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Condos and Townhomes: Bozeman's Affordable Option

Condos and Townhomes serve our market, and in particular, they can be a great gateway to enter our market. It is important to note that condos and townhomes can not be easily identified by their structure style. Condos can look just like single-family homes.

What is the definition of a condo? 

• Condos share ownership of the land under their property amongst the association as a whole. Simply, if there are thirty-three units in a condo association, each unit would own 3.3 percent of the land.
• Condos can be placed side-by-side, detached (free standing), or stacked like apartments.
• All units share one meter for the water and sewer service. That means each month as a condo owner, you pay a flat “dues” or “COA” payment and the condo association pays the water and sewer bill which covers your personal use, as well as the water utilized to maintain the lawns, parks, and any other area under ownership by the HOA.
• Exterior insurance for your condo is paid by the HOA. You insure the property from the “studs in” and the HOA insures the condo from the “studs out.” This translates to the condo association bearing all exterior maintenance costs.

Condos can present more risk to your lender and are subject to additional underwriting requirements as the bank is no longer betting exclusively on you paying your bills and being a reliable investment, but they are betting on the health of the COA as a whole. That is why banks will ask for a “Condo Questionnaire” to be completed prior to approving your loan. 

Key Financials: Condo

Pro's

• Affordable purchase price
• COA pays exterior Insurance, water & sewer, and exterior maintenance
• Owner insures from the "studs in" reducing annual insurance by about 50% vs. a single-family
• The Owner pays for electricity and gas
• The Owner pays a fixed monthly COA bill

Con's

• Not all loan programs are available for condos
• Appreciate at a rate more depressed than single-family
• COA health depends on your neighbors paying their bills

What is the definition of a Townhome?

Townhomes finance just like a single-family home and own the land below their structure, just the same as a single-family home. Townhomes are also independently metered for water and sewer and the Owner is responsible for paying those bills as well as insuring the structure as a whole.

So, why isn't a townhome a single-family home? As far as the bank is concerned, it really is. For you as an owner, the key point of a townhome is shared walls. When purchasing a townhome, the best practice is to ensure that there is a shared wall agreement in place with your neighbor(s). Curious about what that means, let's talk!

Key Financials: Townhome

Pro's

• The owner pays all insurance, water, sewer, and maintenance bills, just like a stick-built home
• More affordable than a stand-alone single-family home
• Finances just like a single-family home
• Appreciates just like a single-family home

Con's

• No HOA to ensure the neighbor maintains insurance in case of loss

Best practice: ensure your townhome has an active HOA and/or a recorded Shared Wall Agreement

• Shared wall, so you are close to your neighbor.

It is all in the Numbers:

The purchase price is just one way to understand ownership cost, and like the difference between interest rate and APR, may not tell you the whole story of the cost of ownership for a property. As we explored here, the nuances of interest rate, taxes, insurance, and property type can notably change the monthly cost of ownership and could be the key to obtaining approval to move forward with your purchase.

We are Bozeman real estate experts and here to help you navigate all of these elements. Call us today and let's explore what the best fit is for you today, together!