Many buyers are not aware of the important differences between a
condominium and a planned unit development (PUD)…as is the case with some
listing or selling real estate agents.
Because there are so many similarities, the two are often confused. In many cases, they may physically look the
same and have common features but there are some critical differences.
Both are common interest developments (CIDs) with the benefit to each
owner of an undivided percentage interest and rights in the use of common areas
and amenities that might be too expensive to be individually owned – pools,
tennis courts, workout facilities, golf courses etc. These developments are managed and maintained
by a Home Owner’s Association or HOA.
Legal documents are recorded establishing the Association and provide for
methods and procedures for governing the development - articles of
incorporation, bylaws, covenants conditions & restrictions (CC&Rs),
financial statements, budgets, rules and regulations, etc. There is a mandatory requirement that each
owner be a member of the association and pay ongoing fees, usually monthly, to
cover the common area costs along with any other costs or reserves specified in
the ruling documents. While on the surface, one type of unit may look the same as the other
there are important differences. For
instance, an owner in a condominium project typically owns the air space within
his/her unit and possesses a fractional or percentage interest in the entire
project, buildings and land. For example
if there were 100 units in the complex, a single ownership would be 1% of the
whole. Whereas a title-holder in a PUD
owns the structure enclosing his unit, the individual parcel on which it sits –
akin to a single-family residence - and has a percentage interest in the common
Why should I care; what’s the
big deal, you may ask. Well, if you are
an all cash buyer and plan to occupy the property, no problem but if you need
to have your purchase financed or want to sell your unit later to someone who
needs financing, it may become an issue.
In the eyes of many financial institutions, the two are not created
equal and it is much more difficult to get a loan approved for a condominium. This seems especially true in the lower-end
markets. Don’t misunderstand, there are probably many great, financeable condominium
properties available but it may take some time and effort to find the right
one. If you are using FHA, financing you
will need to find a development that is at least 70% owner-occupied, with only a
15% delinquency in HOA fees for the entire project and which has already been
approved by FHA. There may be other
restrictions that should be clarified by your lender before embarking on your
search. Even if you are using conventional
financing, the Fannie Mae guidelines are very similar and a loan may be denied
because the development does not qualify.
PUD loan guidelines seem to be much less restrictive and may be a better
way to go for some buyers but in either case, you have to do your
Here are some examples of both types of development in the Arden-Arcade
area you might recognize - that may or may not be financeable:
Pavillions Place (above photo) – Fulton/Fair
Oaks Blvd o
Woodside – Howe Ave o
Timberlake – Fulton Ave
Planned Unit Developments o
Exeter Square – Fulton Ave o
East Ranch – Monroe/American River Dr o
Campus Commons – Howe/American River Dr
Author:Sean Safholm BRE#01270334 Phone: 916-920-7000 Dated: October 5th 2014 Views: 269 About Sean: Sean Safholm started his career in real estate in 1999 when he was going to college to study real es...
Sean Safholm is a licensed Real Estate Broker in California. He is a real estate investor, broker, and seasoned mortgage pro. Sean has closed over 2000 transactions on the mortgage side of the business and a few dozen house deals for his own account. He has extensive knowledge on all sides of the real estate transaction and is here to assist first time buyers, move up buyers and investors with all their real estate needs.
The news came out a while back that Freddie Mac was suspending its new
"My husband and I were looking to buy a home and needed direction. We needed help finding the best area that was going to fit our family needs as well as finding a great loan that would fit our needs. We contacted Sean Safholm who was wonderful in taking care of us and helped us find the area that worked best for my family. He directed us to a new home subdivision that had the perfect house and met all the needs of my family.
He always answered all of our questions and picked up his phone every time we called. Even though he was not our real estate broker, Sean helped us with our financing to purchase our home. We feel we got the best deal in town with our mortgage. I priced/shopped rates with a few lenders and by far Sean Safholm beat them not only in price and payment, but also in customer service! I continue to recommend Sean Safholm to all of my family and friends.