Townhouse 101: Is It the Right Choice for You?

If you've seen San Francisco's famous picturesque row of multicolored houses called The Painted Ladies or walked the canals of Amsterdam, you're familiar with townhouses. What is a townhouse? It's terraced housing with a small footprint on multiple floors, in which multiple homes are connected, each with its own door. You can find townhouses in resort locations, cities and rural areas. Read on to understand whether this type of home is the best choice for you and your family. 

What Is a Townhouse?

A townhouse is a type of terraced housing that features shared walls and multiple levels. You can find two-, three- or four-story townhomes. The homes typically share one or two exterior walls with the neighboring homes. 

The history of townhouses dates to 17th-century European cities, but you can find them in towns and cities worldwide. In 2020, townhouses made up 11% of new single-family construction in the U.S. 

Townhouses are typically tall, thin buildings attached to other townhomes in a long row. Many townhomes are part of a homeowners association (HOA), which may oversee the management of the residential community and yard or take care of exterior maintenance. Townhomes with an HOA have additional fees ranging from $50 to $1,000 or more per month. 

Townhomes are typically more affordable than detached single-family homes but offer more privacy than apartments or condos. For that reason, they remain a popular housing choice, especially among first-time home buyers. Many townhomes are in communities that include amenities like a gym, swimming pool, clubhouse or community center and other common areas.

Townhouse vs. Condo vs. Apartment vs. Detached Home: What’s the Difference?

While townhouses, condos, apartments and detached homes have some similarities, each has key differences. A townhouse has one or more shared walls, but each home has its own entrance. It might have a small private front yard and backyard or shared yard space. Many have homeowners associations that maintain common areas.

While apartments and condos may also be part of an HOA, they typically don't have a private entrance. While townhomes are often tall with multiple stories, apartments and condos are usually on one or two floors. Apartments and condos might share walls, floors and ceilings with other apartments.

In contrast, a detached home doesn't have common walls with another residence. It typically has its own land or yard, entrance and independent space. 

Historically, traditional townhouses were independently owned dwellings, like separate homes. That's still true today in major U.S. and European cities. Some townhouses can be condos if they’re part of a condominium community with the associated rights or part of a planned-unit development (PUD).

Advantages of Living in a Townhouse

There are significant advantages to living in a townhouse. Here are a few of the key benefits.

Space Use and Efficiency

A townhouse can be built on a much smaller plot of land by using vertical rather than horizontal space. Sharing one or two exterior walls with other buildings also improves insulation and energy efficiency. This can be eco-friendly, space-efficient and economical while giving you a large living space. 

Maintenance 

In some cases, a townhome's HOA will take care of all maintenance and repairs. This is a huge advantage for homeowners who don't want to deal with regular maintenance and other responsibilities related to homeownership. 

Community and Shared Amenities

With shared exterior walls and many close neighbors, many townhome owners enjoy the built-in community a townhome provides. You can take advantage of shared amenities like gyms, pools, gardens, community centers or other amenities. For those craving a close community or who already have friends living in townhomes, the community and amenities are a major advantage to owning a townhome. 

Disadvantages of Living in a Townhouse

Living in a townhouse has a few disadvantages, including a lack of privacy, high HOA fees and difficulty selling. Here's what you'll want to consider. 

Privacy and Noise Concerns

When you share walls, a yard and other spaces with others, you will naturally sacrifice some degree of privacy. Neighbors will see you coming and going from your house, and there may be noise between shared walls. Of course, how much of a drawback this is depends on the neighbors, but this can be a major disadvantage for sensitive or private people. 

HOA Fees

HOA fees can range from $50 to $1,000 monthly. At the higher end, the HOA fees can add significantly to your total monthly costs. These high fees can also make it more difficult to sell the property. And HOA covenants or restrictions can limit what you can do with the home, from gardens to exterior paint. 

Multifloor Living

Multifloor living isn't for everyone. Even if you have no difficulty walking up and down stairs, changing floors from kitchen to bedroom to office can be a disadvantage for many. An injury or other change in circumstances can make multifloor living even more challenging. 

How to Buy a Townhouse

If you're ready to buy a townhouse, here are the steps. 

Determine Your Budget

When you purchase any home, the first step is determining your budget and how much home you can afford. Generally, lenders will require that you don't take debt equal to more than one-third of your monthly income, but some will allow up to 40% or 50%. Look at your total income and debt to determine how much you can afford. 

Find a Trusted Real Estate Agent

A good real estate agent will know the local market and help you navigate locating townhomes for sale, understand market value and make an offer. They may know of townhomes not yet listed on the market or be able to help you identify areas of growth.  

Search for Townhouses in Your Desired Location 

To search for townhomes in your desired location, you can look online on sites like Zillow or other home listing sites and also search the multiple listing service (MLS) with your real estate agent. The real estate agent may be able to set up alerts so you don't miss any new listings on the market. 

Arrange Financing Options

After you determine your budget, you can get a mortgage preapproval. This will give you a clear idea of how much you can afford. You can start by comparing the best online mortgage lenders and speaking with your local bank or credit union. Remember to shop around and compare offers to get the best options. 

Learn how to get Federal Housing Administration (FHA) loan preapproval or the difference between preapproval and prequalification. 

Make an Offer and Negotiate the Price

Once you find a townhome you like in your budget, it's time to make an offer and negotiate the price. This can be completed in as little as a day or could take a week or more, depending on how long it takes for the seller to accept the offer. Your real estate agent can help guide you through the process of making an offer and signing the purchase agreement. 

Complete the Purchase Transaction 

Once all contingencies are met, it's time to close the real estate transaction. You will typically have your real estate agent, the seller's agent and possibly a real estate lawyer present when you sign the contract and finalize the sale. After signing and making all necessary financial transfers, the sale is registered in the county where the property is located. You are now the owner of a townhouse.

Should You Buy a Townhouse?

If you love community living, are interested in getting out of an apartment or want more private space but can't afford an independent home, a townhouse offers the best of all worlds. You'll get more privacy at a lower price, but you'll still have the possibility of community and shared amenities.

To save more, carefully research townhouses in your target neighborhoods and work with a trusted real estate agent to prepare a fair and compelling offer. Ready to get started? Find essential tips for first-time homebuyers here.

Frequently Asked Questions