07/06/2019 by Eileen Lanza 0 Comments
What are Tenants in common – TICs?
TICs are new to the Los Angeles market. They are popular in San Fran. Contact me for a current list.
What is TIC?
TIC (or Tenants-in-Common) refers to a property that is owned by two or more people. Much like a condo, the TIC agreement defines what percentage (unit) of the property each person owns. TICs have an HOA and owners share the costs of common utilities and up-keep. TICs tend to be a more affordable way to purchase a home in urban areas. Generally, they are in the entry-level price range, allowing first-time buyers an opportunity to own their home. No right of survivorship.
How is TIC different than a condo?
TICs are very similar to condos. Each tenant has decision-making power over their unit, but all tenants make decisions together concerning the shared spaces and building as a whole. The differences arise with the building of the agreement and with financing. The "agreement" or contract substitutes for an individual "property deed" and condominium by-laws. The TIC agreement protects the owners of the property, defines how bills will be paid and the property is maintained, and specifies how unforeseen events will be handled. The TICs have an unrecorded agreement which every owner has signed. You will receive ONE property tax bill for the entire building.
How are TICs financed?
Since all tenants are part owners of the building, TICs require specific loans. In the past, Group TIC Loans were standard. The co-owners would have to qualify for a loan collectively as a group. But now, Individual TIC Loans for fractional ownership are becoming more popular. Pioneered by Sterling Bank in San Francisco these loans allow each TIC buyer to qualify independently and sign an individual note which is secured by a deed of trust covering only that owner’s share. Unlike with group financing, none of the other TIC owners are affected by the default or foreclosure of one unit. TIC loans can be .5% higher than buying a condo, you may have to put more money down and underwriting is tougher.
Want more information on how to get pre-approved for a TIC loan? Only a handful of banks are financing for now.