Difference between Condo and TownhouseCondominiums ("condo" for short) and townhouses are two very different types of real estate ownership. Their ownership models can impact the property's capacity to increase in value, the rights available to an owner and the ability to be financed.

The largest and most definitive difference between a condo and a townhouse is that in a townhouse the owner owns the land on which the townhouse sits as well as the interior and exterior of the unit, while in a condo the owner only owns the space between the walls and not the building exterior or the land - the homeowners association (HOA) owns the land.

This distinction may seem academic so some people, but the impact is significant:

* Land is a unique and limited resource. While a building can deteriorate due to limited life, land is mostly permanent which gives a townhouse a base value not existing in a condo.

* Since a condo owner only owns the air between the walls, much of their condo value is tied to financial and community strength within the HOA. For example, the HOA must be in good financial shape with a limited number of units being rented to non-owners. If it isn't, the HOA could be considered non-warrantable.

* Should the condo HOA be deemed non-warrantable, buyers will have a hard time getting financing. This is because without the benefit of land ownership and a strong HOA, the lender has very little to back its mortgage other than air between the walls. In essence, both the buyer and the condo must qualify for the mortgage.

* Lending options are also different between a condo and a townhouse. For example, FHA mortgages are not available in the Raleigh, NC area for condos. A different mortgage method would be required with conventional or VA loans being likely alternatives.

Due to these ownership differences, a condo is generally more likely to have a lower sale price, higher HOA dues and include exterior maintenance than a townhouse though some townhouse HOAs do take on exterior maintenance as well.

As a buyer, you should not be dissuaded from purchasing a condo, but you should make sure that you or your agent asks the right questions to ensure you are making a safe investment.