What’s the Difference Between a House, Condo, PUD, Townhouse and a Co-Op?

Before I get into this topic let me define PUD: PUD stands for Planned Unit Development. A PUD is basically a single family residence and the legal ownership of the home is legally defined that way. The biggest difference is that a PUD is part of a community, part of a larger development similar to a condo complex. You will own your home and still pay an association fee per month to maintain community areas such as parks, pools and sometimes recreation rooms. The association regulates neighborhood improvements so if you want to make major changes to your house or want to paint your house you will need the homeowners’ association’s approval. Since a PUD is basically a single family home that is also part of a larger neighborhood you are liable for your own repairs and maintaining your own homeowners insurance since you own the land and the structure.

A condo and townhouse are essentially the same thing, in terms of legal ownership there is no distinction. Generally, the differences between these two terms refer to the architectural style in which they are built. Often, a condo is more of an apartment style building whereas a townhouse looks like an independent home that may or may not have attached walls to the rest of the townhouses in the community. However, in terms of legal ownership they are the same. When you purchase a condo or townhouse what you are purchasing is cubic airspace of a specific unit with an undivided interest in the common elements of the property. The common elements referring to the lobby, swimming pool, recreation area, land, etc. What you technically own is airspace, you dont actually own any land or building for that matter.

Each townhouse and condo community has a homeowners’ association and the association maintains the grounds, structures and systems of the complex. The association fees are pretty high because they maintain the entire community. You wont need homeowners insurance though because its part of the association fees. Unlike owning a house where you may have a huge repair cost every five years, you pay monthly and the money accumulates and is used when needed to maintain the community. When purchasing a condo or townhouse it is critical to find out about the association. If the association is bankrupt you will have major issues in the future with the value of your home and with any repairs that the complex may need.

Co-Op is short for Cooperative and is called an Own-Your-Own also. Structurally similar to a condo, like an apartment you own. A co-op is when the structrure itself is a corporation that holds title to real estate. As an owner, you own stock in that corporation and you are granted the right to occupy as a shareholder in that corporation. Co-ops like condos have a homeowners’ association that handles the community structure and grounds. The association has a monthly association fee to maintain the complex. As a shareholder (owner) of a co-op you wont need homeowners’ insurances since the association covers it. Cooperatives are common on the east coast and sometimes getting a loan for this type of real estate can be challenging in an area like Los Angeles where cooperatives are rare.

A home also called a single family home or single family residence is the simplest type of ownership to understand. As the owner of a house you own the structure and land beneath it and have full legal rights to the property. You are responsible for all repairs since you own it all! You need to make sure you have homeowners insurance and are able to pay for repairs the house may need. There is no association to handle problems or cause problems. Consequently, there is no association fee that goes along with owning a single family residence.

When you are buying a home, condo, co-op or PUD understand that there are FOUR costs you need to factor into your monthly overhead: mortgage payment, property taxes, homeowners’ insurance and association fee. Your mortgage payment is only the beginning!

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