Real-estate Appraisals for Townhouses and Condos
When you buy a townhome or condominium, the appraisal process involves more than just the state of the unit you’d like to purchase. Your mortgage lender will want a report of entire development as well, from both a financial and physical perspective. They are determining whether to loan you funds for an individual unit, but the value of that unit will be affected by the development as a whole.
A townhouse or townhome is a single-family home that shares one or more walls with other independently-owned units. They are often rows of uniform homes, two stories or taller. In townhome purchases, the owner may own a backyard, courtyard, or garage in addition to the interior space of the property. Maintenence costs for the home are determined by the development’s homeowners association.
A condo or condominium is a single building or a community of buildings with separate units owned by individual residents. The owner typically receives exclusive ownership of the interior space of the individual property and joint maintenance responsibility of the common areas (amenities, walls, grounds, fences, facilities) with the other owners in the development. Condos can vary in size or style, ranging from individual homes to high-rises, but they often share walls with adjacent units. Residents own and maintain the interior of their unit but don’t own the property on which it sits. While the cost of shared insurance is factored into the dues paid to the HOA, owners are responsible for their individual homeowners insurance.
Many lenders have a questionnaire that the condo association can complete to assist the lender in analyzing the project and deciding if it is acceptable collateral for a loan. The lender will pay close attention to these details:
- Percentage of owner-occupied versus rented units. (Most lenders want to see 51 percent or more of a development occupied by owners as opposed to renters.)
- A minimum of 70 percent of the units must be sold if the complex is a new development.
- Satisfactory insurance coverage, including hazard insurance.
- Sufficient reserves to cover maintenance and major repairs, such as for roofing, pool, fitness facility, fencing, and elevators.
- The homeowners association is not named in any lawsuits.
Appraising townhomes and condominiums is best performed by experienced appraisers like Gardiner Ray, who have a thorough understanding of the complexities involved in unit appraisal scenarios. Contact us at 214-975-8242 for more information.