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If you’re thinking about buying a townhouse, you’re in good company. Behind detached single-family homes, townhouses were the second most common home choice among U.S. buyers in 2022 , according to the National Association of Realtors (NAR). While the process of buying a townhouse is not unlike that of a single-family home or condo, there are some differences you’ll need to be aware of when shopping. Whether you’re a first-time homebuyer, looking for a second home or interested in downsizing, here’s a guide to purchasing this type of residence.
What is a townhouse?
Townhouses (or townhomes) walk the line between detached single-family homes and condos, offering the best of both. They can differ widely in size and structure, but generally, townhouses are multilevel residences attached by a common wall to another residence, or two. Some have their own small yards or patios.
The Census Bureau’s definition of a townhouse provides more guidance, at least when it comes to what qualifies as a single-family home. In order for a townhouse to be classified as a single-family structure by the U.S. Census Bureau, it must be separated from adjacent units by a ground-to-roof wall and maintain separate utilities and heating/air-conditioning systems from its neighbors.
Townhouses and condos are similar in many ways, but not exactly the same. One of the main differences is the degree of ownership. Unlike a condo, townhome owners typically own both the interior of the home and the exterior land it sits on, including the yard (if there is one). Townhome owners may pay HOA fees for things like maintenance of common areas and trash pickup, like condo owners do, but not necessarily.
Townhouse pros and cons
Just like any other type of home, townhouses can come with both positive and negative aspects.
- Affordability: Townhomes typically cost less than single-family homes of a similar size in the same area.
- Greater ownership: Unlike condos, with a townhouse you generally have ownership over the exterior as well as the interior of the home. While an HOA may enforce certain aesthetic codes for the exterior, there’s generally more freedom to change appearances than you would have with a condo.
- Little maintenance: Because they’re smaller in size and on smaller lots than freestanding homes, it’s typically easier to maintain a townhome. And you’re often not responsible for maintenance of the exterior of your home and shared grounds, says Sallie Cromwell Simmons, a broker with Zeitlin Sotheby’s International Realty in Nashville. “These are often taken care of with a monthly fee to a homeowner’s association,” she says.
- Shared amenities: Like condos, townhouses are often part of communities shared amenities, such as outdoor walking trails, pools, clubhouses and more for residents to enjoy.
- HOA rules and fees: Townhomes often come with monthly HOA fees that cover the exterior and grounds maintenance and common elements like sidewalks and lawn care. While that may be convenient for someone interested in a low maintenance home, it can be costly, says Cromwell Simmons, and the fee can change or increase over time. An HOA also has rules and regulations that may restrict how you can use your property and in what ways it can be altered.
- Lack of privacy: Because townhomes are typically attached units, there might not be as much privacy as you’d have with a single-family detached home. For example, says Cromwell Simmons, you might be able to hear your neighbors. And note the condition of a townhome’s adjoining properties. If the upkeep on these is poor, it will reflect badly on your home when it comes time to sell it.
- Less space: Townhouses tend to be much smaller and narrower than a freestanding house. They also feature multiple stories, which can be difficult for people with mobility issues.
6 tips for buying a townhouse
1. Hire an experienced real estate agent
Real estate agents can act as your guide and advocate when purchasing a home. Your agent can advise you on the median price of townhomes in your area, as well as provide information on the local market, negotiate on your behalf and fill out all of the forms and disclosures necessary to successfully purchase a home.
Agents get paid a commission for their work, so ask upfront about their commission charge so you know what to expect. Generally, however, the it’s the seller who pays the real estate commission, not the buyer.
2. Know the HOA fees and what they cover
Before settling on a townhouse, take a close look at the homeowner’s association (if there is one), the fees it charges and what is covered. The monthly fees should be a consideration in your overall purchase. Cromwell Simmons advises reviewing the rules, regulations, current financial statements and all of the development’s HOA documents prior to buying. “A buyer can make their purchase contract contingent upon reviewing this information to the buyer’s satisfaction,” she says. That way there are no surprises when it comes to fees or restrictions for the property.
3. Prepare for a possible bidding war
Townhouses are more affordable than traditional detached homes, which makes them an increasingly popular choice among first-time homebuyers. The demand for starter homes is strong in today’s market, and so you might find yourself in a bidding war. If this happens, it’s best to determine the maximum you are willing to pay from the onset — and stick to that number. Yes, you may be outbid, but keep in mind that during a real estate downturn, condo and townhouse prices tend to fall the fastest and the most compared with single-family homes.
4. Shop for the best mortgage rates
It’s important to compare mortgage rates with at least three different lenders. Getting a low rate can save you thousands of dollars over the life of a loan. Keep in mind that the most favorable rates go to those with the best credit and least debt as a percentage of their income.
5. Get preapproved for financing
You should always get preapproved for a mortgage before home shopping, says Kurt Johansson, senior loan officer for Shelter Lending Services. Being preapproved offers a number of advantages. It gives you a better idea of what you can afford and can help you compete with other buyers. Plus, it can help you determine whether the HOA fees of a particular townhome will be too high. HOA fees are factored into the purchase price when qualifying for financing. So, a high HOA fee could knock you out of qualifying if you are buying at the top of your range, says Johansson.
6. Get a home inspection
Home inspections are just as important for townhomes as they are for detached single-family homes. Make sure the inspection includes both the inside and outside, even if the HOA takes care of the exterior, says Cromwell Simmons. And if any problems are found on the exterior, make sure they are addressed and repaired before going through with the sale. Often, she says, any exterior problems can be taken care of by the HOA. If not, the repairs are the seller’s responsibility.
Townhouses can be a great choice for first-time homebuyers, thanks to their lower price point than single-family homes. They can also be a solid choice for anyone interested in a low-maintenance lifestyle and a lock-and-leave property, says Cromwell Simmons. But, while townhouses are less expensive than single-family homes, the flip side is that you get less square footage and less privacy. Overall, if you don’t want the exterior maintenance that comes with homeownership, but you would still like the equity and wealth building aspects of owning a home, buying a townhouse is certainly worth consideration.