When you buy a house you own a piece of land and all the structures on in, including the house and garage. Restrictions about what you can do with your property are primarily dictated by the city in which you live.
When you buy a townhouse you own a section of a building from the ground to the sky and have your own private entrance from the street, much as with a house. You usually have at least one shared wall and may share up to three walls. This means outside light may be limited and the direction you face could be more important depending on your natural light preferences. Some townhomes have no private grounds, some do…but all include some shared grounds. Rules about what you can do with your exterior vary from association to assocation and can include what color you can paint your front door and whether or not you can plant any bushes or flowers. If you want to do something outside normal standards you must request approval from the association board.
When you buy a condo you are buying air space in a building and a share in the common areas. It is much like an apartment that you own. Top level units are often preferred because you have no one above you so overhead noise isn't an issue. It is not uncommon for condos to have restrictions on flooring because of noise…for example, some require carpet and some require a certain percentage of the floors be covered with area rugs. Both townhomes and condos may have rules regarding pets, but condos are usually more restrictive.
When I start working with buyers I often hear complaints about the association fees associated with condos and townhomes. In reality association fees are just a different way of assuming the responsibilities of homeownership.
When you buy a house you assume responsibility for everything. In addition to electricity, gas, water, sewer and trash removal you also are responsible for hazard insurance, mowing the grass and shoveling the sidewalks and driveway. If the roof or siding needs to be replaced or the furnace goes out you have to deal with it yourself. In a condo or townhouse some of those costs are shared and covered by the monthly association fees. Typically condo fees are the highest and cover the most.
Townhouse association fees usually include:
- Snow and lawn care
- Outside maintenance
- Sanitation (trash removal)
- Hazard insurance covering the building structure and exterior (you should secure your own separate insurance for the interior and your personal property)
- Water/sewer (some townhomes include it, but many don't – condos include it)
Condo fees usually cover all of the above, plus some or all of the following…typically the higher the fees the more that is included:
- Heating (often, but not always, central heating plant for the whole building)
- Security system (for the building, not individual units)
- Shared amenities, such as a pool, tennis courts, party room, exercise equipment, woodworking shop, car wash (some townhomes also have shared amenities)
- Laundry (can be no charge or coin operated)
- Cable television
- Air conditioning (if central for the building)
- Electricity (pretty unusual, but I have seen it included)
Associations are most often managed by a professional management company. However, some associations are self-managed by elected members of the community. They all establish their own bylaws and governing rules and regulations.
It is important to know whether the association has enough money in reserve to cover ongoing maintenace…if improvements are needed and there isn't enough in reserve it may result in a special assessment. Sometimes low association fees aren't a good thing if they aren't saving up for future expenses.
Here are some questions you might ask about the association…
- Are there any pet restrictions? (usually more restrictions with condos than townhouses)
- Are rentals allowed? If so, any restrictions and what percentage is currently rented?
- Do they have a long-term repair/replacement/improvement plan? Will there be enough reserves to cover the plan or do they plan to pay for them by special assessment?
- What and when was the last major project, and how was it funded? Any upcoming plans?
- What kind of soundproofing is in between the units?
The maximum monthly payment you are approved for when you apply for a mortgage includes association fees. This means that you will qualify for different price ranges for a condo, townhouse or house. Click here (and scroll down) for more information, including side-by-side examples of what price condo, townhouse or house you might qualify for with the same qualifying monthly payments…and for another comparison including regular budgeted expenses for each.
All three forms of ownership are good options…it's a matter of finding the best fit for you. A house gives you more independence, but also greater responsibility. A condo or townhome has the security of more regular expenses and freedom from snow and lawn care, as well as outside maintenance.
- No Dogs Allowed…about CIC association restrictions
- House vs Townhome vs Condo – Historical Market Overview
- Common Buyer Questions
- How much difference does interest rate make in my monthly payments & the price home I can afford?
- Buying your first home…
- Things you will need when you apply for a mortgage
- Credit reports and mortgage loans
- First-Time Home Buyer Tax Credit – 2009 Highlights