By: Stephanie Diana Wilson
Now this is a phase I have had to explain over and over drives me nut. It drives me nuts when sales reps and branches try to tell me a subject unit is, “it’s a townhouse not a condo”. Which is a common statement in DC and Colorado where there are townhouse style condos going up and attached PUD’s. This is a common misconception as townhouses are a style of condo. Often what the person wants to say is the unit isn’t a condo the subject unit is an attached Planned Unit Development or PUD.
The first issue is that many don’t really know what a condo is exactly. A Condo much like a Single Family Home (SFR), Modular Housing, Manufactured Housing, Planned Unit Development (PUD) is a legal description of a property. Where row, townhouse, garden, high rise, etc are styles of properties. The legal description for a condo in short is a property where each unit owner owns their unit with an undivided percentage of ownership of the whole property.
Now it is true that one style of condo is a lot like an apartment where there is a person living right above each other. However, the styles differ greatly in fact there are styles of condos called detached and site condos which are much like a single family home or SFR within a condo complex.
There are also condo projects that are townhouse style where there is an up and a downstairs level inside the unit. Also where a unit might be single story like an SFR or cottage like.
Now a PUD is a horse of a different color. PUD’s are a planned unit within a subdivision which can have mixed use land within. A great example from popular culture is in the movie Poltergeist the homes are PUDs within a sub division. Course that also can take us on the topic of track homes which is a topic for another day. The difference further in a PUD from a Condo is how they are underwritten. As a PUD legally is defined much like a house so it it underwritten much like an SFR. A Condo on the other hand is more involved because the financial implications an HOA can create as a risk factor for underwriting.
To avoid incorrect underwriting always look at the legal description which is most easily found on the title. Usually condos in a legal description state the word condo or note a percentage undivided interests. I have never seen a legal description as a townhouse. So, the moral of the story is alway read the title report. It can save on underwriting issues, wrong appraisals and other additional costs change in property type can cause late in a loan. And know there is no such thing as a property type called townhouse. But there is a condo style called townhouse.
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