The Pros and Cons of Owning a Townhome

Christian: [0:00] Hello, hello, and welcome to another edition of the Awesome in Seattle podcast. This is Christian Nossum of the Awesome Nossum Group at Wilson Realty Exchange, Inc, and today we are talking all about townhomes. We're gonna explain what exactly a townhome is. And we get all sorts of questions about these, so we're kinda gonna go over the pros and cons of owning a townhouse. Some of the questions that we get are, are there homeowner dues every month, like with a condo? And who's responsible for, like, the exterior building maintenance? We're gonna go over how townhomes appreciate compared to single family homes and condos. And also, some of the differences between owning a townhouse and a condo. And last, how sound travels between the two units or three units, depending on how the condo is set up. So those are all fun things we're gonna answer for you today. But before we get into that, let me introduce my amazing co-hosts, the agents of the Awesome Nossum Group. First up, we have the fellow Seattle native, Reed Watson.

Reed: [1:01] Hello, hello.

Christian: [1:03] We have Mel G, otherwise known as Melanie Gadomy.

Reed: [1:06] Hey, hey.

Christian: [1:08] We have the data guru, Jason Saldarriaga.

Les: [1:11] Hello.

Christian: [1:12] And last but not least, we have the dog whisperer, Mr. Les Cutting.

Les: [1:16] Hello. What'd I tell you about putting me last, man?

Christian: [1:19] Oh.

Les: [1:20] You think I forgot?

Christian: [1:21] Oh. I told you, you

Les: [1:22] talked about this last episode All right.

Christian: [1:25] All right. So first, let's get something important out of the way. What exactly is a townhouse? So just so we're all on the same page, a townhome is generally, majority of the time, a three-story tall structure, um, where, you know, it's sharing one, possibly two walls with other units, and it als- often has, like, a small patio in the front or the back that's kind of just large enough for a little patio set and a grill, maybe a little patch of grass for Fido to do its business or, you know, maybe a small, small garden. Sometimes they have rooftop decks. Sometimes there's parking. Sometimes there's a garage. Sometimes none of that is there. And there's usually, you know, the, the townhome was built and replaced generally what used to be one single-family home that was on the lot. That was torn down, and three or four townhomes were built in its place. So the city changed the zoning in order to add more density to the city by adding more housing, by adding townhomes. So that's generally how the definition of a townhome.

Melanie: [2:33] It's important to think of the shape of a townhome, especially if you decide to buy before construction is finished. Townhomes can be square or rectangle-shaped. A good thing to remember is the shape is most often determined by how the builder or developer can achieve maximum density, meaning how can they fit the most units on that specific plot of land. Sometimes in effort to build as many units as possible, the floor plan design isn't ideal. In some cases, the shape of a townhome is very narrow. So I've been to my fair share of townhomes that were very narrow, which made it feel cramped, and overall, just not the best use of space. But on the flip side, I've also seen many townhomes which feel spacious. They have great square footage and somewhat of an outdoor space, which makes it live and feel similar to a single-family home.

Les: [3:24] Let me piggyback off of what Mel G. just said. All right. So a typical townhouse layout has, they have one bedroom or an office and a bathroom at the first floor, so the bottom space where you enter. So right above that, there's a really big space. It's usually the living space, the kitchen, a half bath, and that's the second floor. And right above that big living area and k- slash kitchen, you have your bedroom or the primary suite, sometimes a shared full bath, and most of the times you have your laundry room right on that floor as well. And the newer ones, I would say aroun- around 2010 on up in Seattle, they come with a rooftop deck. It's really important to have a rooftop deck Because most of the townhomes, they don't have a private outdoor space, so a rooftop deck becomes especially important. That's one downside of having a townhome is that you don't have a big backyard. Now, I've seen my fair share of townhomes, just like everyone on this podcast, and the outdoor spaces, they're usually not huge, so the rooftop deck comes in clutch, especially if you don't have space to take your dog out. Some- I've seen rooftop decks, they put little pee patches out there to make it convenient for their lifestyle. Parking is definitely something you wanna think about when considering buying a townhome. Townhouses are notorious for having tiny garages that are hard to get into because the builder, they often cram a minimum four, four townhouses in, on one single lot, what used to be a single family home. So they're notorious for having narrow spaces to get into your garage. So most people, they usually use their garages as extra storage, and they just park their g- their car right in front of the garage.

Christian: [5:04] Yeah, that's a good point. So generally, the layout of the townhome actually is super helpful for having roommates, and that's because usually the ground floor has one bedroom, and then the other two bedrooms are on the top floor. So a prime example of this actually is my cousin. I helped him buy a townhouse years ago. He lived in the downstairs bedroom that had an attached bathroom, and he rented out the two other upstairs bedrooms, and then they all shared the living space on the main floor, and it was awesome. He loved it. He had his own private space. Each roommate had their own primary suite 'cause that townhouse had, you know, an attached bathroom to each bedroom, and it was great. It was a perfect house hack, and he loved it. So townhomes can really be helpful for potentially house hacking.

Jason: [5:55] Yeah, and you generally have more freedom, right? You can actually do what you want with the property-

Christian: [5:59] Mm-hmm

Jason: [5:59] with a townhome versus a condo, where you very likely have some restrictions imposed on you. So, uh, continuing on with that, a lot of people wonder with townhomes, what do you actually own? And this is something that I think is really important to consider when you're buying a townhome because first off, you generally share at least one wall with a neighboring unit or property, a neighboring townhome. Um, that's your shared wall, your party wall. So typically, when you own a townhome, you own the entire building and the land underneath that building, and the building being your unit, so to speak. Mm-hmm. And that, this is a key difference between a townhome and a condo because generally with condos, you own the drywall in. That's what you literally own, and then you kind of have a right or you own a right to the location in a way. That's a weird way of putting it, but I guess it's valid. A townhome, though, you own the actual property plus the land underneath, uh, theoretically going all the way down to the center of the Earth. So townhomes in, in, in effect, are essentially single-family homes with zero lot lines. In fact, the Northwest MLS classifies townhomes and single-family detached homes in the same category. Uh, they s- call them single-family homes, and then they separate out condos as condominiums in their own fun category. So- … we'll talk a, a little more about that in a second. But with townhomes, you do own the interior as well as the exterior, the land, and then all the systems like plumbing and electrical If you contrast that with condos, like I said, you own the interior of the unit, but generally the HOA then owns and manages, hopefully well, and not, you know, disregards and forgets about their responsibilities. But the HOA owns the shared infrastructure, like the plumbing and the electrical, as well as the exterior and all the communal areas.

Christian: [8:04] Yeah, this is a good place to bring up CC&Rs, otherwise known as, uh, covenants, conditions, and restrictions. With condos, having these is, you know, a given. You're gonna have rules. That's basically what we're talking about here. You're gonna have those rules. With townhomes, this initially, when townhomes were first built in the early, late '90s, early 2000s, they did not have these, but then they quickly realized we need to have some generalized rules saying who's in charge of what. Even though you do technically own the land underneath, and there's a line between the shared wall between the two units or if there's three units, you know, there's a line between the units, it needed to be clear who was in charge of maintaining, and these CC&Rs kind of helped to establish these rules. Generally, you are in charge of maintaining your own unit, and there are generally rules in place that dictate which colors or which colors you cannot paint. So really, it's not necessarily saying you can't paint your unit pink. It's saying that your fellow shared wall townhouse has to also paint their unit the same exact color. So you need to have a uniform color scheme going on. That's one of the big things that people always bring up, like, "Hey, how do I know that my neighbor's not gonna paint their place pink with purple polka dots or something crazy?" So the CC&Rs are really there more to help you and your neighbors understand the clear guidelines that are expected of everyone. Who's in charge of what? If the, the shared driveway needs replacement, generally it states that everyone will chip in equally. If the roof of your two-unit building needs to be replaced- That's gonna be split between the two owners. Those types of things are generally established in the CC&Rs. This is not necessarily having to do with or ties in with there being a homeowners association or homeowner dues. So you will be able to review the CC&Rs before you, well, potentially before you put an offer in, and especially once you're under contract. Um, so if there are any rules in there that you do not like, you could potentially back out of your offer if you have a contingency allowing you to, or you could just not make an offer in the first place. So it's definitely something that you want to pay attention to when considering making an offer on a townhome.

Reed: [10:31] Absolutely. And I think there's some real pros that come along with owning a townhouse. Depending on what you're looking for, a townhouse can be a really great option, especially because they're a little bit more affordable than a single family home. They also tend to be in what you might call a, quote-unquote, better location, but certainly a more walkable location- Mm-hmm … as they're in higher density areas. The new builds especially tend to be, you know, close to main streets and thoroughfares. So if you're somebody who maybe doesn't have a car or relies on public transportation, that could be a good option to look at. Townhomes are also, especially here in Seattle, much newer than the average single family home. We have a couple different styles of townhomes from the past 20 years or so, but they are generally from the past 20, 30 years. They're not gonna be, you know, you can't find a townhouse here from 1920, per se. Um, so, you know, newer builds, probably gonna be in slightly better condition. And a lot of people feel like it's a plus that townhomes don't have HOAs. They do have those CC&Rs just to make sure everybody knows, you know, what's expected of them, but there's no HOA dues. There aren't really intense restrictions on what you can do inside of your own house. And so that's a really big plus for people, both financially and lifestyle-wise. Although, if you're somebody who really wants an HOA, say because of quiet hours or something like that, you might- Want to go for something more like a condo

Jason: [12:11] Exactly. Yeah, and if you are looking at condos and townhomes, one thing to just keep in mind, it's generally a bit easier to get a loan on a townhome versus on a condo. At the end of the day, there's just a few more steps required with getting a mortgage on a condo. That primarily revolves around the fact that they have an HOA, and the lender needs to analyze the HOA, so to speak. I said earlier how the Northwest MLS classifies townhomes and detached single-family homes in the same category. You can kind of consider mortgages in the same way. They treat townhomes the same as single-family detached homes. And then Reed, you mentioned in the Seattle area that most townhomes don't have- HOA dues or an HOA at all. Mm-hmm. They just have more of a, like, a communal or a common maintenance agreement of some sort. I would say something like 95% of townhomes don't have any fixed HOA dues. You just are going to split the cost of maintenance on any communal areas. With townhomes, that's generally the mailbox, maybe it's some very basic landscaping, often around the trash area. Now, of course, the opposite's true with condos. There's a lot of communal areas, and there are HOA dues almost across the board. Another reason, by the way, that a townhome is often more appealing to a buyer is that they can increase in value more than condos can, at least historically. Um, the main reason for that, if you think about it, condos, you own the interior of the unit, and that's more or less what, uh, the investment pertains to. Of course, you're in a very central, high-dense location with a condo because of zoning. That's where condos are allowed to be built generally. Townhome, you have the unit, the improvements, so to speak, the, the actual materials, the built environment around you, the unit itself, but you also have the land, and, uh, both of those things appreciate at different rates, and that can lead to greater returns in the long run. If you think of property types as a hierarchy, you have single-family detached homes on one end and condos on the other, and in the middle is a townhome, and the investment potential, the potential returns, at least historically, weigh much more towards the single-family detached. That's where you see the greatest returns. Over time, you have the more, the more options with single-family detached homes. Right now, we're seeing a lot of people who own single-family detached homes condominiumize them or tear them down and build townhomes and that sort of thing. So you have… It's a great investment, whereas condos, you're more limited. Um, and so this hierarchy, this line skews towards greater returns with single-family detached homes, again, with townhomes second If you are interested in this, if you're listening to, to me blabber on and on about this, um, and your eyes aren't glazed over, and you haven't skipped, like, uh, uh, move forward, skip, seek 15 seconds- seek 15 seconds. Yes, I'm still talking. But if you are interested in what I'm saying, feel free to reach out because we love to talk about this stuff. There's lots of data.

Christian: [15:38] Mm-hmm. Definitely is.

Les: [15:40] Well, I think it's time for me to point out the cons of owning a townhouse. All right? Well, you get less space. S- I feel like townhouses are a good amount of space inside of them, I mean, it's just the layout really.

Reed: [15:54] Yeah. Mm-hmm. It's just, yeah, smaller, a lot.

Les: [15:56] You get more noise. Since, you know, they're, the purpose of a town home is to increase density, you're gonna be around more people, so inevitably you're gonna get more noise. As I mentioned before, you're gonna have a small yard. Um, you're, you're gonna live very close to your neighbors. You got one, at least one shared wall, as Jason touched on. And also, Jason mentioned only about 5% of town homes in Seattle come with home owner's fees. But if they do, it's an additional cost that can make the, owning a townhouse obviously less affordable. One thing to consider, for example, with older town homes, they share floor joists, so that means you're gonna hear, you know, little noises, maybe your neighbors walking, and it may creak in your unit. But newer town homes, they have what's called dead air space, meaning that there's gaps between the units, and the only thing that's actually touching is the envelope- of the whole structure itself, but there's a gap in between, so therefore you're not sharing floor joists, so you may not hear them. But older townhomes, that's something you should consider.

Christian: [16:59] Yeah, and to expand on that, like, remember that sound is vibration. So if you don't share any, uh, other than the exterior envelope of the building, if you don't share, you know, studs between the walls and floor joists, that vibration, it's, it's harder for it to travel between units, and that's, that's why you could potentially have more noise in some of these older townhomes. And when we say older, I'd say early to possibly mid-2000, like 2005, something like that, and, and older potentially. The newer ones pretty much all have that dead air space.

Melanie: [17:35] Exactly. But I'm gonna go back to highlighting the pros, and one of those being in a competitive market like the one we're in today, townhomes tend to be slightly less competitive than a single family house. So in Seattle's super hot market, it's beneficial to be a townhouse buyer. Additionally, if you're buying a brand-new construction townhouse, those are often not competitive at all because they are selling numerous similar units. So if you don't get the first choice of a unit, then you still have, have other options to choose from.

Christian: [18:07] Yeah. It's a, it's a really good point, Mel, and sometimes just as a tip for those out there looking to buy a townhouse, oftentimes a developer, a builder, will only put one of, you know, maybe 4 or 10 townhomes up for sale, and It might be a lot of times the least expensive, which often correlates to being the smallest townhome available. So if you do see, like on the exterior photo, that it's not just one unit but numerous, you might want to ask your agent, "Hey, do they have others available as well?" Because there might be, like, a larger unit that is a little more expensive that they aren't advertising yet, but is for sale, and that's just a kind of a marketing gimmick that a lot of developers tend to use. So just something to keep in mind. But that is it. Thank you everyone for listening, and thank you team for sharing all of your knowledge about townhomes. If you, as the listener, have any more questions about buying a home, buying a townhome, how it compares to a condo, or anything else about the Seattle area real estate market, feel free to reach out to us. We do not bite. We are not scary. We will not make you sign a contract in order to work with us if you're buying a house. We really just want to help you. That's why we provide so many educational opportunities for you, the buyer, in this, in this market, and really any market. We always want to keep you up to date on what's happening so that you can make a decision that you do not regret. So if you do wanna reach out to us or do wanna connect with us, you can easily schedule a strategy session online, which is totally free, at AwesomeNossumGroup.com/schedule. There's also a big old button on the front page of the website that says Schedule A Time. Or you can just text us. Our numbers are all on the website. It's very easy to find. But that's it for today. Thank you so much for joining us on this Awesome in Seattle podcast. We'll talk to you next time. Thanks, team