A new type of housing is emerging: houses that look like your average single-family home but are sold as condos, sometimes with owners owning no more than the air between the walls.

 For a long time, the housing choice for the urban middle class has been clear: a condo in the city or a home in the ‘burbs.Now comes Option No. 3, a melding of the two if you will: single-family homes sold as condominiums. Typically packed in tight clusters close to a city, these hybrids offer an affordable alternative for those seeking both easy access to urban life and the feel of their own home.

“It looks like a house, it talks like a house, but legally it’s a condo,” says Mike Pattison, an industry lobbyist who bought a unit for himself outside Seattle. “When you invite people over you don’t say, ‘Come over to my condo.’ You say, ‘Come over to my house.’ “

Nationally, the arrangement is rare. Trade organizations have yet to track the numbers, and their own experts claim to know little about the phenomenon. No one can even seem to agree on a name. Listings can be found under “single-family-detached condos,” “free-standing condos,” “detached condos,” “ground condos,” “land condos” and “air condos.”

Own the building, not the lot

The basic format — you own the building but not the lot — has been around long enough. It’s a sensible way to sell people a house on land they either can’t own — that golf course in Connecticut or ski resort in Colorado — or would prefer not to maintain, like the sprawling grounds of that desirable Virginia retirement community.

What’s catching on now is different: the detached condo as a legal avenue for building cluster housing in cities such as San Diego, Los Angeles and Seattle that are choked by sprawl. There, where growth-management plans promote high-density housing developments, experts say that the homes are in demand and that they are sure to become popular elsewhere.

“It just fits in,” says Chris Morrow, senior vice president of Project Design Consultants in San Diego, citing the rising popularity of transit development, new urbanism and smart growth, which promote tighter suburbs in an effort to preserve open land and reduce driving. “It’s a no-brainer for the developer, and for the consumer. The cities just have to catch up.

“We will definitely see more in the future. I don’t even have to rub a crystal ball to say that.”

Ownership arrangements vary

The specific legal arrangements vary by place and by state, so prospective buyers should read their documents closely. Ownership arrangements can look like one of the following:

• A homeowner might own just the interior of the house, literally, through the carpet and first layer of paint only, with the wallboard, floorboards and exterior paint to be repaired — and governed — by the condominium association.

• The homeowner might or might not own the land the structure sits on, and could be responsible for mowing his lawn either way. Monthly dues might exceed $300 and include use of a swimming pool or trails, or sit at $100 for private street-maintenance costs only.

“The actual form of ownership has very little to do with what the association is going to do in terms of services,” says Steve Brumfield, assistant director of community associations for Toll Brothers, a nationwide luxury home builder.

Cost savings passed to consumers

A detached condo might be a small, two-bedroom cottage or row house, or a 2,400-square-foot luxury home, such as these Tuscan detached condos near the beach in Orange County, Calif.

What these high-density homes typically have in common is a lower price, passed along from the developer’s reduced processing and land costs. Those Tuscans might sell for upward of $700,000, but the nearby subdivision equivalents could top $1 million.

Loretta Tabereaux bought a  two-story, 2,000-square-foot detached condo outside San Diego for $500,000 that would have cost her $600,000 in a traditional subdivision, or put her in a master planned community with double or triple the commute time. As it is, she’s five minutes from the freeway and a quick walk from a trolley station. Her neighbors are 10 feet away, but she doesn’t see them much. “Typically, to have a location like that, you would be in a really urban environment,” she says. “But here you still have the sense of being in a single-family detached home.”

In 2004, Pattison bought a  two-bedroom detached condo in a cluster outside Seattle for $170,000 as the only affordable way to get out of an apartment. A similar home in a subdivision would have cost him about $350,000 in Seattle or $280,000 where he is now, in Lake Stevens, 35 minutes north.

“It was the only entry-level housing I could qualify for,” Pattison says. “And I couldn’t be more thrilled with it.”

Three years later, the condo was valued at $260,000. “For me, it was the best financial move I could have made in my life,” he says.  

That 15% annual rate of return is in line with that for other housing types in the region, says Cheryl Lotz, a senior appraiser with PGP Valuation in Seattle. In many low-end markets, condominiums have appreciated more in the past few years than traditional homes.

Whether detached condos behave more like single-family homes or traditional condominiums in the resale market remains to be seen. But their appreciation is based on the same vacillating supply-and-demand functions that affect the rest of the housing market.

“They can do much better; they can do much worse. It’s very difficult to make a blanket statement about it,” says Jim Gaines, a research economist at the Real Estate Center at Texas A&M University.

The pros and cons of detached condos

So what are the potential advantages?

• Low maintenance: No need to paint, shovel, rake or haul trash.

• Gated entrance or other group security measures.

• Shared amenities: A pool, large tract of open land, playground, fitness center.

• Neighbor control: Set rules enforced by the association offer some assurance the person next door won’t let weeds or rusting car parts let the neighborhood go.

• Nuisance control: Limits on noise, pets or other possible nuisances are defined and enforceable by the association. “The nice thing about the condo association is that it gives you a legal vehicle that encourages cooperation,” says David DiCicco, a developer in Taos, N.M. “You don’t have the situation where if someone refuses to pay the maintenance on their lot, the only other option the other owners have is to sue them.”

• Location: The tight clusters might get you closer to the city.

And the disadvantages?

• See above: If you don’t want to live under group rules or share property, don’t go condo. This is more serious than just not wanting to keep your house painted the specified color. In some communities, homeowners groups have forced people into foreclosure over late payment of association dues. 
• Crowding: Homes might be only 10 feet apart and have small driveways and narrow streets. Outside Seattle, firefighters expressed concern about viable emergency access 

• The looming questions about their long-term resale value: In addition to market forces, the appreciation of detached condos is exposed to how well — or poorly — the association is managed; poorly maintained properties can make for depressed home values.

• Fees: Remember to factor these into your annual costs when the lower list price catches your eye.

Housing for the squeezed-out middle class

When DiCicco moved to Taos 12 years ago, he had a good job as county planning director but couldn’t afford a single-family home. He bought a fixer-upper for $150,000 and had the skills for it; he is a licensed architect and builder.

He’s also a licensed contractor, and after a few years of “building for rich people,” he now works to fill a gaping housing need for the other half. The median income in Taos is $40,000, but the median home price is an unreachable $337,000.

“There are a lot of people in that income bracket and no one was building houses for them in this market,” DiCicco says. “The only option for them was to get a trailer.”

To help build quality affordable homes, DiCicco turned to the legal structure of the condominium. It allowed him to bypass lengthy permitting that would have added $50,000 to the cost of each home. As a community association, he could install two community wells instead of permitting and buying a water system, a process that can take years.

“We just took advantage of the opportunities that the state gives to homeowners willing to share the responsibility of taking care of the property,” he says.

He also could get creative. The 12 houses in Taos Cottages are arranged in one portion of the eight-acre property to allow each good solar access and views of the Sangre de Cristo Mountains. They are 50 to 100 feet apart, with the front doors facing each other, to foster community, leaving three and a half acres as dedicated communal open space.

“You have your own house with land around it; you just happen to own the land in common with the people around you,” DiCicco says.

The two-bedroom, two-bath homes are just under 1,100 square feet and start at $213,000. A $100 monthly association fee covers the private road, phone, electric and sewage maintenance costs.

“I think this type of housing has a really good future, because of the cost of land development and the cost of subdividing,” DiCicco says.

10 questions to ask questions before signing

A reminder: Financial and legal arrangements vary, so request and read the master deed and bylaws carefully. Questions to ask include:

• What, exactly, do you own?

• What, exactly, are your responsibilities? Remember, just because you don’t own the land doesn’t mean you might not have to maintain it.

• What services, exactly, will the association provide?

• What amenities will you, your children and your guests have access to?

• What authority does the association have to enforce the rules and to foreclose? Check the laws in your state, which can protect homeowners.

• Do the documents spell these things out? “If the documents are not clear, those are not good documents,” says Robert Diamond, a homeowners association lawyer.

• What is the association’s financial structure? Is it liable for additional costs that you will have to help pay later? Does it have a reserve structure?

• Were the houses made by a reputable, experienced builder? Is it a quality product?

• Who are the other owners? What do they think about how the condo association is run? How are disputes with the association handled? (For tips on handling disputes, click here.)

• Most important: Do you want this kind of living? Monthly dues can add up. If you don’t want to help pay for a pool, then don’t.

By Karen Aho, MSN Real Estate 

http://realestate.msn.com/buying/Article2.aspx?cp-documentid=5849427http://realestate.msn.com/buying/Article2.aspx?cp-documentid=5849427

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