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Condo or Townhome?

Posted by:  Chip Poli
2012-03-02 13:56:08

What are the differences between Condos and Townhomes
When looking for a home, you may be wondering what the key differences are between condominiums and townhomes, and there are plenty.

In this article we will dig into what those differences are, and what you need to know to become an informed consumer in the condo/townhome marketplace.

For Financing Purposes

requirements for condo mortgagePlease note: Condominiums and Townhomes can occasionally cause an extra layer of approval in order to obtain financing. All lenders will want to take a good look at the project, management and financials to be sure the community doesn’t pose additional risk.

It is very rare that a major lender will issue financing to the first few buyers in any condo project. The lack of a good sales history and management track record make these property types complicated. It is also a common requirement that control be completely turned over to the association by the developer.

Customarily, condominiums and townhomes suffer from drastic increases and decreases in value. This level of uncertainty can make an underwriter nervous but, usually issues are identified quite quickly with a full appraisal and something called a condo questionnaire.

In some cases a community may be ineligible for certain types of financing. FHA for instance maintains a list of HUD Approved Condominium Projects. Most experienced developers in 2012 will make HUD Approval a priority during the building stages.


[caption id="attachment_1238" align="aligncenter" width="580" caption="A Typical Townhouse"]typical townhouse[/caption]

Townhomes, from many perspectives are much closer to what you would get when you purchase a single family home, as opposed to a condominium. In a townhome you own the land upon which your townhome sits. You may have a homeowners association, as with a single family home and you will pay for your own homeowner’s insurance.

In a townhome, you will have a split lot line that follows the interior wall of your unit that meets your neighbor. The outer boundary will be marked similar to a single family home.

The streets may be public or private, and depending on which climate you live in, your snow plow service may come from either a private service, or from your local municipality, meaning potentially lower association fees.


[caption id="attachment_1239" align="fltlft" width="275" caption="Typical Condominium"]classic condominium[/caption]

Condos, though they may appear to be similar to townhomes, are very different in many ways. First, when you purchase a condo, you are purchasing your structure, but the land on which it sits on what is called a common parcel, which is owned and managed by the homeowner’s association. Your property insurance will be included in the monthly association fees that you pay, you’ll be covered under a blanket policy.

Many of the other services that you are accustomed to including, waste removal, landscaping, and parking lot maintenance are also handled through the association, potentially making your dues higher than in a townhome.

Being that many condos, as opposed to single family homes or townhomes, share common roofs, there is also a pool of money that gets paid into each month. When the roof for a block of condos needs to be repaired, that repair money is drawn against this pool to perform the work.

Snow plowing may also be done privately, as many streets, which sit on this common parcel of land are private roads, which would be outside of the city/town plow coverage.

Covenants, Bylaws and Financials: Before purchasing either a condo or a townhome, make sure that you are absolutely clear that you have read and understand what is in the covenants and bylaws, also known as rules and regulations.

They spell out for you what you can and cannot do with your unit, inside and out. Yes, even though it is your home, you agree to these before you buy, and there will be an association that gets paid big money to ensure that these rules are adhered to.

Restrictions may cover things like:

  • Exterior Pools and Jacuzzi Tubs
  • Parking of RVs and Boats
  • Number of Cars in Your Driveway
  • Ability to have Grills, Outdoor Umbrellas and Lawn Furniture
  • Presence of Trash Cans and Yard Debris
  • Sporting Equipment such as Basketball Hoops and Soccer Nets
  • Commonly Pets are Covered in some way
  • Exterior Door Colors and Screen Doors

If after reading the documentation, you decide that it is too restrictive, you may want to look elsewhere before you ink any paper in that community. You may want to have your real estate attorney look at them as well, as they are likely to catch details that the average person might miss.

If you plan on renting out your unit, even years down the road, find out what the restrictions are surrounding renting your unit. Many associations have limits as to what percentage of their units may be rented out. This is especially true with condominiums.

As far as the financials, ask to see them, and also have your attorney look at them. The last thing that you want to do is to move into a townhome or condo whose association is on the brink of collapse, poorly managed, has pending litigation or on the verge of significant monthly association budget increases. The financials will paint a decent picture for you of the overall health of the project.

Most states require by law that you are given at least 1 free copy of your condominium bylaws and budget, these are simply called “Condo Docs”.

Other types of Condos


This term refers to a side by side condos that may have been converted from a duplex to two townhome style units. These are far more popular in some areas than they are in others. A condex will have a shared center wall and a shared roof.

Given the small 2 unit nature, a management company is not required. In most cases there will be an document in place called an “Arbitration Agreement”. This agreement lays out the terms between the two side by side parties as to how and when certain renovations will occur and how they will be paid for.


A condotel is typically found in an area with a lot of vacation properties and amenities. A condotel is classified as any condo project that has a reservation desk like a hotel and the building will openly advertise for weekly rentals on their website.

Condo or Single Family?

[caption id="attachment_1240" align="aligncenter" width="510" caption="A Condo can be a great alternative for busy professionals"]Classic Condo Project[/caption]

Both have distinct advantages and disadvantages. Condominiums are the choice of young busy professionals and retirees because there is very little if any maintenance required by the owner.

Some people look for a condominium because they are typically a slightly less expensive option than a single family residence.

Growing families can have difficulty squeezing into a condominium as space can be limited, this is something you will want to consider when looking for a home.

Do your homework and rely on experienced professionals for advice when making a decision on your next home.


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