Frequently Asked Questions - Condos

What is a townhome?
What kind of insurance do I need?
Who buys townhomes?
What is the difference between a condo and a townhome?
Why does Peterson Homes have preferred lenders?
What does the homeowners association’s insurance cover on my condo or townhome?
Can my insurance company cover my condo or townhome?


What is a condo?
A condominium or townhome complex can look like an apartment building or even a larger estate home.  The difference is the individual units found inside the walls of these larger structures are segemented into individual homes or units and are sold individually/  As the owner of the home, you agree to be a member of the homeowners association, which provides maintenance for the common areas and the structure itself. This usually includes commonly shared open spaces, pools, roofs, staircases, balconies, etc.

There was a humorous X-Files episode about a homeowners association for a planned unit development in which folks pay, shall we say, the “ultimate price” for painting their mailboxes the wrong color. Most associations are somewhat less . . . intense, and while they do plenty for you – fix the roof, paint the outside of the structure and mow the lawn – they don’t do everything. The stuff inside your home is your responsibility. While their roof may leak, it’s your sink that leaks and your carpet that needs replacing. Additionally, the homeowners association provides insurance for the entire structure and liability insurance for the common areas.  Usually the CCR's or the Covenants, Conditions and Requirements recorded with the project address each project specifically.

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What kind of insurance do I need?

For your personal items, you’ll need personal property insurance, which will pay you if, for example, your TV is stolen. However, if someone falls down the steps or damage occurs to the unit that you did not cause, the homeowners association’s insurance will take care of it.

Your rights to your unit come with CC&Rs (Covenants, Conditions and Restrictions). This is typically a gigantic document that spells out in great detail what the "rules" are. While on the surface the extensiveness may seem absurd, the purpose is to diminish the possibility of expensive litigation. You should familiarize yourself with your CC&Rs and avoid surprises later when you learn about restrictions on Christmas light placement, unauthorized modification of the interior of the structure and other restrictions an association may choose to include in its policy.

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Who buys condos?

Condos are ideal for at least three groups of people:

1) Young couples who want their own house but cannot afford one. Condo ownership brings them many of the advantages of home ownership without the steep price.

2) A young single person who doesn’t want the maintenance responsibilities of a home or a landlord to deal with but does desire the economic advantages of home ownership.

3) Older folks who no longer need their four-bedroom home and the maintenance problems associated with it.

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What is the difference between a condo and a townhome?

A buyer of a condominium owns his or her individual unit, plus a percentage of the surrounding property, including land and any amenities on the property Generally, townhomes are similar to a flat condo in ownership method, but are not stacked.   A buyer of a townhome purchases his or her individual unit, as well as the ground underneath that unitIn most cases you own the land under your townhome.  With condo's you usually just own the airspace inside the walls. 
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Why does Peterson Homes have preferred lenders?

There can be challenges in getting mortgage loans on homes these days as some lenders feel the associated economic risk is too great. Lenders traditionally are not as comfortable with having a condo or townhome (as opposed to a standard home) as loan collateral, because there have been times when condos have depreciated in value faster than single-family homes. Fortunately, over the last 20 years, this has not been the case in the greater-Salt Lake and Utah markets. However, in all cases when financing a condo or townhome, both the buyer and the project must be approved to qualify for funding. Peterson’s builder project-approved lenders have already approved the project and need only qualify the buyer.

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What does the homeowners association's insurance cover on my townhome or condo?

Read all documentation provided by the association so you will know exactly what you own and what the association owns. Regardless of the division, make sure to determine that between you and the association the entire structure is insured. Many condo and or townhome documents are drafted to shift the risk away from the association and onto the individual unit owner. And that’s not necessarily bad: it keeps the association's insurance premiums – and your fee – lower.

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Can my insurance company cover my townhome or condo?

If everybody understands what's going on and the individual owners purchase the appropriate insurance, this usually isn’t a problem. A problem can arise if the insurance agent doesn’t understand the legal description that separates the individual owners' interest from the association’s. Know the facts and make sure your insurance agents knows the exact nature of home you own, be that a condo, a townhome or a traditional home.  Don’t settle for a "box of air" legal description from your agent. Even if you must wrangle, make sure to get a coverage level of about $150 per square foot, which is generally what it would cost to rebuild most condos. This way, in the event of a big loss, you can take the money and go elsewhere.

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