Friday, May 27, 2005

Condos and Tenancys In Common (TICs) - Part I

A lot of you visiting this site have been looking for information on San Francisco condominiums and conversion from Tenancys In Common (TICs) to condos.

Therefore, I will be providing a series of posts that will help you understand the differences between TICs and condos, different rules pertaining to condo conversion, and other useful information about this type of market, including great resource links.

Please feel free to send me questions that you would like answered, as I am sure the answers I provide will be useful to many more readers.

Q: Tenancy In Common vs. Condominium – What’s The Difference?

A: The basic difference between a TIC and a condominium is the way that the particular unit is financed, and thus the degree of risk involved in ownership. From a physical perspective you cannot tell them apart. They are both one unit in a building that contains two or more units.

In TIC ownership, each person owns a percentage of the building as a whole. It is a partnership in investment, and ownership is broken down by the percent value of the each person’s investment – which is represented by the particular unit they will occupy or rent out to others. Therefore, as a buyer you are paying for that unit’s worth overall, depending on its size, location and amenities in relation to the rest of units in the building.

From a financing perspective then, every “partner” in the building is accounted for on the same mortgage, for the investment as a whole. One mortgage, several accountable partners for its timely payment. If one partner is unable to pay, it affects all of the other partners in the investment. This risk factor, along with other issues I will address later, is why TICs have historically been less expensive to purchase than condominiums.

TIC partners must come up with their own rules about how to share common areas in the building, as well as the burden of maintenance, upkeep, and security issues.

When an owner TIC unit decides to sell, he or she is really making the decision to opt out of the investment and find a replacement for the “partnership.” The value of the unit, and its relation to the building’s value, are re-assessed. A new person purchases that interest in the building, and either assumes the previous owner’s mortgage, or a new mortgage with the new partnership (all other investors plus the new investor) is created.

Condominiums, as I said, look and feel just like TICs. The difference is that a condominium is a separate and divided interest in a building with two or more units. Each buyer is purchasing one unit free and clear of the others, with exception of having joint responsibility to maintain common areas. Condo owners therefore have a mortgage for only the unit they own, lowering the risk of default. Because the degree of risk is lower, condominiums historically have been more expensive to purchase than TICs.

In addition to financing one’s own separate unit in a multi-unit building, condo owners pay Home Owner’s Association (HOA) dues on a monthly basis. These dues vary per building, according to the needs and desires of all residents of each particular building.

Condominiums also have outlined standard Conditions, Covenants, and Restrictions (CC&Rs) that prescribe the rules and regulations of all occupants. CC&Rs are official legally binding rules, and can only be altered by a unanimous decision from the HOA board. CC&Rs are designed to help protect each owner’s right to quiet enjoyment of their space.

When the owner of a condominium decides to sell, he or she sells the interest in that single unit. That unit’s value is re-assessed and sold to another individual purchaser, who will find his or her own financing option.

Have more questions about trends in the housing market? Questions about selling or buying a home? Contact me today for honest, experienced answers. Amy Blakeley, Realtor®
ablakeley at
(415) 296-2173 Direct

Monday, May 23, 2005

SF Real Estate Market Conditions for May 2005

If you're confused by the current state of the San Francisco real estate market, you're not alone. Even we Realtors are a bit confused about the unpredictability of what a property will sell for.

A few posts ago I provided my insights on where the market would be for Spring 2005. To recap, I mentioned that Spring would continue to be a Seller's market, but that there would be more opportunities for buyers in the super-hot $600,000-$850,000 price range. These predictions were based on an expected influx of housing inventory as well as an increase in mortgage rates, which would push out some buyers on the demand side.

So here we are in the height of the season, and the housing inventory is only a little above flat. Additionally, mediocre job growth, high oil prices, and fears of inflation have kept interest rates low even though the Fed raised national rates to 3% - so the buyers I expected to be pushed out are still in the game. Overall, there has been very little change in the market conditions since March.

The major difference between March and current market conditions, is that I don't know one person who can figure why certain properties in this $600,000 - $850,000 range are selling the way they are selling. To give some examples, a 2 bedroom condo on Steiner at Alamo Square, listed for $599,000 sold for $625,000 after only receiving 2 offers. Yet a 3 bedroom home at 17th and Kirkham, listed at $839,000 received 3 pre-emptive offers after just 2 days on the market and closed at a cool $1,000,000. Examples like these can be found all over the City, and occasionally with properties that are similar and only blocks away from one another.

The point for sellers: don't let a real estate professional aggressively underprice your home and hope that the offers come flying in; you just might not get what you were expecting. Ascertain your absolute lowest acceptable number and clearly communicate this with your Realtor.

The point for buyers: don't get discouraged when you see 15 other groups looking at the same property as you; it isn't an indication of how many offers will be presented. Also, if you've been looking and writing offers for a while, it's easy to want to take a break from it all. It is better to simply slow down your pace but let your Realtor continue to alert you of new opportunities once he or she is familiar with your needs.

Finally, whether you are buying or selling, make sure your Realtor knows exactly what is going on in your neighborhood, and be able to show supporting evidence for the strategies he or she presents.

Have more questions about trends in the housing market? Questions about selling or buying a home? Contact me today for honest, experienced answers.

Amy Blakeley, Realtor®
ablakeley at
(415) 296-2173 Direct