Condominiums, Co-ops and Townhouses
What’s the Difference?
I'll be meeting with a new referred buyer this Saturday and he said on the phone that he is looking for a condominium or a townhome on Capaitol Hill. It occurred to me that he may not know the important differences.
Although the terms are often confused, knowing the difference before you buy is an important discovery step before you make an offer on a home.
Condominium is a legal term and most states have laws governing how they must be set up and certain special requirements for how property transfers take place. It is a term of legal ownership.
A condominium may be formed as new construction or in a conversion from an apartment building or other building in to units which are sold and legally described separately. In each unit there is physical space and a certain extent of the property which is owned by individuals and there is also certain space and property owned by the community. Condos are generally managed by a Home Owners Association. Members of the board are elected by the owners and they decided on the budgetary operation and other rules of the group of owners. Each individual owner pays dues to support the common areas and expenses of the group.
Condominium units may be flats, two or three stories, or other. They may be stand alone or homes with common walls.
Condominiums are relatively easy to finance. Depending on the market, Fannie Mae and Freddie Mac require that 60-80% of the units be owner occupied, that the buyer put 10% or more down and for new construction, a certain percentage of the units (60%) are already sold before closing on any of them can occur. FHA loans are okay for approved condominiums.
Condominiums enjoy all of the tax benefits of home ownership.
Co-ops are buildings owned by an entity. To live in a co-op an individual must buy stock in the entity and that entitles one to live in a certain place in the building. The building is governed by an elected board and dues are collected for the expenses of the building.
Co-ops enjoy the tax breaks of home ownership.
Financing is usually through special lenders or by owners.
Townhouses are officially called Zero Lot Line Homes in the northwest. Each person generally owns the land under and often, some adjoining land. Townhomes often have one or more shared walls with other units. Zero Lot Line Homes started popping up here in the early 1990’s and took off in a big way between 2000 and now. There are no home owner dues and there is no board to make rules. Each unit is separately and wholly owned by the person who is responsible for all upkeep, taxes and insurance.
There are often easements that allow for access to garage areas and for foot traffic.
Zero Lot Line Homes enjoy all of the benefits of home ownership and are as easy to finance as stand alone homes.
I'd be happy to spend some time with you to determine what style of home ownership best suits your needs.