The road to home-ownership can be overwhelming, especially for first-time buyers. Learning the terms, navigating the mortgage market, taking care of the paperwork, then deciding on the type of home to buy – condominium or single-family home, there is a lot that is involved in the home buying process. In the fast-growing real estate market, most home buyers are opting for condominiums thanks to the benefits that come with owning one. However, before putting ink to paper, it is important that you understand how condos differ from a single-family home, and whether this is truly the best option for you.
? How a Condo Differs from a House
Most home buyers assume the difference between a condominium and a single-family home is that one comes with a yard while the other does not. Well, there is much more to it than this, and it is crucial that you know all the factors before deciding which one to buy. The other area buyers easily get confused about is the difference between an apartment style and a townhouse style. An apartment and a townhouse are terms used to refer to the style of the home.
What is a condominium?
A condominium or a condo, comes with most of the same amenities as single-family home ownership, except that an “association” that acts more like a cooperative’s board of directors manages development. Each condominium owner has a share in the ownership of common areas like recreation rooms, corridors, as well as courtyards. It is the association’s responsibility to ensure that the common areas are kept in good shape. The association may decide to have an on-site superintendent or enter into a contract with an offsite maintenance crew.
What is a single-family home?
Legally, a single-family home is defined as a “structure used and maintained as a single dwelling unit.” This is a detached or stand-alone property that does not share a roof or wall with any other dwelling. It is built on an exclusive parcel of land, and the area around the building exclusively belongs to the homeowner. As the name indicates, it is built as one family’s residence whose owner has an undivided interest in the property.
? Homeowner Associated vs. Community Associations
There are similarities between the homeowners’ associations (HOAs) and community or condo associations. The developers create both associations and governed by a board put in place by the property owners. Both associations assess membership fees and joining an HOA or condo association is mandatory if you buy in the community. Additionally, both HOAs and condo associations are responsible for repairing, replacing, and maintaining common areas such as sidewalks, parking lots, playgrounds, green areas, and any other recreational facility within the community.
While HOAs in single-family home setups must approve any exterior alterations or improvements to a home, condo associations wield much more power. For instance, they can dictate whether you can or cannot buy the condo, to whom you can sell your condo to, whether you can lease it (and for what duration), how you should market your condo, and the extent to which you can improve your condo’s interiors. A condo association also regulates pet ownership, parking spaces, as well as outdoor furniture. Finally, condo associations also take care of management, maintenance, and insurance on of the building’s common elements as well as vetting and hiring all the contractors that work on the building.
? Mortgage Loan Considerations
When applying for a mortgage, most lenders look only at your financial status but also the financial health of your prospective HOA or condo association. An association that has financial problems can cause a delay or even a cancellation when buying or selling a property. Purchasing a condo that has a positive, successful association can be a plus.
Federal Housing Administration (FHA) loans are popular with first-time home buyers. However, to qualify for FHA financing when buying a condo, more than half of the condominium units in the building must be owned and occupied. Additionally, a single investor should not own more than 10 percent of the units, and no more than 15 percent of the existing owners must be defaulters on their monthly dues.
? Insurance & Taxes
Condominium owners have an advantage over single-family homeowners when it comes to home insurance. This is because they are only responsible for what is within their homes such as furniture, flooring, and kitchen and bath fixtures. The condo association insures the overall building, common areas, and exteriors. A single-family homeowner, on the other hand, is responsible for insuring the entire home and the land upon which it sits.
There is no significant difference in taxation for condos and single-family homes. While most share the same structures, condos are treated as separate units for tax purposes. Their values are assessed in the same manner as single-family homes. The fees paid to HOA or condo associations are not tax deductible. In both cases, mortgage interest, as well as property taxes, can be deducted on federal income tax by taxpayers who occupy them.
?♀️ How a Real Estate Agent Can Help
Whether you are opting for a condominium or a single-family home, the road to home ownership can be a bumpy one, often characterized by unexpected turns and detours. A professional real estate agent has negotiation skills, experience, and knowledge of the local market as well as the pros and cons of both housing options. A good real estate agent can assess your needs, budget, preference, and motivation to help you narrow your search with respect to these priorities. Finally, a good real estate agent will walk with you through the buying process to ensure that all the paperwork is handled as required.