Condo, TIC, Co-op. What are the differences?

Diff betw condos tics coops InfographicWhat’s the difference between a condo, a TIC, and a co-op? No doubt you’ve heard of each of them but if you are like most people, you’re not sure about the specifics.

Generally speaking, if you are looking to buy a place to live in San Francisco (and it’s not a single family house) then you are probably talking about one of these three forms of ownership.  Since these are forms of ownership and not styles of construction, you can’t tell these buildings apart by physically looking at them. Here are the primary differences in how they each work:

A condo is the most common form of ownership. When you buy a condo, you own one particular unit in a building. You’ll have title to the unit plus you have rights to a use the common areas. In a condo, you’ll pay a monthly homeowners association fee, and you’ll need to abide by rules & regulations (called CC&Rs). Condos can be financed with conventional mortgages (think 30 year fixed rate loans issued by major banks). Most banks that issue mortgages will loan on a condo as long as it meets their underwriting criteria.

A tenancy-in-common (aka. TIC) is a hybrid form of ownership where you own a percentage of a multi-unit building. TICs came about as a way for people to be able to band together to buy property relatively affordably in otherwise expensive cities.  As a TIC buyer, you’ll have rights to live in one unit in the building. Just like a condo, you pay a monthly fee and can use the common areas. In a TIC, the rules and regulations of ownership are spelled out in a TIC agreement. Major banks do not loan on TICs (because there is no secondary market where they can sell the loans to other banks). Financing is therefore more expensive and less attractive than condos. There are a few smaller banks around the Bay Area that offer TIC loans. They charge a 1% fee up front to write the loan, and the interest rate is often about 1% higher than a conventional condo loan, and the rate is locked for no more than 7 years (compared with 30 years for condos). Down payment requirements are higher than for condos, often 25-30%. Although TIC owners each have their own mortgage, this form of ownership does come with some additional risk, primarily surrounding payment of property taxes and potential default by a co-owner. The TIC agreement does address the risk to some degree however buyers should be fully aware of the details before buying a TIC.  The upside is that the purchase price for a TIC is almost always considerably less expensive than a comparable condo.

A co-op (aka. cooperative) is a building owned by a private corporation. It is basically an elite gated community. When you buy in to a co-op, you are purchasing shares in the corporation. You’ll pay a rather hefty monthly fee for rights to live in one unit. Buyers must first be interviewed by the board of directors (ie. other owners) for approval. The interview process generally requires buyers to provide personal financial details for review. The board may accept or reject buyers for any reason. Like TIC financing, terms for co-op financing are less attractive than conventional condo financing and the number of banks that will issue loans are limited. Co-op buildings tend to be well maintained (because they usually have substantial amounts of cash in the bank). Co-ops do not allow rentals, so purchasing one as an investment property is not an option. Like condos and TICs, co-ops may have shared common areas as well as rules and regulations governing what owners can and cannot do.

This is just a quick summary of the differences in these forms of ownership. I’ve sold all of these types of properties and am happy to discuss the specifics with you.  You can find me anytime at 415-971-5651.

 

2 new condo listings in the Mission District

I have two great condo listings coming up soon in the Mission District. Here is some info on each, let me know if you’d like more details before they go on the market:100_2186

2889 24th Street #6 is a bright two bedroom two bath condo facing the quiet side of the building. Built in 2006, this intimate building sits in the heart of the Mission within walking distance to BART, shopping, restaurants and more.  Approximately 935 square feet of living space per the condo map. This sweet condo offers upscale appliances, a contemporary open kitchen, gas fireplace, garage parking, in-unit laundry and a large shared patio. This one is not to be missed. List price is $875,000

2208 Mission St #405 is an awesome three bedroom two bath condo at the corner of 18th & Mission. Located just steps to some of the finest restaurants and coffee shops plus BART and tech shuttles are within a few blocks. The building was built in 2009 and includes a locally-owned grocery store and an upscale coffee shop. Approximately 1173 square feet of living space per tax records. This condo boasts a huge central great-room concept for living/dining/entertaining and it includes a private balcony, shared laundry, garage parking, common area roof deck, and one of the most walkable locations in the city. List price is $975,000

What is a disclosure package?

If you  have spent more than a day searching for a place in San Francisco, you have probably heard something about disclosure packages.  When a seller prepares their home for sale, they are guided by their listing agent through an important but rather lengthy disclosure process. As the name implies, disclosures are documents that give prospective buyers more information about a particular property. If the seller knows of a material fact about a home, they are obligated to tell the prospective buyer about it.

The contents of a disclosure package usually include a variety of statements and mandated reports.  Often these include: home inspection report, termite inspection report, preliminary title report, history of permits, natural hazard report, condo rules & restrictions, underground tank inspection, seller’s transfer disclosure statement, and many more.  Most residential sales in SF are “AS IS”, meaning that the buyer is taking the property in it’s current condition and accepts the disclosures as they are, including the imperfections.  It is therefore very important for buyers to read and understand the entire disclosure package before submitting any offer.  Sellers are wise to disclose everything to buyers in advance to avoid any re-negotiation resulting from undisclosed issues during the inspection and sale process.

If you have found a property you love, your agent can get the disclosure package for you, just ask.  Keep in mind that packages can be 100-300 pages in length, so you may want to be careful how many you request.  Interestingly (at least to me), SF is one of the few cities where sellers and agents prepare a disclosure package up front before a home hits the market. Real estate custom in most other cities is that agents and sellers wait until a buyer is in contract before they prepare the reports and disclosures.

A sample disclosure package cover sheet:

sample dp cover sheet