Realtors: How to Show a Townhome or Condominium

With their low maintenance living, townhomes and condos represent a great purchasing opportunity for your clients. Whether they are first-time buyers, empty-nesters, or someone who just wants to put minimal time and effort into the upkeep of the outside of their home, there’s a good chance they will find something that they like in condo or townhome living.

There are a few differences between the two, and your clients will need to be aware of them. First, in a townhome, both the dwelling and the land under it are owned by the buyer. In a condo, they still own their unit, but the land underneath it is part of what is called a “common parcel.”

Another major difference is the level of maintenance provided by the owners’ associations. As far as landscaping is concerned, they may mow the lawns around the units and in the common areas but likely won’t plant or maintain shrubbery around each individual unit. Condos tend to provide landscaping and maintenance for the entire development to create a uniform look.

On the other hand, condo associations are also more involved with maintenance such as external painting and roof replacement. Part of the reason that condo association dues tend to be higher than townhome fees is because the association is responsible for these items. This is due, in part, to the fact that because of the way they are configured, condos are more likely to share roofs than townhomes, so entire roofs need to be replaced at the same time.

Before your showing

Before showing your clients a condo or a townhome, it’s important to learn what financing will be available to your prospective buyers from lenders. Condos, specifically, have to be on what is called an Approved Condo List before many lenders will consider approving a mortgage application.

This list was created due to the fact that in the eyes of the lenders, some condo and townhome developments either had rules and regulations that were too rigid, or the associations refused to show lenders their bylaws at all.

FHA borrowers, in particular, have had challenges with these types of developments, as FHA will limit the percentage of units they’re prepared to finance. This is to protect their interests should the homeowners’ association collapse and the units lose significant value. In contrast, conventional mortgage borrowers are less likely to run into these lenders’ concerns, because they can put down more money and generally have better credit scores.

Financial statements

The financial stability of the homeowners association will also be of significant concern to potential buyers; if possible, try to obtain a copy of the association’s latest financial statements. If they are available only to serious buyers, recommend that your buyer ask the association’s management company for a copy.

Ensure that both the buyer and the real estate attorney read and understand them. What they are looking for is the association’s solvency level as well as any trends that point to potential issues down the road.

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