If you're thinking about buying a townhouse, you're in good company. Behind detached single-family homes, townhouses are the second most common home choice among buyers in the U.S., according to the National Association of Realtors (NAR). And they're particularly popular among young buyers under 30.
While the process of buying a townhouse is not unlike that of a single-family home or condo, there are some tips you'll need to be aware of when shopping. Whether you're a first-time homebuyer, looking for a second home or interested in downsizing, here's a guide to purchasing this type of residence.
6 tips for buying a townhouse
1. Consider hiring a real estate agent
Real estate agents can act as a guide and advocate when purchasing a home. Your agent can advise you on the median price of townhomes in your area, as well as provide information on the local market, negotiate on your behalf and fill out all of the forms and disclosures necessary to successfully purchase a home.
It's important to remember that agents get paid a commission for their work. Ask upfront about their commission charge so you know what to expect. Generally, however, the it's the seller who pays the real estate commission, and it gets split between the seller's and buyer's agents.
2. Know the HOA fees and what they cover
Before settling on a townhome, take a close look at the homeowner's association (if there is one), the fees it charges and what is covered. The HOA fees should be a consideration in the overall purchase.
3. Prepare for a possible bidding war
Because townhomes are an increasingly common choice among first-time homebuyers, you might find yourself in a bidding war. If this happens, it's best to determine the maximum you are willing to pay from the onset - and stick to that number. Yes, you may be outbid, but keep in mind that if there's a real estate downturn, condo and townhouse prices tend to fall the fastest and the most compared with single-family homes.
4. Shop for the best mortgage rates
It's important to compare mortgage rates with at least three different lenders. Getting a low rate can save you thousands of dollars over the life of a loan. Keep in mind that the most favorable rates go to those with the best credit and least debt as a percentage of their income.
5. Get preapproved for financing
You should always get preapproved for a mortgage before home shopping. Being preapproved offers a number of advantages. It gives you a better idea of what you can afford and can help you compete with other buyers. Plus, it can help you determine whether the HOA fees of a particular townhome will be too high. HOA fees are factored into the purchase price when qualifying for financing. So, a high HOA fee could knock you out of qualifying if you are buying at the top of your range.
6. Get a home inspection
Home inspections are just as important for townhomes as they are for detached single-family homes.
Make sure the inspection includes both the inside and outside, even if the HOA takes care of the exterior. And if any problems are found on the exterior, make sure they addressed and repaired before going through with the sale. Often, she says, any exterior problems can be taken care of by the HOA. If not, the repairs are the seller's responsibility.
Pay special attention to a townhome's adjoining properties. If the upkeep on these is poor, it will reflect badly on your home when it comes time to sell it. In addition, your neighbors failing to maintain things like roofing and siding can damage your home, no matter how well you keep up with maintenance.
Overall, if you don't want the exterior maintenance that comes with homeownership, but you would still like the equity and wealth building aspects of owning a home, buying a townhouse is certainly worth consideration.
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