Real Estate Tips: What Is A Townhome?

An explanation of what a townhome is plus some advantages and disadvantages of financing and owning one including homeowners fees and what they mean.

A townhome, or townhouse as it is also called, has no legal definition. It's just a convenient architectural term, one that most people are familiar with. A townhome is defined, not just by the builders, but by realtors and mortgage lenders too, as a house that is attached to other homes on either side. Townhomes usually - but not always - have their own space at the front or the back of the house.

Townhomes still have somewhat negative connotations among homebuyers. Many people consider them not "˜real homes' although these days many town homes are just as luxurious as other homes - they may have large master suites, garage, modern appliances and innovative floor plans. A recent trend is the three story townhome, which offers as much floor space at a lower price as other homes. Generally speaking, townhomes are still less expensive than detached homes (also called "˜single-family homes') as they occupy less land. They are still sought after by first-time buyers, single professionals and people on a more limited budget. The average cost of a townhome nationwide is around $120,000 compared to around $150,000 for a single-family home. Townhomes are considered to be a step up from an apartment or a condominium and usually have more room than an apartment and offer a little bit more privacy as there is generally nobody living below or above you.

The main advantage of a townhome - apart from the lower price - is the lack of having to carry out maintenance and upkeep. Unlike a regular house, there is little to maintain in a townhome. Unless you have one of the end units, you will have shared walls on either side; you may have a small yard or patio, but in general probably not a huge lawn or outdoor area to look after. Many townhomes are in communities where everyday repairs and maintenance are included in monthly or yearly fees. You may also have use of a swimming pool, tennis courts, golf course or other amenities if you own a townhome. Townhomes generally increase in value a little bit faster than a condo or apartment.

There are drawbacks to living in a townhome. You won't have as much space as a more conventional home; most townhomes have a patio but there may not be a big yard or garage. You have neighbors on either side of you, so there may still be a problem with noise. Some older townhomes have thinner walls, and may not be insulated well. One of the biggest problems with a townhome is the many rules and restrictions that you must abide to. Many townhomes belong to a homeowners' community or cooperative whose rules govern what you can do to the inside and the outside of your house - even though you own it. Always check what their restrictions are - they may be as specific as having the outside of everyone's house a uniform color, they may not allow you to plant trees or flowers etc. Some homeowners' associations have a problem with satellite dishes or TV antennae on the roof of your house.

The homeowners' rules may even expect you to be responsible for upkeep and maintenance of the area outside your home, or other communal areas. Technically, you are a shareholder in the communal grounds, other buildings - everything except the actual inside of your home. Some townhome communities are situated in areas not maintained by the town or city - a major disadvantage when snow and ice is not removed from your street.

Be careful of the amount of homeowners fees or dues, they can be substantial, even for a modest home, especially if they cover the use of a pool or other amenities. Always ask what your dues include, whether there are any plans for a rate increase, and if you can see a detailed breakdown of expenses. The dues usually include trash collection and water rates, making it easier to mange monthly expenses. The homeowners association can be all powerful - deciding to replace everybody's roof, for example and increase dues accordingly, whether you want it or not. There may be a homeowners' board of directors, consisting mostly of your neighbors - ask when they meet, and what their responsibilities are.

Townhomes can still be somewhat difficult to finance and resell, although they are fairly easy to rent out by their owners. If you are thinking of buying a townhome, try to find out how many of the homes in that particular community are rented, rather than owned. Renters are generally not as responsible for their environment as owners tend to be; you may find it more difficult to sell your home or get a fair price if there are a high proportion of renters nearby. Some mortgage lenders are reluctant to give a loan on a townhome if more than 25 percent of the properties are rented.

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