The Difference Between Co-Ops, Condos, and Townhouses

Condo building with overlay text

You want to buy a home, but you’re really not sure is a large property is right for you. You’re not interested in tending to a large lawn every weekend, trimming rows of trees, or spending hours hedging bushes. In fact, you really don’t think you’d need a large house. Maybe it’s just you and your spouse; perhaps it’s just you alone.

Instead of buying a traditional single-family home, perhaps you should purchase a condo, co-op, or townhouse. This would certainly be a more convenient option if you don’t need, or want, a large house.

But do you know the difference between these different types of homes? Let’s look at condos, co-ops, and townhouses so you understand how each one is unique.

Co-Ops, Condos, and Townhouses: What’s The Difference?

What is a Co-Op?

Cooperative housing, commonly called a “co-op,” is one of the oldest forms of housing in the country. According to the National Cooperative Law Center, this form of housing started in 19th-century Europe to help residents escape harsh living conditions found from rentals.

This type of housing is defined by resident ownership. Most co-ops in America are located in New York City, but unlike their European forebears, co-ops in the U.S. are generally for higher-income individuals and families. While American co-ops can be exclusive, like an elite country club, they are generally less expensive than condos. Despite their relative affordability, co-ops can, however, be difficult to purchase.

If you buy a co-op, you basically purchase shares in a corporation. You’ll have a “proprietary lease,” which gives you stock in the property. The corporation is operated by board members who have many responsibilities, including deciding who gets to buy into the building.

This type of housing is ideal for people who want to feel like they can control the property. They are known to be tough to enter, as potential buyers have to submit extensive information during approval. This can include financial statements, letters of recommendations, and personal references. Essentially, you have to agree to be judged worthy of entering the co-op.

The benefits, however, can be profound. You’ll live in a home where your neighbors are essentially permanent, and strict occupancy rules help keep out renters or AirBnB occupants who may disrespect the property. Essentially, everyone who lives in the co-op owns and takes pride in the property.

A co-op may be the right choice for you if you want a slightly more affordable home that has exclusive ownership. If you don’t mind the extensive approval process, it could be an ideal situation for your needs.

What is a Condo?

While they might seem unique, a condo is not as different as you might think. Condos are essentially buildings governed by an elected board or managers. The task for this board is similar to that of co-ops: they will need to hire property maintenance, approve interior renovations, and make decisions for outdoor decorations. Unlike a co-op, when you buy a condo you are purchasing an actual apartment and given a portion of the property’s common space, which can include the lobby, elevator, and recreation areas.

Condos have an interesting history. They were actually first approved in Puerto Rico in 1958, allowing developers to boost the economy of this U.S. territory through real estate.

While co-ops can decide who is allowed to purchase into the property, condos cannot. They can, however, exercise the right of first refusal, which allows the current property owners to buy any units that come up for sale before anyone else.

In most cases, the cost of a condo will be higher than that of a co-op. There is no board approval process, which is a benefit for many people who would rather not be scrutinized, but you will likely pay more for the condo than you would for a similar co-op.

If you want a smaller house that is convenient to own, easy to maintain, and gives you more room than a typical apartment, then a condo could be a great choice.

What is a Townhouse?

The term has been used to describe a few different types of homes, but it was originally used to describe homes in the center of town. They were often owned by affluent citizens; affluent at least compared to the people living in the rural areas surrounding a city. Now, townhouse has become a term used to describe rows of urban houses.

When you buy a townhouse, you are 100% responsible for that property and no one else’s. There is no common area, just your house. You may be crammed in closely with your neighbors, but you are simply purchasing your own home. This is a home that you own completely, which means you are also responsible for the roof, heater, air conditioner, and all other utilities.

Because they are generally smaller, co-ops, condos, and townhouses offer luxury at an affordable price.

Townhouses are usually connected in rows, usually with brick or concrete walls in between. Most are two-stories to give more living space to each townhouse. The brick or concrete walls help to improve soundproofing between the units and create superior fireproofing for the home.

While townhouses are small compared to larger houses found in the suburbs, they can be extremely expensive. Quite frankly, owning a three or four-story building in the middle of a major city will cost you; sometimes it will cost millions, making it unattainable for many buyers. To make them more affordable, some townhouses have been divided into one-floor apartments and duplexes. This is a way that property owners can get a better return from their real estate investment.

If you have the money for a townhouse, want to live in the city and not the suburbs, but also want a little more space and privacy, a townhouse could be the ideal choice.

Get the Best Loan for a Co-Op, Condo, or Townhouse

If you need financing for co-ops, condos, and townhouses, contact San Diego Purchase Loans today. We’ll help you find the right loan for your specific needs and use a common-sense approach to help you get approved!



Chad and his team are fantastic!

Chad and his team assisted me with the financing of my condo. Every member of Chad’s team was extremely professional, highly competent, super responsive, and friendly. They realize that financing a home can be a stressful experience and they do their best to alleviate that stress by keeping you in the loop on everything. They were great about giving me frequent updates on the status of my application. In addition, they happily answered my questions. At one point, when I felt like I was pestering Chad with questions, his response was a friendly, “keep them coming!” And he meant it!!! Likewise, Maria and Karina were just a pleasure to work with as well! This team is like a fine-tuned machine. Thank you so much for all of your help!!!

Incredible Turnaround and Stellar Customer Service. Chad and his team helped us get into our first home here in San Diego. When we first started the process we were skeptical it would even be worth applying. But Chad and his team walked us through the whole lending process with integrity and know how that surpassed our expectations. After helping us to pull together our pre-qualification, he and his team stayed at the ready. Before we even walked up to a home we were seriously interested in he had the data we needed over to us and our realtor. After finding the home we wanted to place a bid on, we were able to place a bid with a matter of a few hours. Then, after having our offer accepted, he had our loan package completed and the keys in our hands in under a month — I am pretty sure it was less than. Like I said, incredibly fast and professional turnaround. if you are looking for a motivated lender who can walk you though every detail and have your back every step of the way, Chad and his team at HomePoint Financial is your best decision. Recommend them highly!”

Outstanding experience

I was referred to Chad by my Realtor for a purchase of a new house. The experience with Chad and the team (I mainly worked with Juliann) was nothing short of outstanding. From start to finish there were always quick to respond and when needed, notify me of any new documentation that was required. There were very helpful explaining to me the pros and cons of different financing options as well as some other loan related issues, such as termite clearance outside the purchase contact and septic tank certification process. Overall, very knowledgeable and processional team. Loan preapproval was done in a single day and loan documents were ready for signing in 21 days, which was 9 days ahead of schedule. That never happened to me before.

I hope you enjoyed reading this article. It's my goal to keep you updated with the latest real estate mortgage news. I'm proud to provide you with 100% original and unique content. Subscribe now to get high quality real estate mortgage content and articles delivered directly to your inbox. Chad Baker is Regional Manager for LendUS. Chad is consistently recognized in the top 1% of mortgage originators in the United States 2011-2017. Got a question for Chad? Call (858) 353-8331 or submit your question online