TIC vs. Condo: Understanding the Differences in San Francisco's Real Estate Market
San Francisco's real estate market offers a diverse range of homeownership options, including condominiums (condos) and tenancy-in-common (TIC) properties. While both types of ownership allow individuals to purchase a portion of a building, there are significant differences between the two. Let’s delve into the differences between buying a TIC and a condo in San Francisco so you can make an informed decision when purchasing a home in the city.
Ownership Structure: TIC vs. Condo
The primary difference between a TIC and a condo lies in the ownership structure. A TIC, also known as a tenancy-in-common, is a type of co-ownership where multiple individuals own an undivided interest in a property. Each co-owner has an equal right to use and possess the entire property, and decision-making requires the consent of all co-owners. A TIC agreement is created and signed by the owners and dictates the rules or usage for the building.
In contrast, a condo is a type of ownership where each unit is individually owned, and the common areas, such as hallways, lobbies, and amenities, are jointly owned by all residents. Condo owners hold a deed to their individual unit and have an undivided interest in the common areas.
Maintenance Responsibilities: TIC vs. Condo
When it comes to maintenance responsibilities, TICs and condos differ significantly.
In a TIC arrangement, each co-owner is responsible for maintaining their unit, including repairs and renovations. The shared spaces, such as the lobby, hallways, and roof, are maintained by the co-owners collectively. The signed TIC agreement dictates how decisions are made.
In a condo, each unit is individually maintained by the owner, while the common areas are maintained by the homeowners association (HOA). The HOA is responsible for repairs, replacements, and upgrades in the common areas, and the cost is typically covered by monthly or annual fees paid by each condo owner.
Flexibility and Customization: TIC vs. Condo
TICs offer more flexibility and customization options compared to condos. Since each co-owner has an undivided interest in the property, they can make changes to their unit as they see fit, as long as they comply with local building codes and regulations.
In a condo, the HOA often has strict rules and regulations regarding renovations and changes to individual units. This can limit the level of customization and flexibility for condo owners.
Financing: TIC vs. Condo
In the old days, buying a TIC in San Francisco was more complicated. All owners of the building shared one mortgage. In today’s market, financing a TIC has become easier and each individual owner can now hold their own mortgage for the percentage of the building they own as per the TIC agreement.
Because TICs are considered a shared ownership arrangement, lenders view them as riskier investments. TIC lenders may require a larger down payment, and the approval process may be more challenging. There are only a few banks that issue TIC mortgages in San Francisco, so rates can be higher. Ask us for a list of recommended TIC banks.
Resale Value: TIC vs. Condo
In San Francissco, TIC buildings are fairly common and over the years have become a much more common way to by property. The resale value of a TIC and a condo can differ significantly. Condos tend to appreciate in value over time, making them a more lucrative investment option. TICs, on the other hand, may not appreciate at the same rate as condos, as the shared ownership structure can be seen as riskier or less desirable to potential buyers.
San Francisco's real estate market offers both TIC and condo options for homebuyers. While both types of ownership have their advantages and disadvantages, understanding the differences between the two is essential for making an informed decision when purchasing a home in the city. TICs offer more flexibility and customization options, while condos provide a more traditional homeownership experience with a clearer ownership structure. Carefully consider your needs, budget, and long-term goals before deciding between a TIC and a condo in San Francisco. Always consult a real estate professional familiar with the local market to ensure a successful home-buying experience.
