House, Condo, Townhouse, PUD or Co-Op…What Should I Look For?

Before I get into the differences between these types of properties, I will define what a PUD is. PUD stands for Planned Unit Development. A PUD is essentially a single family home and the ownership of it is treated that way also. The major difference is that a PUD is part of a community, part of a larger development. So although you will own your residence if it is a PUD you will pay a small association fee per month to maintain community areas often consisting of parks, pools and sometimes recreation rooms designed for the entire community. There is also an association as there is with condos and so if you want to make major improvements to your home or want to paint your house an outrageous color you will need the approval of your association if you live in a PUD. However, because a PUD is essentially a single family home that is simply part of a larger community you will be responsible for your own repairs and for maintaining your own homeowners insurance since you own your building (house) and land.

A townhouse and condominium (condo) are basically the same thing legally, there is no distinction in ownership. The differences between these two words refer to the architectural style they are built. Usually, a condo is more of an apartment style building where a townhouse looks like an independent home that may or may not have attached walls to the rest of the townhouses in the same community. For ownership purposes they are the same. When you buy a condo or townhouse what you are buying is cubic airspace of a unit with an interest in the common elements of the property. The common elements meaning the lobby, swimming pool, recreation area, land, etc. What you technically and legally own is airspace, you dont actually own any land or a structure.

Every condo and townhouse community has a homeowners’ association and that association is responsible for maintaining the grounds, structures and systems of the community. That is the reason the association fees are pretty high. You wont need homeowners insurance though because this is part of what is covered by your association. Unlike owning a house where you may have a huge repair to do every five years, you pay monthly and the money accumulates with the association and then is used when needed to maintain the community and all of the structures. If you are looking into purchasing a condo or townhouse it is important to find out about the association. If the association is bankrupt you will have problems in the future with the value of your condo and with any repairs that the complex may need.

A Co-Op (short for Cooperative) is also called an Own-Your-Own is unique in its own right. Structurally a condo and co-op often look the same, like an apartment you own. A co-op is where the structrure itself is a corporation that holds title to realty. If you are an owner, you own stock in the corporation and you are granted the right to occupy as a shareholder. Co-ops like condos have an association that handles the community structure and land. Along with the association is a monthly association fee to maintain the community. When you own a co-op you wont need homeowners’ insurances because the association covers it. Cooperatives are common on the east coast. Sometimes getting a loan for this type of real estate can be challenging in an area like Los Angeles where cooperatives are not common.

A home also referred to as a single family home or single family residence is the simplest type of ownership to understand. When you own a home you own the building and land beneath it and have full rights to the entire property. You are also fully liable and responsible for repairs since the buck stops with you. You need to make sure you have your own homeowners insurance and are able to cover repairs the home may need. There is no association to handle problems. Consequently there is no association fee that goes along with owning a single family residence.

So when you are looking at purchasing a home, condo, co-op or PUD remember there are FOUR major costs you need to factor into your monthly overhead: mortgage payment, property taxes, homeowners’ insurance and association fee. Homeowners’ insurance isn’t always expensive depending on what you get, what part of the country you live and what types of natural disasters you insure.