2 Things to Consider Before Buying a Townhome
If you’re like many home shoppers, you understand that there are differences between condos and townhomes but you may not understand what those differences are. This is because there are also similarities. For example, townhomes are frequently governed by a homeowner association (HOA) and condos almost always are.
I don’t know about you, but when I think about condos, I picture a large structure with lots of units. This is typical of many of our condo communities. The problem with describing the home in this manner, however, is that the word “condominium” is a form of ownership, not a type of structure.
There are three main types of homeownership:
- Fee Simple. I own the land and the home.
- Condo. I own one unit (Sole ownership) in a community and I jointly own the common areas with the other owners.
- Co-Op. I own shares in corporate-owned building, and I have the right to live there. I don’t actually own the unit.
Condo owners own only what is between the walls, and they have a share of ownership in the common areas (swimming pools, club houses, picnic areas, etc).
“Townhome,” on the other hand, is a structure. It typically has at least two stories. It’s attached to at least one other home but each home has its own front door to the street, not a hallway as many condos do.
To make it even more confusing, townhomes can be owned as condominiums or fee simple ― meaning the homeowner not only owns the home, but the land on which it sits as well.
Let’s take a look at two of the most-significant questions you should ask when you’re considering buying a townhome.
1. Homeowner Association
Buying a home in a managed community means that you’ll be required to pay monthly HOA dues and other fees. These can be hefty, so take them into account when determining how much you can afford to spend on housing every month.
Also, ask questions about anything in the HOA documents that you don’t understand.
It’s a good idea to ascertain what you get in exchange for your HOA dues.
2. Getting Financed
If you’ll be taking ownership of a townhome as a condominium, rather than fee-simple, the lending process is a bit different.
The lender may look at the owner-occupancy rate in the community. If the tenant-occupied rate is more than 30 percent, you may have to search long and hard for a lender who will take it on.
The lender will also peruse the documents to determine the number of homeowners that are behind in their dues payments. If that number exceeds 15 percent of all homeowners in the community, you’ll have trouble finding a loan.
Townhome living is ideal for those that want the benefit of homeownership at a cheaper price and without some of the maintenance chores that come with a detached home. Do a bit of homework, however, before agreeing to purchase. Know what you’re getting into before you buy.
A great place to start is with a Realtor — it’s literally our job.