What are the disadvantages of purchasing a TIC over a Condo? Are there any legal issues buyers should know?

Asked by Nicole, Palo Alto, CA Wed Sep 26, 2007

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Jed Lane, Agent, Petaluma, CA
Thu Sep 27, 2007
Nicole,
There are many disadvantages in purchasing a TIC over a condo. If you have the choice between the two buy a condo.
As others have said that may not be an option or you could get more for your money so it is better than not buying and remaining a renter.
Over the past year there have been some advances in TIC financing with fractionalized loans. This is an evolving product that is offered by community banks here in the Bay Area. Just last week I attended a seminar where the four largest of these lenders informed us that they are still evolving. Also at that event the Assessor of San Francisco announced that each fractional owner will be recognized and taxed individually, the group would still be responsible for the whole tax bill though.
TIC’s are complicated and while you may get some information on a forum like this you need to find a good Realtor that is current on the situation. The reality is that this is a political football in SF and if the Board of Supervisors has a change in its make up in the next election, you’ll look like a genius for having bought if you can convert to condo.
Andy Sirkin has been mentioned, I would also recommend http://www.g3mh.com. This is another law office in San Francisco and they have very good up to date information.
I would also recommend that you look at http://www.plancsf.org Plan C was the sponsor of the seminar I attended. They are working to move the TICs through to condo.
Jed Lane
Web Reference:  http://www.jedlane.com
1 vote
Liz Stevens, , Berkeley, CA
Thu Sep 27, 2007
TIC's have been around in Berkeley since the advent of Rent Control and in SF as well. The disadvantages come when you wish to make a change in your ownership or your loan. As the other Brokers pointed out, you are on the loan and title with others. When one owner wishes to sell or refinance, she must have the cooperation of the other TIC owners. It is not as readily saleable, but is a way for first time homebuyers to have some ownership. If you have a group of friends or family and you become a TIC owner with them, all the better. Be cautious about your TIC partners, and move towards condominiumization ASAP. Liz Stevens, Windermere Real Estate
1 vote
Mary Fenton, , San Francisco, CA
Wed Sep 26, 2007
This is a very complicated question. The first thing I will do is direct you to an excellent website where you can read up on TIC issues: http://www.andysirkin.com. The disadvantage is that you are not the sole owner of your unit. If you purchase a condominium, you are the one and only owner, the only person on title, and the only person on the loan. If you purchase a TIC, you are on the title along with the other owners of the other units in the building. You essentially own a percent interest in the entire building with a right to occupy your unit.

The other disadvantage is the financing. In the past, your only option was a group loan, where you are on the loan with the other owners in the building. Now there is also the fractional financing option, where you can have a seperate loan, but the cost of these loans is usually about a percentage point higher than a regular loan.

As far as legal issues go, you just want to be sure there is a good TIC agreement.

There are also advantages to purchasing a TIC, the biggest being that it may get you into a neighborhood or a unit you otherwise could not afford to live in. It is a form of affordable housing that San Francisco really needs.
Web Reference:  http://www.vanfenton.com
1 vote
Scott Rose &…, Agent, San Francisco, CA
Wed Sep 26, 2007
Hello Nicole,

There is a lot to say about TIC versus Condo. I think a really good start would be to go to Andy Sirkin's website for the questions and answers on TIC's. (see link below) He has made TIC's much easier to understand.

THere is only so much info you can write down and I think you picked a question that could receive very long answers.

Good luck with finding the right match.
1 vote
Michelle Car…, Agent, Coppertino, AL
Wed Sep 26, 2007
Here's the question: how do you feel about owning real estate in common with a stranger (or strangers)? Do you feel more secure or less secure? While there are potential benefits, TICs are fairly new in the Bay Area-the main benefit being owning a portion of real estate at a reduced price, hoping making it more affordable. Condos & townhomes are not perfect, but there are many laws already in place for them.
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