Author Topic: Notes on a permanent housing shortage  (Read 4313 times)

alexpkeaton

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Re: Notes on a permanent housing shortage
« Reply #50 on: August 11, 2017, 12:25:31 PM »
Like I said it's a diy condo.  When you buy a condo you also buy shares in the HOA.  When you buy a co-op (common in NYC and other places), you buy shares in a corporation with a right to use a specific apartment.  In both cases you are essentially going into business with a bunch of people you don't know.  Same thing for TIC

I own shares in a co-op and I've read the terms of the contract. This is accurate. The bank can foreclose on your shares and resell them. I don't recall if their sale is conditional on co-op board approval or not, but I'd guess not.

What I'm curious about is if TIC is commonly used on single-family residence where the owners are simply roommates. Otherwise, why not have a condo or co-op structure?

Jrr85

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Re: Notes on a permanent housing shortage
« Reply #51 on: August 11, 2017, 01:17:05 PM »
Like I said it's a diy condo.  When you buy a condo you also buy shares in the HOA.  When you buy a co-op (common in NYC and other places), you buy shares in a corporation with a right to use a specific apartment.  In both cases you are essentially going into business with a bunch of people you don't know.  Same thing for TIC

I'm not sure about TIC foreclosure, it's an interesting question.  I'd guess it's not as complicated as you think- your ownership of the unit is already contractually based, so maybe your home loan is also based on a contract that gives the lender the right to possession with a lease to you or something like that.  On the their hand, there could be legislation simplifying the process.  I've never owned one so I don't know
I may have misunderstood you.  I thought you were implying that banks were lending for single family residences and only getting a security in the individual's tenancy in common, not the entire residence.   If you were just talking about using TIC to finance something like a duplex or triplex, with a TIC in the entire property but an assignable contract that basically has the same effect as a condo or coop agreement, that doesn't seem that crazy. 

dragoncar

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Re: Notes on a permanent housing shortage
« Reply #52 on: August 11, 2017, 05:38:43 PM »
Like I said it's a diy condo.  When you buy a condo you also buy shares in the HOA.  When you buy a co-op (common in NYC and other places), you buy shares in a corporation with a right to use a specific apartment.  In both cases you are essentially going into business with a bunch of people you don't know.  Same thing for TIC

I own shares in a co-op and I've read the terms of the contract. This is accurate. The bank can foreclose on your shares and resell them. I don't recall if their sale is conditional on co-op board approval or not, but I'd guess not.

What I'm curious about is if TIC is commonly used on single-family residence where the owners are simply roommates. Otherwise, why not have a condo or co-op structure?

In SF, it's a complicated political issue.  San Francisco instituted rent control.  Then the State of California exempted SFH from rent control (including condos).  There are a lot of older houses that have been converted into duplexes (upstairs/downstairs) or quads.  These count as multi-family residences, subject to rent control.  These people apply for condo conversion.  San Francisco no likey, because then rent control doesn't apply.

So people sell as TIC.  Rent control applies, but San Francisco is severely limiting condo conversion (there was a lottery, and priority rules, but I think they may have changed the rules since I last read up on the issue).

In other words, they would if they could, and when they are able to convert to condo the price goes up because you don't have rent control issues (which include things like just cause eviction, protected tenants, etc... very tenant friendly and onerous for a small time landlord).

There are also some Co-ops in SF, for similar reason, but those are usually for larger buildings due to corporate overhead and regulations.




I may have misunderstood you.  I thought you were implying that banks were lending for single family residences and only getting a security in the individual's tenancy in common, not the entire residence.   If you were just talking about using TIC to finance something like a duplex or triplex, with a TIC in the entire property but an assignable contract that basically has the same effect as a condo or coop agreement, that doesn't seem that crazy. 


No, I think you understood right: banks get only security in a portion of the TIC.  They can foreclose on your shares.

If you're interested, you can get a nice $7 million TIC unit

https://zephyrre.com/market-insights/tic-market-hits-new-highs-in-san-francisco/
https://sf.curbed.com/2015/1/26/9998780/park-lane-sfs-100m-tic-finally-shows-off-pics-of-its-units
« Last Edit: August 11, 2017, 05:44:17 PM by dragoncar »

alexpkeaton

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Re: Notes on a permanent housing shortage
« Reply #53 on: August 12, 2017, 01:33:54 PM »
In other words, they would if they could, and when they are able to convert to condo the price goes up because you don't have rent control issues

Co-ops here in New York are priced at a discount to condos. The reason is co-op boards have a lot more control and usually require much stricter financial requirements than a bank would for a mortgage. The effect is that you can't overstretch as much to buy which keeps prices somewhat muted.

For example, my building requires 20% down and two year's worth of liquid assets in reserve post-closing (24x your mortgage + maintenance payment). They also like to see a DTI below 20%, but I think usually if you can meet 2 out of 3 requirements they'll approve you. It really depends on the building though, I've heard some require 30% down or just that you must have a net worth in excess of some high number. It also used to be a way for non-jewish buildings to keep jews out and for jewish buildings to keep the gentiles out, but probably not so much these days.