When diving into the world of real estate, one of the frequent questions that comes up is: “What is the difference between a condo and a townhouse?” They might seem similar on the surface, but there are key distinctions to consider. At JVM Lending, we pride ourselves on ensuring our clients know the differences and can make an informed decision when buying a home.

    Condos vs. Townhomes: The Basic Structure

    When you think about types of homes, condos, and townhomes often come to mind. But how do they stand apart?

    Condominium is a type of land use zoning. Townhome is a style of building.

    Condos are units within a larger building. This means that when city planners are designating what type of properties can be built, they set aside land for condominium usage. This requires that developers use that land to build high density housing units. Traditionally, this means “apartment” type homes built in a master planned community in which condo owners share in the ownership and maintenance of their common structures through HOA fees. However, this can also mean 2 or 3 story townhomes, or even single-family homes built as “site condos”. The important thing to keep in mind is that no matter what the home looks like, it will be considered a condominium from a lender’s perspective if the land usage is zoned for a condominium.

    On the other hand, townhouses or townhomes are just a style of property. This style of home can be built on land zoned for condominiums or they can be built on a type of single-family home zoning referred to as “planned unit developments”, or PUDs. PUDs got this name to distinguish them from traditional single-family homes because PUDs are built in a large, uniform, master planned development and have a homeowners association (or HOA) that ensures the units in the development maintain their upkeep and appearance. HOAs in PUDs are typically not responsible for maintaining structures, as that responsibility falls on the homeowner.

    Townhome style homes are typically multi-floor homes that share one or two walls with adjacent properties. If townhomes are built as PUDs, they have similar ownership rights to single-family homes, giving owners rights to the land underneath and the airspace above and full responsibility for their own structure. If townhomes are not built as PUDs, then the HOA controls the land and administers it on behalf of all owners.

    Do Townhomes And Condos Have HOAs?

    Yes, both condos and townhomes are part of homeowners association (HOA) communities. An HOA is an organization that oversees and administers the rules and maintenance of a community. It is uncommon to find either a condo or a townhome lacking an HOA. But, it is typical that condo communities have relatively larger HOA fees than townhomes because condominium HOAs have more control and responsibility for maintaining its units, namely in maintaining the overall building structure.

    Condo Fee vs. HOA: Is There a Difference?

    This is a common area of confusion. The terms “condo fee” and “HOA fee” are used interchangeably based on your local dialect. Both terms refer to the fees collected to cover the cost of maintaining the building’s structure, community amenities, and/or services. And once again, as mentioned above, the fees a condo HOA will collect will necessarily be higher than a townhome or PUD’s HOA fee because the condo’s HOA will have more expenses to cover in maintaining their buildings’ structure.

    Condo vs. Townhome Insurance: What’s The Deal?

    When it comes to insuring your new home, understanding the nuances is crucial. For condo owners, condo insurance typically covers only the interior of the unit and personal belongings, also known as “walls-in” coverage. The HOA often has a master policy that covers the exterior of the building and common areas.
    If a townhome is a PUD, the insurance is more like traditional homeowners’ insurance on a single-family residence. It generally covers both the interior and exterior of the home. Always double-check with insurance providers to ensure you have the right insurance coverage for your type of property.

    How Do Property Taxes & Interest Rates Affect My Decision?

    Whether you’re considering buying a condo or a townhome, factors like property taxes and interest rates will play a part. Property taxes vary based on location and the assessed value of the property. Condo owners might find that their property taxes are slightly lower than townhouse owners, given that they don’t own the land.

    Interest rates, on the other hand, can be influenced by factors like the strength of the HOA’s reserve funds and the overall health of the community. For properties zoned as condominiums, rates are generally higher to account for the increased risk to investors. This increased risk is due to the large role HOAs play in the marketability of a condo. Fortunately, any “condo hit” to your interest rate can be waived by putting 25% or more down towards your purchase.

    At JVM Lending, we can help guide you through the intricacies of interest rates to ensure you get the best deal possible.

    View mortgage rates for April 21, 2024

    What Are The Pros & Cons Of Condos vs. Townhomes?

    Every type of home has its pros and cons. For many, the appeal of a condo lies in the amenities and reduced maintenance responsibilities. Common amenities may include shared common areas, swimming pools, gyms, or clubhouses, but this might come at the cost of higher condo HOA fees.

    Townhouses are desirable for their multi-floor layouts which offer more privacy, space, and no neighbors overhead. But, if the townhome is truly a PUD, this also means more maintenance responsibilities will fall on the homeowner.

    Do All Condos Have HOA Fees?

    Most condos do come with HOA fees, as they are typically part of intertwined communities that must share maintenance and structural repair expenses. However, there may be some rare exceptions, especially in smaller or older condo complexes that operate without a formal HOA structure.

    What Do Condo Fees Cover?

    Condo fees, often called assessments, generally cover the cost of maintaining the buildings, common areas, recreational amenities, and sometimes even utilities and property taxes. This can include everything from roofing, balcony repair, and pool maintenance to snow removal and garbage collection. In some condos, the fees might even cover costs like water, cable TV or internet services. It’s essential for potential condo buyers to get a clear breakdown of what their fees will cover and whether the HOAs are well capitalized enough to cover upcoming expenses. At JVM Lending, we always advise thoroughly checking this before making a purchase.

    Do Townhomes Have HOA Fees?

    Almost without exception, townhome communities have HOA fees, especially if they offer shared amenities like a pool, clubhouse, or gated security. These can be extremely low in cases where there are only minor items covered by the HOA. In some unique circumstances in older developments, a townhome can be HOA-free.

    What’s The Role Of The HOA Board?

    The HOA board plays a pivotal role in the smooth functioning of a community. Comprised of elected members (usually residents of the community), the board oversees the management of the community, ensures rules are followed, handles maintenance, and balances the budget. They work closely with property management companies, plan out the budget based on upcoming expenses, handle disputes, and set community standards.

    Are Property Taxes Different For Condos vs Townhomes?

    Property taxes are determined by local municipalities based on the assessed value of a property. While the method of assessment can vary, condos might have slightly lower property taxes than townhouses since they don’t always include land ownership. However, the amenities, location, and overall value of the community can influence these rates. Consult with our expert team at JVM Lending, to understand the specific property tax bills for a specific home or community.

    Thinking About Buying A Condo Or A Townhome?

    The intricate world of real estate can sometimes feel overwhelming, especially when learning the subtle nuance between a condo and a townhome. This is where JVM Lending shines. With our unparalleled expertise and deep commitment to serving our clients, we not only clarify the muddied waters of property decisions but also provide tailored advice as you advance your home search to ensure your choice aligns with your life goals. When it comes to making an informed decision on condos vs. townhomes, you’re not alone—JVM Lending’s team of experts are available to help you navigate the ins and outs

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