LaPlante Appraisals' Blog

If you ask a realtor, appraiser and homeowner, what constitutes a townhouse versus a condominium you will likely get various answers. The difference between a townhouse and condominium goes beyond the style or design of the home. 

   

As appraisers, we look at the ownership rights and legal descriptions of the subject to determine what the real property includes. For a condominium, you own the structure, for a townhouse or single family home, you own the structure and the LAND. This is the key difference between a townhouse and condominium. Take a look at the difference in assessor cards between these two types of properties. Can you see the differences and tell which one is a condominium and which one is a townhouse ? 

      
Condominiums have an undivided interest in the surrounding common elements and land. This means they all share a part of the surrounding areas together with the other units within the complex. While a townhouse owns the structure and the land it sits on with no other shared interests with neighbors. So in these two examples, Rough Rider's structure outline is the same as the structure, while 24th Pl shows a lot line and some land rights beyond the subject's structure. Another key is to see what the legal description states.

Does it say "LOT" in the legal description? Does it mention an undivided interest in common areas in the legal description? 

When ordering an appraisal, it is important for the lender and title to know the ownership type. This is because they have different lending requirements for different type of properties. Condominium loans can be more expensive due to restrictions related to shared and/or jointly owned building spaces, making the loans potentially more risky. As an appraiser, we are typically asked to verify if there is any pending litigation for the HOA in the condominium. If so, this can make the loan riskier and sometimes lenders will not loan on it. 

But I am not an expert on the lending side of things, so I asked another friend to come and share his perspective from the lender's view. Here is what he had to share: 

Determining whether a property is deemed a townhome or a condo by the county can be make-or-break for financing. From the lending perspective, “Townhome” is a style, and this home can either be a PUD or a Condo in official classification. If it’s determined that it is officially a PUD, just in the style of a townhome – it’s business as usual. No overlays. You’re financing just another Single Family Home that happens to have an HOA.

If it is determined that it is officially a condo: that opens a whole new set of obstacles as Kari discussed earlier. Now we have to look at what loan type we’re using as they all treat condos a little differently. We need to get a copy of the CC&R’s, Master Insurance Policy, a condo questionnaire needs to be filled out and HOA’s , tragically, have “varying” levels of diligence and efficiency. If you’re utilizing programs such as Grants or Down payment Assistance, you need to double-check their guidelines & overlays with Condos and how they’re treated if they’re on HUD’s approved condo list or not.

I’ve seen many a loan be rejected due to failure to identify the loan type, and can’t stress enough the importance of being able to spot it. --Ryan Zamudio

If you are planning to purchase a condominium or townhouse and want more information or have questions please reach out. Ryan is very personable with great energy, he is passionate about what he does. Ryan can be reached at: ryan.zamudio@edgehomefinance.com or find him on Facebook or Instagram @lender.ryanzd