In a hot market, co-ops provide a toehold to affordable housing. But there are a few strings attached.

FIRST-TIME buyers may find even the tiniest condos out of reach, but there’s an overlooked alternative that’s becoming increasingly attractive to low- and middle-income buyers: cooperative housing, a unique arrangement that gives a resident the right to live in a unit but doesn’t convey real property.

On the surface, the difference is mostly legal: When you purchase a condo, you’re buying real estate, which means you own your piece of the building outright. When you buy a co-op, you’re buying a share of the corporation that owns the property, which gives you a right to live in your unit. Co-ops tend to be older converted apartments in central Seattle neighborhoods like Queen Anne and Capitol Hill. Buying into one means joining a community and taking on some of the responsibilities of keeping it running (repairs, maintenance, etc.). The challenge, of course, is learning to live and work with that community.

Why do I always hear about condos, not co-ops?

They’re rare in the Northwest, unlike on the East Coast, where they originated around the turn of the last century. The movement spread to the Seattle area in the ’40s and ’50s. Today, there are merely 40-odd co-op buildings in Seattle, as compared to hundreds of condos.

What are the advantages?

Cost. Historically, because the sale of a share in a co-op had to be financed by the seller, co-op prices remained relatively low. Then there’s the buyers’ aversion to the unfamiliar. Says land-use attorney Sam Jacobs, who represents co-ops and homeowner associations, “People . . . like having more of the bundle of sticks of ownership in their control rather than somebody else’s.”

But since the ’90s, when co-ops gained bank financing through the National Co-Op Bank, they’ve become more attractive—and, consequently, more expensive. Even so, explains Donna Walsh, a Lake & Company realtor, financing terms that allow buyers to put as little as 5 percent down “are making co-ops a much better option for first-time buyers.”

Despite their increasing popularity, a typical co-op remains a bargain compared to condominiums. But again, that’s also because co-ops tend to be older—what realtors charmingly refer to as having “character” (right down their vintage plumbing and wiring). Virtually all new multiunit housing built today is condo, since it’s easier and more profitable for developers to sell. According to the Northwest Multiple Listing Service, the median price of a Seattle condo hovers around $198,000. For co-ops, it’s more like $150,000.

The second advantage to a co-op is that you get to pick your neighbors. And they pick you. Which leads to . . .

What are the disadvantages?

In a word: democracy, with all the quarrels, pettiness, and occasional discrimination it entails. Your creditworthiness, cooperative behavior, and appearance will all be scrutinized by a co-op board when you’re looking to buy. Later, you may sit in the same seat of judgment. (In a condo, you just need to qualify for a mortgage.) Noise and pet restrictions are frequent points of contention, as is members’ willingness to pitch in with running the corporation. And privacy—how often board members can enter residents’ units, how much notice is required—can be an issue. You’re stuck with these people for the long haul; unlike a condo, a co-op’s hard to sell quickly.

Financially, co-ops appreciate slowly. They aren’t a great investment for someone who wants to turn a quick profit by selling in a year or two. Lending rates aren’t as good, and financing is still harder to come by.

How do I buy a co-op?

There’s no central listing for co-ops, although ads run in the classifieds. You can just drive around or ask friends for leads. If you find one you like, scrutinize the co-op’s bylaws (especially regarding pets, noise, and subletting, which is often prohibited). Make sure you like these people, and they you.

To finance, seek out a specialty lender like Eagle Mortgage or First Horizon Home Loans. The traditional option, seller financing, makes the seller the banker for the purchase; the buyer sends the seller a monthly payment, plus whatever interest the two parties agree to.

If you’re willing to live and work closely— very closely—with your neighbors, co-ops offer a small but viable niche for the aspiring home buyer.