Hey everybody, I hope you are doing well. Thanks for tuning in to another episode of the Inside Track. Last summer I covered this, but I want to cover it again: the difference between condos, townhomes, and PUDs (planned unit developments) and how it affects you. This doesn’t affect you unless you’re going to buy a place in the near future, or if you already own a place, it still may affect you.
Long story short, condos and townhomes, what’s the difference, and what is a planned unit development? Condominiums and townhomes are forms of ownership, as are PUDs. They tend to get lumped into something they look like, so you assume they are what they appear to be, which may not necessarily be the case.
The differences are mainly that condos are typically more high-rise and more affordable. Townhomes look like a certain style, and you often get the land with it. Condos generally have less maintenance. What I really want to show you is where the rubber hits the road. A planned unit development, a condominium, and a townhome are all different types of housing with varying ownership and maintenance responsibilities. With a PUD, the owners typically own the land and the structure. With a condominium, the owners typically own the interior of their unit, which is why you need insurance just for the inside, called a walls-in policy. The association owns the land and common areas.
Where this really matters is that townhomes themselves can either be a PUD or a condo, with the difference being who owns the land underneath. Just because you look at a property and it’s labeled a townhome, you can’t assume it is a planned unit development. On the MLS, it may show as a townhome, an end unit, built in ’96. People often refer to PUDs as townhomes, but townhome is just a style, not a formal zoning designation. In PUDs, the owner owns the lot or ground underneath the unit. With condos, the owner owns an equal and undivided interest in the entire project, not the land, you just own the walls in.
Looking at an example, it is a townhome and looks like a PUD. In reality, it is a condominium. That’s a big deal because condominiums, unless you put 25% down, come with a hit from the government since there’s more risk in a condominium. If it were a PUD, it would not be subject to that. Because it’s owned as a condo and not a PUD, it’s also subject to Fannie Mae and Freddie Mac’s condo approval, which is a whole different set of rules.
At the end of the day, if possible, you want to do PUDs because there are fewer hoops and no hit from the government if you put less than 25% down. They don’t consider those as risky as a condominium. A condominium is not a style of property but a form of homeownership.
The point is you have to do the legwork. Just because it’s a townhome, it could be a PUD or it could be a condo, and there is a big difference. The way you find out is by looking at the legal description to see how it is characterized—whether it says condominium or planned unit development.
If you have questions on this or anything else, please reach out and I’ll walk you through it, because even real estate agents don’t always know what they’ve got when it says townhome. Also, if your current interest rate is six and a half percent or higher, it’s time for us to talk. Simply email me your most recent PDF mortgage statement and I’ll have a look at it. If you’re in Salt Lake City, Salt Lake County, Davis County, or Utah County, we should talk and see if we can make things a little bit better for you. As always, thank you for watching, and we’ll talk to you soon. Take care.
