August 25, 2005
Tenants In Common (TIC) Thursday
Rumblings of TIC lottery reform and continued coverage of individual loans for TIC units are headlining stories today. To be honest, TICs scare the hell out of us these days. In an up market everyone’s happy (okay, so not everyone), but if the market should change, watch out. We believe that too many current TIC purchasers are undercapitalized and overly banking on appreciation.
Almost by definition, these buyers, along with 91% of all San Francisco residents, don’t have the resources to purchase a traditional condo or single-family residence in the city. And if they’re already stretching to make the purchase, there’s a good chance they’re going to be stretching when it comes to the carrying/conversion costs. As the Chronicle notes, “inflated housing prices mean TIC owners who get in over their heads can sell their units at a profit. But if the market were to cool significantly, TIC owners would face more potential liability if their co-owners financially flounder."
Don’t get us wrong, TICs aren’t inherently evil or flawed. But in the immortal words of Hill Street Blues, “Let’s be careful out there.” Run the numbers on your purchase, and your partners' finances, assuming that the market is going to turn. And then be pleasantly surprised when it doesn’t. Rather than financially ruined if it does.
· Supe proposes new TIC lottery system [Examiner]
· Strangers sharing mortgages [Chronicle]
· San Francisco TIC borrowers about to get some TLC from lenders [BizJournal]
First Published: August 25, 2005 11:42 AM