A couple years ago I made this video about the difference between a townhouse and a condo:
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The video lays out some of the biggest differences between condos and townhomes, which a lot of people (even real estate agents) don’t totally understand. The difference is HUGE when it comes to getting a loan, whether or not renting out your place down the road is an option, and how much your dues are.
Since I have two friends selling their places downtown right now, I thought I’d use them as examples. One is a condo and the other is a townhouse– these properties are both really great examples of the pros and cons of each- so lets check’em out! In the first blog post, we’re going to check out the condo option. To see the townhouse option click here!
The Condo Option:
This is a great example of a condo for sale in Downtown Tacoma listed by my friend Janet at Windermere for $227,000. Awesome 1 bedroom. The building is The Vintage Y. It is a historic building that was renovated and turned into condos by Fred Roberson a few years back. I have several favorite peeps in this building. It’s gorgeous, historic, has HIGH ceilings, and has garage parking in my favorite neighborhood downtown, St Helens.
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The big advantage of a building like The Vintage Y is that it is FHA and VA approved (rare in Tacoma), so it’s a great option for first timers or military buyers using their VA benefit loan. It’s steps (like less than a block) to all my favorite places: The Grand Cinema, The Mix, Puget Sound Pizza, Stink, The Pantages, and Opera Alley! Click here to view the listing on this condo. Feel free to contact me if you would like to schedule a showing.
Here’s the breakdown on how condos work:
1. DUES: On a condo, the dues tend to be higher. This is because you’re not just paying the bills as you go- with any luck, you’re actually planning for future expenses. Every month you’re paying into a kitty that will one day replace the roof, paint the exterior, or fix the elevator. You’re also splitting your building’s main insurance policy with all the other owners, as well as common area maintenance. What kind of stuff is included in common area maintenance? That would be like cleaning the gym or the pool, or keeping the grounds maintained. Buildings with higher dues tend to have more amenities and more in savings- so make sure you take a look at the books when you buy. Sometimes low dues mean no one is saving for your condo building’s rainy day fund.
2. FINANCING: When you go to get your loan, whether it is from a bank, credit union, or broker- the loan they approve you for will determine which condo buildings you can buy in.
FHA & VA Loans: If you get an FHA or VA loan- the condo building you are buying in has to have an FHA or VA certification. Unfortunately in Tacoma, FHA and VA certifications are not as common as I would like. Why is that? Honestly, I have no clue. I wish more condo owners would remind their HOAs to apply for and renew those certifications annually- because when units in their building sell more people will be able to buy them (which means higher prices people! PULL IT TOGETHER!)
Conventional Loans: Many of the buildings that don’t have FHA or VA certification can still be purchased with a conventional loan, but since even conventional loans have strict rules that condo buildings have to follow (check out this video on how to keep your condo financeable if you want to go down that rabbit hole)
CASH: Some buildings just need cash. You can usually spot them because the prices are CRAZY CHEAP. I get buyers messaging me on this blog, “I’d love to buy that 2 bedroom condo downtown for $85,000 with my VA Loan!” they say. Well I would love that too- but that building can’t be financed- which is why it’s SO CHEAP. Buildings that are perfectly well run but embroiled in lawsuits sometimes can’t be financed. Sometimes it’s because one person owns too many of the units or too many owners are delinquent on their dues. I typically recommend that only savvy seasoned investors buy in these buildings- or if you do pay cash for one- you do a LOT of research!
If you want to see which buildings in Tacoma are currently approved for FHA financing, check out this list.
If you’re planning to buy with a VA loan, check out this list.
3. Walls In: As I say in the video above, the fundamental difference with a condo is that you own from the walls in, and then you have a shared ownership in everything else. This is a VERY brief and simplistic version of actual laws that govern what you own in a condo- so check with your agent and title insurance when you buy. For example, a lot of the time you don’t technically have sole ownership of your deck- but you might have sole USE of the deck. The upside is when the deck needs to be repaired or replaces the whole condo building pitches in- even if it’s just your deck. Again, this can vary based on the condos rules and how everything was set up- so check with your agent. But the rule of thumb with condos is you own it from the sheetrock in and share ownership in all the common areas.
Conclusion: Condos are awesome because when they are run right you don’t have to think a ton. Great for people who don’t want to take care of a yard, but you need to do your research and stay involved in your HOA. Click here to read part 2, townhouses!
Want to buy a condo? Contact me. I’ll help you figure it out.
