be offset by savings in your personal budget.
There are two big factors that may help to determine how much your fees will run: Maintenance and Amenities.
Many co-op buildings are older, historic, or otherwise notable buildings whose upkeep over time became financially prohibitive for individual owners. Therefore, they were turned into co-ops so that a group of shareholders could own the building collectively. This allows the care and maintenance of the older or more elaborate building to be shared in common among the owners. However, these types of buildings also often have more expensive upkeep and repair costs than newer buildings. It may be worth it to you, however, if you love the building, the location, or both, or if you have a desire to live in a landmark home without the financial burden of sole ownership.
As to amenities, landscapers, doormen, maintenance personnel, and other staff contribute to costs which must be addressed through co-op fees. Add to that the upkeep of facilities like pools, gyms, media rooms, and other common areas which can increase fees as well. And as the prices of goods and services rise over time, so too can the fees you’ll be charged, which in some cases go up on an annual basis to keep up with rising costs.
A new feature of some co-op agreements is a requirement for prospective members to pay a portion of their fees up front at closing to be held in escrow for future upkeep and maintenance costs. While this is not yet a widespread practice, it has happened in some co-op buildings. As co-op boards become more strict in their financial requirements, this is one way that some are seeking to provide extra assurance that every shareholder in the co-op will be able to meet future financial obligations for the building.
No matter what beautiful building you’ve got your eye on, your Eng Garcia Grant Realtor has the expertise and market knowledge to ensure that you get the right home at the right price for your budget. Let us help you navigate the DC real estate market and find the co-op of your dreams today. Contact us to begin your targeted DC real estate search.