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Tenancies in Common as comps - San Francisco

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V. Nightshade

Junior Member
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Nov 17, 2003
Professional Status
Certified Residential Appraiser
State
California
In San Francisco, 2-unit properties are often sold as TICs. Is there anything wrong with using it as a comp? Particularly if you can't find anything else. It seems that in this market one of the units is always owner occupied anyway, so what's the differenc? Thanks! Trudy
 
If that's the market and the approach taken by the "typical" buyer(s) then I don't see a problem.
 
Tenancy in common is form of ownership...why would this make a difference in using as a comp?
 
Maybe it makes difference. Can you elaborate?
 
In San Francisco, where most people can't afford to by a house, friends (and strangers) get together and decide to buy a duplex, triplex or fourplex, 1 unit for each owner. They get on the waiting list for condo conversion. There are some banks now lending on these, although most require 1 loan with all parties responsible for the loan.

The difference is these properties are purchased for owner occupation instead of investment, or owner occupation in 1 unit with income from the other units. The group of people may be willing to pay more on a price per unit basis because it's the only way they can become owners, and it's cheaper than an SFR. Also, San Francisco has pretty strong rent and eviction control, keeping rents artificially low. Investors have a harder time meeting expenses. The rent control allows eviction for owner occupation,


Individual Tenancy-In-Common (TIC) mortgages are now being offered by lenders in San Francisco, allowing, for the first time, TIC owners to sidestep the two biggest problems associated with a TIC group mortgage, i.e., the risk of default by one member of the TIC group, and re-financing complications when one TIC member wishes to sell his or her "unit."
The replacement of a group TIC mortgage with individual TIC mortgages largely eliminates the distinction between condominium and TIC ownership.​
http://www.g3mh.com/downloads/Sept_2005_TIC_Brochure.pdf#search=%22san%20francisco%20%22tenants%20in%20common%22%20rent%20control%22
 
Trudy,

I am thinking that what you are describing may not be Tenants in Common. Please give us some info- Mike and Steve are both right, but we need more.

T in C is a form of ownership. It differs from joint tenancy in that JT is essentially a single entity, normally with right of suvivorship whereas T in C essentilly creates two estates and if one tenant passes on their share does not automatically go to the other unless by devise.

CA has 3 primary forms- Joint Tenancy, Tenants in Common, and Community Property. Some other states have Tenancy by the Entirety.

I have never seen a market difference among them. The choice depends on the needs of the parties who take title, but usually has little to do with the market values.

My last IL house was purchased in JT. When my wife and I divorced, we deeded the property to ourselves as tenants in common so that, if either remarried (I did; she did not) then the new spouse would have no claim on the other's portion and that portion could be willed to our daughter.

Tell us all you know about this and let's see if we can help.

Brad
 
Of course since it is San Francisco, it could be Joint Tenancy might not apply in some cases, LOL!
 
Brad,
This may be the type of circumstances they talk about in the comment to SR 1-1a (which doesn't belong there). The basic idea is things change because people come up with new and creatiive ways to make money: condo, timeshares, etc. It stretches the capacity of antiquated terminology (rooted in William the Conqueror paying off his buddies with land to tax for the duratin of their lives) to explain who owns what, for how long and subject to what conditions.

The key difference between JT and TIC is who owns the fee. In most states, the joint tenancy owns the property not the joint tenants, that is why it does not affect marketability, financing or value - except for the interim period while the surviving tenant has to assmble papers to prove transferrable title. In TIC, each tenant is a partial owner. This creates sub-properties. Unlike JTs who have to agree to sell, TIC's can normally sell their partial interest without the consent of the other tenants.

These deals are starting to sound like a bit of a hybrid, effectively "partnerships" or maybe they are just stretching the bounds of TIC. I have read enough in Cynthia's article to believe these arrangements affect marketability and value. The details of the internal contractual arrangements have to be analyzed to be sure you are not comparing apples to oranges.
 
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This happened in San Francisco so you can compare apples and organes and get away with it. Not there is anything wrong with apples or oranges mind you. Remember they both came from trees and we can't help which tree we came from. When cross pollenation occurs who knows what kind of fruit will result? It just adds to our diversity which is the strength of our country. The more weird fruits we produce the better for us all. It is even better when they all congregate in one city like San Franisco. The place is a hoot!
 
A case study...

I just noticed that the public record for the comp that inspired my question, does NOT record the current (8/06) sale as the "Last Market Sale". I missed the nuance before. I wonder why not?

Here's the timeline:

March '04 : Chuck (not his real name) buys an old Victorian duplex shack from Norman for 750K. This appears under heading "Last Market Sale"

March '05: Chuck does something (not sure what) that causes a new deed to be recorded.

July '05: Chuck gets a mortgage for 1.1 mil, presumably to fix the place up.

May '06: Chuck lists the place and is looking for a buyer on any arrangement. It's listed as 2-units for 1.575 mil. Listing says: "Also available as TICs, easy condo conversion. "

The following appears under "Sales History", with the word "Nominal"

August '06 Chuck sells something to Toby for about 780K, with a grant deed.
August '06 Chuck sells something to Donald for about 795K, separate deed.

Toby and Donald can still rent the units out if they choose. So I guess I've answered my own question...I think it's ok to use as a comp for small income residential. Also, we really don't know what Toby and Donald's ownership arrangements are, do we? Do we care?

Oops, there's more! I just noticed that under Owner Info only Donald is mentioned...and someone entirely different...Susan!
 
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