To novice buyers, a condo, townhouse and a co-op may seem indistinguishable.
These options are often more attractive to first-time homebuyers. They're less expensive than a single-family house. They also have a sense of community, bringing numbers of people and families together in close physical proximity. They don't have a large land area, meaning little or no lawn to mow.
But there are legal and practical differences between the types of housing. They affect not just your monthly payment but how you use your property and who decides.
Here's a look at the pros and cons of each housing type.
Condo
A condominium is the individual ownership of a living area inside of a larger structure which houses similar units. The building and common areas are owned jointly by homeowners and all other condo owners.
- Homeowner owns interior space between the walls of a building
- Homeowners association, or HOA, is responsible for maintenance, insurance and upkeep of common areas
- The association is governed by a board comprised of condo residents
- The association sets rules that govern how condo owners use their interior space and common areas
- The association sets monthly fees that must be paid in addition to mortgage payments
Pros:
- Condos are often more affordable alternatives for first-time homebuyers
- Someone else does the yardwork
- You get a built-in community with social events
- The cost of amenities like a fitness center and pool is shared with your neighbors
Cons
- A condo board or homeowners association dictates how the overall property is used
- Unexpected expenses and inflation can lead to higher fees or a special assessment
- Deferred maintenance can lead to a hefty special assessment down the road
- Stiff HOA fees may discourage buyers when you sell
Co-op
A co-op is a form of ownership in which residents purchase shares in an association that owns the building where they live. The ownership gives them the right to live in the building. It does not give them ownership of an individual unit.
- Residents purchase membership instead of actual property like home or land
- Co-op board must approve your application to become member
- Members receive right to live in property
- Members jointly pay for building and repair expenses with other members
- Co-op sets rules for members
Pros:
- Living in closer proximity fosters close-knit community
- Co-op members are more familiar with each other as neighbors
- Co-op decisions are made by all members, so more democratic
- Fewer costs for paying your personal repairs as property is jointly owned
Cons:
- Co-op application must be approved by co-op, and applicants can be rejected for personal/petty reasons
- Application process opens door to possibility of unlawful housing discrimination (based on race, sex, gender, etc.)
- Co-ops may have greater restrictions on use of property
- Application process can take a long time
Townhouse
A townhouse is a multistory home that shares exterior walls with another home and is part of a planned community that is governed by a homeowners association. Each home has its own exterior door.
- Homeowner owns not just the interior space of a unit but its walls and possibly land around it
- Homeowners association is responsible for maintenance, insurance and upkeep of common areas
- HOA governed by board comprised of residents
- HOA sets association rules that govern how owners use their interior space and common areas
- HOA sets monthly fees that must be paid in addition to mortgage payment
Pros:
- More personalized ownership with structure and land
- HOA often not as restrictive
- HOA fees can be less because there are fewer amenities
- They only share two sides of property with residents
Cons:
- Typically has fewer amenities than condo
- Owner responsible for maintaining structure and repairs
- Owner may be responsible for lawn or surrounding land
- Community less tight-knit because of sprawl of townhouse units