Buyers snapped up tenancy-in-common (TIC) interests in San Francisco’s most popular neighborhoods over the past six months, proving that the TIC market is alive and well despite its inherent ownership risks.
TICs represented a fairly small percentage of overall sales from August 2017-January 2018. Though almost 1100 condos sold in that timeframe, only 118 TICs did. The TIC median price was $1,017,500—closer to $1.2M for TICs in two- to four-unit buildings. But more than half of all sales were for TICs in buildings with five or more units, notable and surprising because these properties won’t be eligible for condo conversion if the lottery indeed resumes in 2024.
TICs sold most frequently in these popular neighborhoods where condos are much more expensive: Noe/Eureka Valleys, Mission Dolores, Hayes Valley, Nob/Russian Hills, Bernal Heights and the Mission. Though the average TIC overbid was three to four percent, some buyers paid 20% or more for ones located in those prime areas.
A 2BR/2BA TIC interest with no parking at 465 Waller in Hayes Valley commanded the largest overbid (42%), listing for $998,000 and selling for $1,420,000.
Ten TICs sold for $2M or more, with the most expensive being 2300 Divisadero in Pacific Heights. The 3BR/2.BA, 2450-square foot home was situated in an eight-unit building and offered two-car parking, closing for $3.2M. My favorite was the 2BR/2BA TIC at 8 Russian Hill #2, which had unobstructed North Bay views and sold for $2.4M in cash.
All but one of the TICs at this price point were located in the north end of town, where condos cost considerably more.
TIC loans are done through fractional financing with adjustable-rate loans, and interest rates are pretty low right now. TIC lending expert Gordon Friedman reports that three- and five-year ARMs are just under four percent. But it’s important to note that fractional loans have some different requirements, such as:
– 1% origination fee (based on loan amount)
– 80% financing allowed with minimum 740 credit score; 75% financing allowed with minimum 700 credit score
– minimum down payment required is 20% to $1,000,000, 25% to $1,500,000
– six months of the total housing payment (monthly mortgage, taxes, and HOA dues) must remain in liquid or retirement accounts after close of escrow
– maximum loan amount $1,500,000.
Don’t hesitate to contact me if you’re planning to buy or sell a TIC this year. I’d be happy to chat with you about the details (415.823.4656 | ebermingham@zephyrsf.com).