Teacher's Lounge to Living Room: Condo, Townhouse or Single Family Home?

Valerie Mattei  |  May 22, 2024

Teacher's Lounge to Living Room: Condo, Townhouse or Single Family Home?

🍎Welcome to Class 🎒

Lesson 3: Should I buy a condo, townhouse, or single family home?

🏘 Overwhelmed by the many options available in the real estate market in the San Francisco Bay Area? You are not alone. From condos and townhouses to single-family homes, each type of property offers its own unique advantages and considerations. Let's dive into the key differences between these options, along with insights into the specialized loans needed for each. We’ve also included a special addendum to this lesson about purchasing a “TIC” (Tenancy in Common) in San Francisco. 

📚 First and foremost, the purpose for this series is to educate and make new homebuyers feel more comfortable and at ease. Unfortunately, we do not have a crystal ball and I cannot tell you when the interest rates will go down, if it ever will. I can only say to my buyers, “Think about what you need in your life, can you reasonably manage this purchase, and are you flexible and patient enough for this process?” I will not sugarcoat things for buyers. I am a straight shooter. It can be tough, but if you are flexible and open minded, you may find yourself in exactly the right place. 

Lastly, I believe very few people can purchase their dream home right off the bat. Part of this post is to remind first time homebuyers (or even second or third time buyers) that it is more than ok to purchase the home that works for you now, and to think about upgrading later. I went from a 2 bedroom/ 1.5 bath townhouse that was barely 900 square feet with a small yard, to a beautiful brand new 2 bedroom/2 bath condo with a small patio, to a house with a yard in a desired neighborhood but…the house needed a lot of work including ripping out urine soaked hardwood floors. All this to say, it was a journey to our current living situation. Even today our house still has an older kitchen, and we are slowly upgrading the home. Bottom line: be patient, it takes time to get your dream home in the Bay Area. Think of it as “stepping stones.” 

Why think about purchasing a Condo? 

🏢 Condos are a popular choice for many Bay Area residents, offering a convenient blend of ownership and community living. When you buy a condo, you own the interior space of your unit while sharing ownership of common areas such as hallways, elevators, and amenities like swimming pools or gyms with other unit owners.

Condos are the perfect place to start, or end, for a variety of reasons. Singles, couples, or young professionals find condos a perfect fit for space and lifestyle. The entry prince points into condos, even new ones, are much less than a single family home. Condos also offer the safety and security of a close knit community. Even families can find condos as a great option. If a family needs a 3 bedroom/2 bath, but is still priced out of single family homes, a condo complex with a pool, playground, or shared outdoor space may fit the bill. I think the hardest sell on a condo for my buyers is that it feels like the “lesser” choice, and frankly that is not true. Yes, you are limited by an HOA, but that HOA also helps maintain amenities and the grounds. In a single family home, you are all by your lonesome in labor and money on that front. I would love to hear more buyers be open to a condo that has the interior space they need, and a willingness to compromise on the outdoor aspects. Personally, we picked a first floor condo with a patio that has a gate that led to the shared outdoor space. I simply did not want to have to take my dogs down an elevator or stairs every time they needed to go out. We just opened the gate, and I walked them to the grass. It was a compromise I was willing to make. We made it work for over 3 years, and moved onto the next purchase. Take-Away: Be open minded and might find something that will work for you now, and that you can turn into that big dream home down the road. Also, to my downsizing friends, condos are the ticket to freedom from upkeep! 

Condo Financing Overview: The same type of loans that are available to single-family homebuyers are available to those looking to purchase a condo. However, condo mortgages often involve more paperwork and due diligence, as well as higher interest rates. If they deem the project a risky investment, lenders will not finance the purchase of condo units. When the vacancy of the units is higher, it means that each unit has to pay a bigger share of the association dues. Therefore, the risk of owners defaulting is greater. Lenders will look at the history and finances of the condo association to assess the overall picture. If the condo association is experiencing difficulties in terms of financing, this may cause the condos to lose their value.Keep this in mind. Take Away: Go over the condo’s HOA docs, especially the HOA’s financial health with a fine tooth comb with your realtor. 

Bonus Material: One distinctive feature of condos in San Francisco is the concept of "tenancy in common" (TIC). In a TIC agreement, multiple individuals collectively own a building, with each owner having the exclusive right to occupy a specific unit. This arrangement allows for more affordable homeownership in a city where real estate prices can be daunting. However, it's crucial to thoroughly understand the legal implications and potential challenges associated with TIC ownership, such as shared financial responsibilities and decision-making processes. Go with a realtor that specializes in the San Francisco market (maybe a born and raised San Franciscan- Joe Polyak, Sean Kelly and Mike Sinitsky I’m looking at you guys 👀). 

How is a Townhouse different from a condo? 

🏘Townhouses offer a middle ground between condos and single-family homes, providing the benefits of homeownership with a touch of community living. Unlike condos, townhouse owners typically own both the interior and exterior of their unit, including the land it sits on. However, townhouses may still share certain amenities or common areas with neighboring units, depending on the specific development.

In my opinion, townhomes are perfect as far as indoor and outdoor space. I love that many townhomes are 2 stories and feel like a single family home. Often, garages are connected to the unit giving owners even more flexible space not just parking (think: play space during a rainy day, think: corner for an exercise area, think: family party that extends in the driveway, and let's just call all of it, storage). I love that a townhouse often offers a larger outdoor space, more than a balcony or small patio. You will often see a private garden type yard. In my first townhome, I had enough space for a small patch of lawn, a stone patio area for eating, and perimeter space for garden boxes. The dogs and the young kid were happy as clams back there. 

Townhomes offer buyers a lower price point. For example, for my parents, retired “boomers,” a townhome might be the best bet to fit their needs in the future. Less square footage to clean and organize, manageable outdoor space that does not require hired gardeners, shared responsibility for maintenance, but still enough space to comfortably host family and friends. Families will find townhomes spacious, and eliminate feeling like they are on top of each other. Singles or couples could be in a townhome for a long while depending on where their life takes them. Again, stepping stones. This is not the huge 3500 square foot house with the pool, guest house, and built in BBQ. It’s just not. It is a home that can serve someone’s needs for a few years and be turned into a profit to fund that bigger purchase with all the bells and whistles. Take-Away: Townhomes often offer a lower entry price point than single family homes, but give buyers a little more yard space, a little more breathing room, and a little more room to grow. Townhomes are also a natural downsize for older folks looking for less maintenance. 

Townhouse Financing: In terms of financing, townhouses are often eligible for the same loan options as single-family homes, such as Conventional Loans or FHA Loans. Again, there will be HOA documents to look through. Look at all the details closely, most notably the financial health of the HOA. Beware of any special assessments. Before I purchased my townhome, the HOA had an $8,000 special assessment for a new roof. It was a tricky purchase as it was a foreclosure. At the end of the day, I wanted the townhouse, and knowingly accepted special assessment. 

Why Single Family Home Ownership? 

🏡 For those seeking maximum privacy, space, and autonomy, single-family homes remain the quintessential choice. Whether it's a cozy bungalow in the suburbs or a sleek modern residence in the heart of the city, owning a single-family home provides the ultimate freedom to customize and personalize your living space according to your preferences.

For the many people I work with, the single family home is the goal. They want the bedrooms, the yard, the neighborhood, the school district, the cute mailbox. Now that I’m in my 40’s (so many feelings about this), more of my friends are headed this way. Truth be told, these homes were not their first purchases. Many had small condos and lived there until the wheels fell off and they couldn’t fit one more bunk bed into the 2nd bedroom. If they did initially purchase a single family home I will honestly tell you they sacrificed size (smaller than some condos and townhomes), location, and condition (often needing a great deal of work). All of this is ok if you are ok with it. Are you? These are the questions you need to ask yourself. Would you rather take the 3 bedroom townhome which has a smaller yard in a preferred neighborhood, or buy the 2 bedroom single family home in a location you are uncertain about? It truly depends on the buyer and their situation. Bottom Line: Don’t be disappointed if the single family isn’t your first purchase, you will get there. 

Financing a Single Family: Financing a single family home typically involves obtaining a Conventional Loan, although buyers may also explore options like Jumbo Loans for higher-priced properties. While single-family homes generally require a larger down payment compared to condos or townhouses, they offer unparalleled potential for appreciation and long-term investment.

In conclusion, in the diverse landscape of the San Francisco Bay Area real estate market, choosing between a condo, townhouse, or single-family home ultimately depends on your lifestyle preferences, financial situation, and long-term goals. Whether you prioritize urban convenience, community amenities, or spacious privacy, there's a perfect property waiting for you. 

Before making any decisions, it's essential to consult with a knowledgeable real estate agent and financial advisor who can guide you through the process and help you navigate the complexities of property ownership in the Bay Area. With the right expertise and support, you can find the ideal home that fits your needs and aspirations, making your Bay Area dreams a reality.

👩‍🏫 Class dismissed. Next class we will explore in detail everything escrow. 


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