If a detached house is out of reach, more maintenance than you want, or simply not your preference, attached housing is the usual alternative. Condominiums, townhouses and cooperatives are often discussed as one thing, but they differ in what you actually own — and that difference affects your financing, your taxes and your monthly costs.
What You Own
Condominium. You own the interior space of your unit and a shared interest in the common areas — hallways, exterior walls, roof, grounds and amenities. You do not own the land beneath the building. You pay property taxes on your own unit and belong to the association automatically.
Townhouse. Usually a form of ownership as much as a building style: you typically own the structure and the land it sits on, including a small yard, while sharing side walls with neighbors. Most townhouse communities still have an association handling shared areas.
Cooperative. The important one to understand, because it is genuinely different. You do not own real estate at all. You own shares in a corporation that owns the building, and those shares give you a proprietary lease on your unit. Consequences follow: financing is a share loan rather than an ordinary mortgage and not every lender offers one, the co-op board can usually approve or reject your buyer, and monthly charges often include a share of the building’s own mortgage and property taxes.
The Trade-Offs
The appeal is real: lower entry prices in expensive areas, no roof or lawn to maintain, amenities you could not afford alone, and often better security. So is the cost.
- Shared walls — possibly on several sides, and above and below. Ask about the construction and sound insulation, and visit in the evening.
- Fixed space — what you buy is what you have. You cannot add a room, because you do not own the land or the exterior.
- Rules — on pets, renting out, exterior appearance, noise and much else. See easements and covenants.
- Monthly fees — a permanent housing cost on top of your mortgage, and they rise. See condo fees and HOA dues explained.
- Special assessments — the risk people underestimate. If the roof or elevators need replacing and reserves fall short, owners are billed for the shortfall, sometimes thousands of dollars, and you cannot decline.
- Less control — decisions are made by a board and by votes, and you may disagree with them.
What to Check Before Buying
Buying into an association means buying into its finances and its disputes. Ask for the documents during your contingency period and actually read them.
- The reserve study and reserve balance — is the association saving for major repairs, or deferring them onto whoever owns the unit when the bill lands?
- Recent board minutes — the fastest way to learn about looming assessments, litigation and chronic problems.
- Fee history — how much dues have risen over five years.
- Pending litigation — can affect both your costs and your ability to get a loan.
- Owner-occupancy ratio — a high share of rentals can make conventional financing harder to obtain.
- Insurance — what the master policy covers and what you must insure yourself.
- Delinquency rate — if many owners are behind on dues, the remaining owners carry the shortfall.
Lenders scrutinize these too. A condo project with weak reserves, heavy litigation or too many rentals can fail to qualify for financing, which limits who can buy your unit when you come to sell.