We spoke with agents well-versed in the world of Ontario's co-ops to get their tips on buying and selling these shared properties.
1 – Financing
Many banks won’t lend on co-ops because of the unique nature of their ownership. As a result, buyers in Ontario usually need to have a down payment of at least 30 per cent.
“The challenges are that a co-op requires 30 per cent down as opposed to a conventional mortgage,” says Susan Krever, an agent with Chestnut Park. “There’s really only one lender who will provide mortgages for co-ops – Duca – and their rates are a little bit higher.”
As a result, Krever says potential co-op buyers will have significantly fewer mortgage options than if they were purchasing a condo or single-family home. For that reason as well, most buyers will be well-established and able to afford the steep down payment.
“You would have many empty nesters and retired people [who are] selling their homes so they have cash and it’s easy for them to move [into a co-op],” says Kathi Oliver, an agent with Royal LePage. “But for first-time buyers it’s more difficult.”
2 – Ownership
In Ontario, the mortgage challenges with co-ops stem from the ownership structure of the property.
“For a co-op, you are buying shares in the [co-op] corporation,” Oliver says. “So if there are, say, 40 units in a building and you buy one, you’re actually buying one-fortieth of the whole property.”
More specifically, buyers’ share in the building is relative to the square footage of the property purchased. Owners of a 2,000 square-foot unit will own a larger portion of the property than the owners of a 900 square-foot unit.
Further, the bills for the building are split according to the share structure of the corporation. Property taxes are incorporated into the maintenance fees, too, so they appear higher than the fees for a traditional condo building.
3 – Restrictive rules
Another issue that many buyers have with co-ops are the restrictive rules that often come with them.
“Some of them don’t allow pets,” Oliver says. “You’re buying your own place but you can’t put a washer/dryer in your own unit.”
There are also restrictions around leasing the unit; many co-ops do not allow owners to rent out their units. While these rules seem quite stiff, many buyers like to live among similarly minded individuals.
4 – Selling
Selling a co-op is also quite challenging. The prices are significantly lower, which makes them very attractive to unwitting buyers – for instance, a co-op in Toronto’s exclusive Rosedale neighbourhood might average $600,000, but a house in the neighbourhood would easily top $2 million. But many of those leads are quickly priced out of the property.
“You have to price it better, price it competitively and know you’ll appeal to a smaller group of people,” Krever says. “But they’re often more interested in the building so you attract people who are more [serious buyers].”
Sales also take longer to go through, since you’re looking for the right type of buyer. That, however, is out of your control and the control of your sellers.
In the end, it’s up to you as the agent to educate buyers and sellers alike so that no one is surprised with the end result of the transaction.
“I think [clients] just have to have it explained to them,” Krever says. “We have an informational piece that we give buyers and it sets up the differences.”
Clients faced with a competitive marketplace are increasingly drawn to lowly priced co-operative listings, but few clients – and agents, for that matter – understand the finer points to buying and selling these unique properties.