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January 21, 2021

TIC Inventory Poised To Grow in 2021

3320 Scott exterior

The tenancy-in-common (TIC) market slowed to a crawl in the last quarter of 2020, with almost 100 cancelled or expired listings laying by the MLS wayside. With the condo market cooling due to Covid, it was no surprise that the less conventional TIC took a bit of a hit, as well.

But 87 TIC interests did end up selling (up from 70 sold in Q4 2019) despite these challenges. Buyers snapped up TICs in popular neighborhoods like Noe/Eureka Valleys, the Haight, Hayes Valley, NoPa, Marina, Russian Hill and the Mission in search of prime locations and more space than condos can typically offer for the same price.

And though almost half of the sales closed below the list price, 34 buyers overbid and a dozen paid the list price. There were even three TICs that sold for 20% or more over the list price.

Almost half of the TICs sold were two bedrooms (average price $1,087,630), but 29 three- to four-bedrooms (avge $1,587,026) and 11 one-bedrooms (avge $749,000) also closed.

Luxury buyers were no strangers to TICs. Five TICs changed hands in the $2,015,000-$2,537,500 range. One of these was the extensively renovated, top-floor 2BR/2.5BA at 3320 Scott (see photo, above, courtesy Artemis Real Estate), part of a three-unit TIC building located a block from Chestnut Street in the Marina. Listed for $2,294,000, the sale closed for $2,150,000.

TICs have come a long way since I began selling real estate in 2002, when group loans were the only option. Fractional financing has made TICs much more mainstream, allowing buyers to have their own individual (adjustable-rate) loans at competitive interest rates. It’s not all about condo conversion anymore; 78% of the TICs that sold in the last quarter were in buildings with three or more units. (Condo conversion is only currently possible for two-unit buildings that are fully owner occupied.)

The value gap between TICs and condos has also narrowed. In general, TICs in those two-unit buildings with condo conversion potential sell for close to condo prices. But TICs in buildings with three or more units seem to be worth approximately ten- to fifteen percent less than their condo counterparts—good news for TIC owners who could traditionally expect that gap to be more like twenty percent.

I’m expecting TIC inventory to steadily expand as 2021 progresses, with many sellers putting the listings they cancelled in 2020 back on the market.

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