"What Is The Difference Between A Condo and Townhouse?

The answer to the question comes down to legal ownership.  A more general, yet inaccurate way of describing the difference between the two is that in a condo, you may have a neighbor living above or below you, while a townhouse is a two story dwelling where you have neighbors to the side, but never above or below.  While this notion holds true for many examples, there are the exceptions.

Like the example of a townhouse style condo…confusing?  Let me simplify and explain!

A buyer of a condo owns the "airspace" in their unit plus a percentage ownership in the remainder of the development such as the common grounds and amenities.  The owner does not technically own the specific plot of land below their home as they may be "sharing" the land beneath them as there may be a direct neighbor above or below them.

A buyer of a townhouse buys the subject home plus the land beneath the home.  As a result, if you live in a townhome, you will not have any neighbors above or below you as you are the exclusive owner of the land.  You may also notice that it is much more common for a townhome development to have attached garages, when compared to condo developments.

And what about the exception, a townhouse style condo.  This is where the home is mapped as a condo, meaning that you do not exclusively own the land beneath the unit, however, there are no above or below neighbors.  So from the "naked eye" the home appears to be a townhome, but if you look at the way the home is mapped, it is technically a condo.

So what is the advantage or disadvantage to buying a condo versus a townhome?  From my experience…not much.  There are certain banks which will charge a bit more if the purchase is a condo rather than a townhome while others banks don’t make a differentiation at all.  The real advantages from my view have to do with the layout of the unit, regardless of if it is a townhome or condo.

Townhome Style Advantage:  No above or below neighbors.  You don’t have to worry about big foot making a bunch of noise upstairs and you don’t have to tippy toe around during evening hours if you are on the second floor…the whole place is yours to run around in.

Condo Style Advantage:  You have all of your living space on one single floor.  If you cannot go up and down stairs due to health issues, a bottom floor unit of a condo development is the solution to your problem.  Additionally, heating and cooling your unit is much easier and affordable when everything is on one level.

As you can see, both condos and townhomes have their advantages and disadvantages, the real question to ask yourself is what is most important to you.

Chris Kamali is a TriValley Real Estate Agent , helping clients buy and sell homes in Dublin, Pleasanton, San Ramon and Livermore.

Today, the rental markets in Pleasanton is scorching hot!  Recently, a three bedroom, two bath house in Pleasanton with only 1555 sf rented out for $2600.  A two bedroom condo in Livermore just rented for $1600.  With interest rates still historically low and prices at or near “the bottom” investors are taking advantage and jumping into the market with both feet.  The deals are so good, that with a 20-25% downpayment, many of these properties actually get pretty close to having a break even cash flow.  This is something that has not been seen in years. 

In years past, a California investor who wanted to see break even cash flow would need somewhere between 40%-50% downpayment in order to not need to pay into the mortgage on a monthly basis.  Investors purchased in California not for the cash flow, but for the appreciation on the property.  With today’s market condition, you can see both a good cash flow with as little as 20%-25% down and expect future appreciation.

Let’s take a hypothetical look at how a possible investment property and how the numbers would pencil out.  The below chart shows a purchase price for a 3 bedroom, 1600 sf townhouse in East Dublin.  These units sold for over $600K at the peak but today can be purchased in the mid to high $400s and can be rented out in the low to mid $2000 range on a monthly basis.

As you can see by the chart, with a 20% cash infusion, there is an actual $11 positive cash flow when factoring in all tax write offs including depreciation.  Please keep in mind that these figures are solely for the purpose of discussion and all figures should be validated by a CPA (here is mine!)  The big picture is that indeed today’s market is not a seller’s market, but if you are an investor looking to put your money to work for you in one of the most stable investments out there, this is a great market to consider.  As Mr. John D. Rockefeller is quoted, “The way to make money is to buy when blood is running in the streets.”

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Chris Kamali is a TriValley Real Estate Agent, helping clients buy and sell homes in Dublin, Pleasanton, San Ramon and Livermore.

So, are we at the bottom?  Is this the time to buy?  Quite honestly, I don’t know.  But here is something interesting to think about.  Maybe you should buy BEFORE we hit the bottom (this is not a typo).  Here’s why.

If we are 6-18 months away from the ‘bottom’ and prices are going to slide down further, then maybe it is a good idea to wait it out until then.  However, if we are 3-6 months away from the bottom, then I think that would be the best time to buy. 

(Keep in mind this analysis is only for individuals who are currently renting and thinking of entering into the housing market.  If you currently own a home and are thinking of moving up, you have no worries because you would be selling and buying in the same market, whether it is a hot or cold market)

Let’s take a look at the chart I have drawn up.  Letter “A” represents the market if we are 6-18 months away from the bottom.  With a possible year and a half of price correction left to go, it would most likely be wise to wait on the sidelines until things were closer to letter “B”. 
The only way we know we have hit the bottom of the market by definition is only after we have bounced back as represented by letter “C”.  As the chart suggests, the prices we see right before the bottom would be similar to the prices right after the bottom, hence a buyer buying at point “B” or point “C” would be buying while the market price would be the same.  While the market price would be similar in this scenario, there would be a significant difference in the purchase price and terms.

At point “B” the market has still not recovered and the economy is suffering.  As a result, interest rates will be lower and banks would be competing for the business of the buyers.  Capturing a lower interest rate, can save you thousands in the long run even if you pay a higher price than someone who buys the house for cheaper but pays much more in interest over the years. 

Further at point “B” the other buyers are still on the sideline waiting and waiting and waiting.  This allows you to be selective and not have to fight over best house deals in the neighborhood.  When you put in your offer, the sellers are nervous of losing you and your offer and as a result would be willing to negotiate price and terms much more aggressively and in your favor.

In review, point “B” allows you to purchase in an environment which would share similar market prices compared to the market once we bounce back from the bottom, you are able to capture in most cases a lower mortgage interest rate, pick out your favorite home from a large selection and negotiate a better price and terms with sellers who are afraid they may lose you if they don’t deal…sounds good to you?

And what if you wait until point “C”.  Point “C” represents the market after prices have jumped back up and everyone knows we are back at a regular increasing market.  The media is back on the housing bandwagon remembering that real estate is still the best investment.  The federal reserve is again raising interest rates making mortgages more expensive.  Open houses are busy with buyers and the best homes on the block receive multiple offers.  You put in an offer and the seller now knows that we have hit the bottom and they are no longer willing to negotiate as they did just months ago.

So, are we at the bottom should not be the question because we will never know until we bounce back.  Are we 3-6 months away from the bottom…now that’s a good question!

And then it hit me…I guess it depends where we are looking.  Let me explain. 

Through MLS feeds, the public (buyers in this case) can gain access to available homes on the Internet through a sundry of website such as Realtor.com.  As homes become available for sale and are posted on the MLS, buyers can search for detailed information on these homes viewing descriptions, pictures, virtual tours and property characteristics.  However, once a property goes under contract and the agent changes the status of a home to ‘Pending’ the home disappears from the list of homes that the typical buyer finds on their search results.  So what remains?

Well, if the homes in the right areas, that are priced correctly and show nicely are put into contract, marked “pending” and removed from the available list of homes which buyers can see, what does that leave the buyer viewing?  You got it!  What remains are all of the homes which aren’t under contract for whatever reason and are still sitting on the market.  Further, as these ‘rejected’ homes remain on the market and become stale, motivated sellers reduce their listing price in attempts of getting buyer’s interested in their property.  Again, the buyer will only see these stale homes with the reduced price and thus paint an inaccurate picture of how the market is doing.

To gain a true picture of how a market is doing, it is vital not to just look at what is available and active on the market, but to also look at what homes are going into contract and selling.  Following statistics such as the absorption rate of an area is a great way to better understand the true picture of a given market.

If you have any further questions or would like to receive any stats, please contact me or leave a comment.

Chris Kamali is a TriValley Real Estate Agent, helping clients buy and sell homes in Dublin, Pleasanton, San Ramon and Livermore.

While it is unclear on what will raise a flag which may freeze your existing line of credit, it is clear that you may not be immune from it.  These freezes have nothing to do with the borrower’s credit score or repayment schedule.  In efforts to protect their own interest and stay ahead of the curve, the banks are reducing, readjusting and removing existing lines of credit in certain situation based solely on property value from their automated programs.

In certain markets, where prices have adjusted downwards 10% or more, it only makes sense that the banks would do this when presented with the opportunity.  The bank’s chief equation for determining how much to lend is based on the loan to value, or how much money is borrowed compared to the going market rate for the home.  For example, a home buyer purchasing a $1,000,000 home may have borrowed $900,000 which would have included an $800,000 first loan and a $100,000 second home equity line.  The combined loan to value (LTV) for this situation would be 90% ($900,000/$1,000,000).

Fast forward two years and now the home buyer has paid down their home equity line to zero, so in essence they have only one loan outstanding with $800,000.  The home equity line which is now paid down to zero typically acts as an open line of credit, so traditionally speaking, the borrower would have unrestricted access to pull up to the original balance of $100,000 should they need the money for an emergency or remodeling.  What is recently occurring however is that the banks are freezing the home lines of equity because of the decreased they are seeing in the housing markets.

Take our example of the $1,000,000 home and a decline of 10% in the market value to give a new value to the home of $900,000.  And remember that the banks agreed to lend up to 90% loan to value of the property.  So if we take the new price of $900,000 and lend 90% that would result in total loan commitments of $810,000.  Since there is an existing first of $800,000 we may see the second line of equity being capped at $10,000 thus maintaining the original 90% LTV or a maximum loan amount of $810,000.

Many home owners such as myself pay down the equity line because of the convenience of being able to tap into the funds if needed.  Now with this latest developments, nervous homeowners are prematurely drawing the funds available from the equity line and placing the money in another financial institution to ensure that should they need this money, it is available for them to access.  While we have not seen this move from the banks occur too many times, it has happened enough where you should be aware of the situation.  If you or someone you know may be in this situation, please contact me or your financial professional to see what your options may be.

Chris Kamali is a TriValley Real Estate Agent, helping clients buy and sell homes in Dublin, Pleasanton, San Ramon and Livermore.

This shift of the buyer’s attention from the entire market to just REO listings has created an interesting phenomenon in my view. As buyers zoom in only on REO listings, it has created an artificial higher demand thus defeating the primary reason why people are looking into buying REO homes. Not enough people take advantage of supply and demand. I want what you want, and you want what he wants. We as consumers don’t take advantage of going against the grain and seizing the opportunity. We all want REOs, and I am warning you to look outside of the box, as there are some great deals out there from the traditional seller.

Don’t believe what I have to say? Here are some real stats comparing bank owned homes in Pleasanton, Dublin, San Ramon and Livermore which closed from 03/01/08 to 03/20/08 compared to the rest of the market.

I have performed my research based on the four major cities in the Trivalley (Pleasanton, Dublin, San Ramon and Livermore). From the beginning of the month 03/20/08 we have had 76 total units close in these four cities. Out of the 76 units, 11 of them were banked own homes and 65 were sold by regular home owners. Interestingly enough, the average List Price/Sales Price for the bank owned homes were 96.1%, where the ratio was 95.1% for regular home sellers. (No typo here, the REO homes closed for a full percent higher this month). And at an average sales price of $771K, a 1% difference is nearly $8K in savings.

The argument against this theory would be that the REO homes are already priced lower or more competitively than the other homes on the market and thus would have less room for negotiations. While that argument could be viable, you must also consider that many REO homes are in distress and need additional funds to bring it back to a nice, livable condition.

Nothing seemed more interesting to me than the 3 REO homes which sold in San Ramon. The average list price for these 3 homes was $761K and the sold prices for these San Ramon homes were $770K. That is 101% of the asking price!

The long and the short of it is that you should consider the entire market when searching for your new home. My past two clients have purchased from regular sellers who had healthy equity and we were able to purchase their homes for 93% of the asking price. Based on these stats, this can only mean that you should widen your horizon on your home search and that you should work with an agent who can get you better than average results.

Chris Kamali is a TriValley Real Estate Agent, helping clients buy and sell homes in Dublin, Pleasanton, San Ramon and Livermore.

The answer is very simple, but the act can be tedious. Prior to opening the doors to potential buyers, you need to depersonalize your home and make it into a house again. A house that buyers can go in and image themselves living there with their pictures on the wall. Remove anything that is religious as you will have people from different ethnic backgrounds come through your house and you want to present the space as neutral as possible.

Also, make sure to declutter and remove any extra furniture which may make your home look small. Large couches, dressers and tables can obstruct paths and make it hard for the potential buyer to imagine their furniture fitting. It is time to sell floor space and wall space!

Remember, your home is now ‘open for business’ and a public place for potential buyers to come through, make sure you do what you can to make potential buyers feel comfortable and help maximize the sales price of your home. For more tips or local staging professional, feel free to contact me.

Chris Kamali is a TriValley Real Estate Agent, helping clients buy and sell homes in Dublin, Pleasanton, San Ramon and Livermore.