Financing a Co-op
Financing a co-op can be difficult because this unique form of ownership is not considered as holding real property. Co-ops are buildings communally owned by a corporation. Each owner receives shares of stock in the corporation, and the building often resides on leased land.
Financing a Co-Op with a Share Loan
You can’t get a mortgage on a co-op because mortgages are reserved for real property. However, co-ops can be financed with a share loan. With a share loan, the lender holds a proprietary lease & stock certificate as collateral. Ask your lender and Realtor about co-op financing. If you discover a co-op that does accept financing, ask the board which lenders they have worked with in the past. Co-ops can be financed, it just requires a little more research.
Financing a Co-Op is Rare
Most co-op purchases are cash. Very few lenders will finance co-ops in Florida, and very few co-ops will accept financing as an option. Most co-op boards are not willing to take on the risk of default and the communal disturbances that accompany a foreclosure. You will probably be required to put down a higher down payment and show proof of sufficient liquidity to cover carrying costs for a few years if you do find a co-op that accepts financing.
It is much easier for a lender to foreclose on co-ops than it is for real property. A bank can conduct a foreclosure sale on a co-op without a judge’s approval. All the lender has to do is publish a foreclosure notice in a local newspaper for three weeks before holding an auction. If the co-op unit fails to sell at auction, the bank will take possession.