3 Things to Consider Before Buying a Town House (Baton Rouge, LA)

3 Things to Consider Before Buying a Town House

3 Things to Consider Before Buying a Town House Have you ever noticed how the terms town house and condo are sometimes used interchangeably This is most likely because both types of housing structures may be governed by homeowners associations. That however is where the similarity between the two ends. Comparing condos with town houses is akin to comparing apples and oranges. When most consumers hear the word condo they picture a unit in a larger structure. For the most part this is accurate. The problem though is that condominium is actually a form of ownership not a type of structure. There are three major types of homeownership Condominium Fee simple CooperativeCondominium owners own the interiors of their units and share ownership of the common areas. Town house on the other hand describes a type of structure one that is typically two or more stories and attached to one or more other town houses each with its own front door. In some parts of the country town houses may be owned as condominiums or the homeowner may own it fee simple in which she owns the building and or land in its entirety. As you can see the questions to ask if you are thinking of purchasing a town house will be quite different than those you ll consider when purchasing a condominium unit. Let s take a look at three of the most significant factors you should consider. 1. Homeowners Association While not all town houses are governed by homeowners associations many are. This fact opens up a can of worms when considering whether to purchase. HOA fees can be quite expensive so you ll need to take them into account when determining how much you can afford to spend on housing every month. During the purchase process you ll be given a pile of HOA-related paperwork and you ll need to read every word of every page or have your attorney do so. You ll want to know if the HOA is solvent how often it levies assessments and if there is pending litigation among other issues. Finally you ll need to consider if you want to live in an area managed by an association. Some people prefer the structure that an HOA affords while others find that structure too confining. 2. Getting Financed Purchasing a fee simple town house is identical to purchasing a detached single-family home as far as lenders are concerned. If the town house is owned as a condominium lending becomes a bit trickier. Owner-occupied homes tend to be maintained better than those used strictly as rentals. Lenders understand this and make it a part of the lending decision. Find out the ratio of owner-occupied to tenant-occupied units before making an offer. If it exceeds 30% you may not be able to get a mortgage for it. Determine the percentage of homeowners that are delinquent in paying their HOA dues. This is critical information because banks typically won t lend to anyone wishing to purchase a town house where the HOA delinquency rate is more than 15%. Click here to see more information about our preferred lenders. 3. Exit Strategy If you re using the purchase of a town house as a springboard to the future purchase of a detached home you ll want to plan an exit strategy. Yes it seems silly to consider moving before the ink is dry on the purchase agreement but it s necessary to achieve your future goals. Building equity in a home takes time and depending on market conditions and the type of home you own it may take longer with a town house. All things being equal (location proximity to good schools etc.) a single-family home will appreciate in value quicker than a town house. In reality the opportunity to build equity in the first few years of ownership of any type of home is minimal unless you pay an enormous down payment. Ask your real estate agent to give you statistics on town house sales in your area over the past year. Check the average days on the market. The longer a home remains on the market the less money it eventually brings. Should you decide to purchase ask your agent to keep you updated on the town house market in the future. Most agents are happy to do this.Keep in mind that even when your equity begins building your property taxes may rise. Property reassessments can take a bite out of how much equity you re able to build. Living in a town house is ideal for those who want the benefit of homeownership at a cheaper price and without some of the headaches that come with a detached home. Choose your town house wisely and with an eye toward future market value. Click here for Townhouses and Condos for Sale in Baton Rouge Louisiana Thank you for your interest in Land For Sale in Baton Rouge Louisiana. 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