Tenancy-in-common (TIC) units can sometimes go on the market with the promise of closing as a condo. This scenario is most common for TICs in two-unit buildings. If you’re planning to buy or sell a property that will be condo converted at close of escrow, there are two big things to know that will ensure your transaction goes smoothly:
The existing owner of the other TIC in the building has to refinance into a condo loan. Both the refi and the buyer’s purchase loan have to close simultaneously. It’s ideal if the refinancing owner works with the same lender the buyer is using. That lender also needs to have experience with TIC sales and condo conversion. Refinancing tends to take longer than a purchase loan, so it’s good if the existing owner has a head start. (This is not the case if the existing owner doesn’t have a loan, of course.) My clients purchased a condo in the Outer Richmond last year that was technically a TIC, and they were fortunate to have been preapproved at the outset with Redwood Credit Union, which specializes in TIC loans. We got the other condo owner in the building on board with Redwood, and it was infinitely easier than having two lenders involved.
You will need to get a new HOA insurance policy on the building. The insurance policy on a two-unit building (e.g., two TICs) is different from a homeowners association (HOA) policy for two condos. The latter policy is more expensive, and the new condo owners also need individual unit insurance. Allow sufficient time to get quotes for both the HOA and individual condos. Insurance is increasingly challenging to get, and each condo owner will need to factor in insurance costs.
Do your homework if you’re buying or selling a TIC that will close as a condo. The more preparation you have, the better.