A housing cooperative is formed when people join on a democratic basis to own or control the housing and/or related community facilities in which they live. Usually they form a not-for-profit cooperative corporation. Each month they pay a fee to cover their share of the operating expenses. Personal income tax deductions, lower turnover rates, lower real estate tax assessments (in some local areas), controlled maintenance costs, and resident participation and control are some of the benefits of choosing cooperative home ownership.

Let’s say you are buying a $100,000 home. Most likely you would not be able to pay the seller the entire purchase price in cash. Instead, you would pay a down payment, and you would get a mortgage to cover the remainder of the price. In a cooperative, since you are actually buying a share(s) in a corporation rather than real estate, you get a type of loan called a share loan, which is like a mortgage. It provides you with borrowed funds to buy the share(s) from the seller. You then make monthly payments on the share loan to the lenders and a monthly carrying charge (maintenance) payments to the cooperative.

Currently First National bank is offering share loans on a limited basis. Please contact Mark Pruzan at 610-238-5018 email: mpruzan@firstrust.com

The main distinction between a housing cooperative and other forms of home ownership is that in a housing cooperative you don’t directly own real estate. But if you don’t own real estate, what exactly are you buying? You are buying shares or a membership in a cooperative housing corporation. The corporation owns or leases all real estate. As part of your membership (as a shareholder) in the cooperative you have an exclusive right to live in a specific unit (this is established thorough an occupancy agreement or proprietary lease) for as long as you want, as long as you adhere to the cooperative’s rules and regulations. As part of your membership, you have a vote in the corporation’s affairs.

When you buy a share or membership in a housing cooperative, you are paying for just that: a share of the cooperative housing corporation. The purchase price will vary depending on the neighborhood, the unit’s size if the cooperative limits resale prices, and if the cooperative has an underlying mortgage for the entire property.

Almost all cooperatives charge residents a monthly carrying charge (often called a monthly maintenance fee). The amount of the monthly charge varies and typically covers your proportionate share of operating and maintaining the cooperative, which can include blanket mortgage payments, property taxes, management fees, maintenance costs, insurance premiums, utilities, and contributions to reserve funds.