The difference between owning a condominium and a cooperative apartment are night and day. Condos and coops might seem the same on the surface, but one key factor separates the two and should impact your decision on which to own. One is real estate, the other shares in a corporation.

When you purchase a condominium, you are indeed the owner of a piece of real estate. There is a deed transferred between the buyer and seller in a condominium purchase, which should be recorded. You can mortgage a condominium to make the purchase, under similar terms and conditions as buying a house. When you buy a condo, you are granted automatic membership in a condominium association.

In a coop (short for "cooperative") you are purchasing shares in a corporation, which confers you rights of occupancy in a specific apartment. No deed transfers between owners, shares of stock or transferred. No mortgage can be acquired since no real estate is involved, although most banks will likely accept the stock as security for the loan. The terms, and the loan-to-value ratio will likely be lower than in a conventional mortgage.

The biggest difference lies in the history of why the two exist. Condominium ownership was created to permit the average urban dweller an opportunity to be a part of the home ownership dream. Cooperatives were created to form an elitist culture in which like-minded people in similar socio-economic circles could live in the same location.

Surprisingly, both kinds of living emanated from Chicago, even though several decades separated the creation of the first coop and the first condo association.

One of the biggest differences between purchasing a condominium versus a coop apartment lies in the approval process.

In a condo, the transfer is between two parties who have agreed to the sale-purchase. In a coop, it is likely there will be an approval process in place, in which the board of the cooperative will determine the buyer's "suitability" for living in the coop.

Both condos and coops have a Board of Directors (sometimes Managers) to oversee the business operations of the property. The boards are elected by the members, with voting rights determined by a share of ownership. In a condo, the percentage of ownership is stated in the Declaration of Condominium, which is a recorded instrument available at the local courthouse. In a coop, the share of ownership is determined by the number of shares owned, just as in a stock transaction.

Understanding these key underlying differences between owning a condo and a coop are critical before you make the final decision between which environment you desire.