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February 2, 2015

TIC Market Hits New Highs in San Francisco

2200 Beach Exterior

The San Francisco tenancy-in-common (TIC) market for three or more units reached new heights in 2014, with the average sale price of $940,433—up 26.5% from its average in 2013.

I think buyers are more open to TICs because the fractional financing available makes you responsible for only your loan. You don’t have to share a mortgage with your co-owners, which was traditionally the case.

We’re also seeing a steady stream of TIC inventory due to the “expedited conversion program” that took effect in 2013. TIC owners who had been in the lottery for a long period of time were awarded the right to pay a fee to bypass the lottery starting in 2013. So we’ve been seeing many buildings condo converting, with long-time owners ready to sell.

If you’re considering buying or selling a TIC interest, here’s what you need to know about the market going into 2015 (all info based on 2014 citywide sales in buildings with three or more units):

Two-bedroom TICs are the most popular. Buyers snapped up 120 two-bedroom TICs in 2014, compared to 80 one bedrooms and 58 three bedrooms.

Buyers are frequently purchasing TICs in very large buildings. More than four units in a TIC building used to be fairly undesirable, because you’d be agreeing to share title with several owners. However, this doesn’t seem to be as much of a concern anymore. Several TICs in eight-unit properties changed hands last year, and three twelve-unit buildings (20 Parkridge in Twin Peaks, 2200 Beach in the Marina, and 1556 Jones in Nob Hill) successfully sold a bunch of units. The mother of them all is Park Lane at 1100 Sacramento, the 33-unit, renovated apartment building that accounts for the most expensive TICs sold in San Francisco to date. (Buildings with more than six units aren’t eligible for condo conversion.)

Luxury TICs are on the move. 28.5% of TIC sales in 2014 clocked in at $1M or more, and a quarter of those high-end sales were all cash. Park Lane did the honors of having the most expensive TICs sold in San Francisco history, with units selling for $1.6M-$7M. (Yes, seven million.)

Six neighborhoods were the most popular for luxury TIC sales. Those would be Noe and Eureka Valleys, NoPa, Nob and Russian Hills, and the Mission.

Buyers for TICs under $1M had more neighborhoods to choose from. These ‘hoods included the usual Noe and Eureka Valleys, Noe/Russian/Telegraph Hill, NoPa and the Mission. But also popular for more budget-minded buyers were the Sunset, Richmond, Haight, Twin Peaks, Mission Dolores, Alamo Square, Pacific Heights and Bernal Heights.

Buyers are overbidding for TICs. Of the 100 TICs sold from September 2014 to January 27, 2015, 68% sold for more than the list price. The average overbid was 6.36%. The most aggressive overbids were on 56 Sanchez #2 in Duboce Triangle (2BR/1BA listed for $799,000 and sold for $1,120,000) and 1626 Hayes in NoPa (2BR/1.25BA listed for $799,000 and sold for $935,000).

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