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If you’ve settled on or are thinking about buying a townhouse, you’re in good company. Behind detached single-family homes, townhouses are the second most common home choice among buyers in the U.S., 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 on what to think about when purchasing this type of residence.

What is the definition of a townhouse?

Townhouses walk the line between detached single-family homes and condos, offering the best of both. Since they differ widely by size and structure from area-to-area, they’re difficult to define by appearance alone. Generally, however, these are multilevel residences attached by a communal wall to another residence or two. Some may also have small yards or patios.

These residences differ from a condo in ownership. Unlike a condo, townhome owners typically own both the interior of the home and the exterior land (a small yard or patio). Like a condo, owners may pay an HOA fee for things including care of common areas and trash pickup.

The Census Bureau’s definition of a townhouse provides some 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 United States Census Bureau, it must have no units above or below, be separated by a ground-to-roof wall, maintain separate heating systems and have individual meters for public utilities.

Why buy a townhouse?

Just like any other type of home, townhouses come with pros and cons.

Here are some potential pros of buying a townhouse:

  • Better affordability: Townhomes often cost less than single-family homes of a similar size in the same location. “Because of high land costs it is less expensive to build homes attached and hence lower cost for consumers,” says Lawrence Yun, NAR’s chief economist.
  • More ownership: You generally have ownership over the exterior as well as the interior of the home. While the HOA may enforce certain aesthetic codes for the exterior, there’s generally more freedom to change appearance on the outside of the home than you would have with a condo.
  • Less maintenance: Because they’re smaller lots, it’s typically easier to maintain the interior and exterior of a townhome. And you’re often not responsible for maintenance of the exterior of your home and shared grounds, says Sallie Simmons, affiliate broker for Zeitlin Sotheby’s International Realty in Nashville. “These are often taken care of with a monthly fee to a homeowner’s association,” she says.

Here are some potential cons of buying a townhouse:​

  • HOAs: Townhomes can come with monthly HOA fees that cover the exterior and grounds maintenance and common elements like sidewalks, pools and lawn care. While that can be convenient for someone interested in a low maintenance home, this fee can be costly, depending on what it covers, says Simmons. And the fee can change or increase over time. Plus, Simmons adds, the HOA has rules and regulations that may restrict how you can use your property and in what ways it can be altered.
  • Potential lack of privacy: Because townhomes are typically attached units, there might not be as much privacy as with a single-family detached home. For example, says Simmons, you might be able to hear your neighbors, or a leak from an adjoining property may seep into your home.
  • More expensive per square foot: According to NAR, townhomes are the second most expensive type of housing per square foot behind condos in buildings with five or more units.

Tips for buying a townhouse

1. Consider hiring a real estate agent

Real estate agents can act as a guide and advocate when purchasing a home. Your agent can provide information on buying a townhouse in your local market, negotiate on your behalf and fill out all of the forms and disclosures necessary to successful purchase a home.

It’s important to remember that agents get paid commission for their work. Ask upfront about their commission charge so you know what to expect. Generally, however, the seller pays the real estate commission and the selling broker may share that commission with the buyer’s broker.

2. Know the costs of townhomes in your area

Being aware of the median cost of a townhouse in your area can help you decide if you’re paying a fair price for what you’re getting. For example, buyers who purchased a townhome in 2018 paid an average of $150 per square foot for a 1,600-square-foot home, according to the National Association of Realtors.

Here was the median price per square foot in different regions throughout the U.S. in 2018:

  • Northeast: $140 for a 1,700-square-foot townhouse
  • Midwest: $130 for a 1,600-square-foot townhouse
  • South: $140 for a 1,730-square-foot townhouse
  • West: $210 for a 1,340-square-foot townhouse

Naturally, median prices-per-square-foot vary by city. The median price of a home in Los Angeles, for instance, will be different from the median price in Seattle. Your real estate agent can advise you on the median housing price of townhomes in your area.

3. Know the HOA fees and what they cover

Take a close look at the homeowner’s association, the fees it charges and what is covered before settling on a townhome. The HOA fees should be a consideration in the overall purchase, says Yun.

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, she notes.

4. Prepare for a possible bidding war

Because townhomes are an increasingly common choice among first-time homebuyers, 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 if there’s a real estate downturn, condo and townhouse prices tend to fall the fastest and the most compared with single-family homes.

“In the current environment of very low interest rates the demand for starter homes have been exceptionally strong and therefore be mindful of possible multiple bidding and better than usual price growth,” says Yun.

5. 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.

6. Get preapproved for financing

You should always get preapproved 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 helps you to determine if 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.

7. 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 Simmons. And if any problems are found on the exterior, make sure they addressed and repaired before going through with the sale. Often, says Simmons, any exterior problems can be taken care of by the HOA. If not, the repairs are the seller’s responsibility.

You’ll want to pay special attention to adjoining properties. If the upkeep on these is poor, it will reflect badly on your home when you go to sell it. In addition, failure of your neighbors to maintain items like roofing and siding can can damage to your home no matter how well you keep up with maintenance.

Who townhouse buying is best for

First-time homebuyers living in densely populated metro markets may find townhouses a very good and affordable option, says Yun.

They can also be a solid choice for anyone interested in a low maintenance lifestyle who wants a lock-and-leave property, notes Simmons.

Overall, if you don’t want the exterior maintenance that comes with home ownership, but you would still like the equity and wealth building aspects of owning a home, buying a townhouse in an HOA is worth consideration.

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