Many homes in multi-unit buildings in San Francisco are TICs (tenancy-in-common units), rather than condominiums, partly due to the limits on condo conversions in the city. Some online real estate platforms don't identify TICs vs. condos in their descriptions, but it is important to understand the differences.
TICs function like condos, with couple of important legal differences
A TIC (tenancy-in-common) is a type of shared ownership structure that is similar to owning a condominium in most ways, but with a couple of important legal differences. Unlike with individual condos, a multi-unit TIC property has one common deed and one property tax bill . A TIC owner owns a percentage share of the entire parcel of property, and it is the TIC agreement that specifies how exclusive use of the space is allocated and how the property taxes are divided and paid by all the co-owners. Having a clear, well-drafted, and signed TIC agreement is critical.
You can get an individual loan from a a TIC lender
TIC buyers are now able to get individual loans for their interest in the property, called fractional loans. If you are interested in making an offer on a TIC unit, you will need to get a pre-approval letter from a lender who specifically makes this type of loan. For condo units, you would work with a conventional lender. Historically, the interest rate for TIC loans has been slightly higher than for conventional loans because of the relatively small number of lenders and the lack of a secondary market for these loans. However, in recent months, rates on some TIC loans have actually been better than for conventional loans.
Buying a TIC can be a good way to get into San Francisco real estate
In addition to favorable interest rates currently, TICs tend to be priced approximately 10% lower than similar condos, so buying a TIC can be a good way to get into the San Francisco market. Please reach out if you would like me to send you a list of TIC lenders, or feel free to contact me with any other questions.
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