Get to know apartment types in SF!
In San Francisco there are three main types of apartments that you can purchase: Condominium (condo), Tenancy in Common (TIC) and Stock Cooperative (Stock Co-op, or just Co-op). While the differences can sometimes be subtle and confusing, they can greatly impact the way you own your apartment, and it’s important to understand each property type when hunting for a new home. In this blog, you’ll find a description of each of these three types of property ownership, and a few of the major pros and cons.
Condo:
A condo is most common type of apartment for sale in most parts of the country. Sometimes people use the term “condo” to mean any of the three property types discussed here, but that’s not actually the case.
In a condo, you own the specific unit you live in. Typically, the ownership encompasses anything from the walls of your apartment inward (often not including structural aspects of the building, and electrical or other building-wide wiring, ducting, or plumbing behind the walls). Sometimes your ownership includes extras like storage space, or deeded parking.
Some condo buildings have common space that is shared between all owners of units in the building. These spaces, as well as other general upkeep for the building is usually paid for through a Home Owners Associate (HOA). HOA fees vary from building to building, and unit to unit, often based on size of the specific unit. What the fees pay for varies as well, and is something you’ll be able to read about in the disclosure packet before purchasing a condo. HOAs often have a board made up of owners in the building that make the rules and regulations for the building. Renovations often have to be approved by the HOA, and sometimes curtains or outdoor furniture (i.e.: anything that can be seen from the street) needs to be approved as well.
Generally speaking, I recommend purchasing condos over other apartment types as they tend to be easier transactions, easier to re-sell, and there are very few hoops to jump through when it comes to purchase, sale, and renovation.
TIC:
TICs are uncommon in many parts of the country, but they are commonplace in San Francisco. TICs tend to be smaller buildings, often between 2 and 10 units, but there is no maximum size, so you’ll occasionally find larger TIC buildings – the Park Lane (1100 Sacramento St.) on Nob Hill is a good example of a large TIC.
In a TIC, unlike a condo, you don’t own the specific unit in which you live. Instead, you own a percentage of the building. For example, in a 4 unit TIC building where each unit is the same size, you might own 25% of the building as whole. Extras like storage or parking probably won’t be deeded directly to you, but will be assigned to a specific unit in the building (i.e.: “parking spot #1 can be used by the owner who lives in unit A”, rather than “owner of unit A also owns parking spot #1” as in a condo.)
TICs can also have HOAs and fees that cover common space and any building amenities. However, instead of a board, it’s common for TIC owners to all have a say or vote in changes to be made in any part of the property. If you want to renovate the interior of your unit in a TIC, you might need approval from the other owners of the building, as you don’t technically own your unit but rather own a portion of the building along with your neighbors.
Financing for a TIC is often different than a condo as well. In a TIC, the whole building is usually financed together, with each owner paying a portion of the financing that equals their ownership in the building. This is generally not a problem, but can get messy when one owner wants to move, as the building might need to be refinanced with the new owner. Sometimes fractional financing is available, which makes ownership of a TIC much more similar to that of a condo, at least in terms of how you pay – the availability of this is specific to each building, and you should always ask to be sure when considering making an offer on a TIC.
When you sell a TIC unit, most of the time other owners in the building will have the right to refuse an offer you receive because of things like the potential buyers financial status. However, as with any real estate transaction, these decisions cannot be made based on any protected class.
TICs are often cheaper, making them desirable for many and easier to obtain. The downside is that they can sometimes be harder to re-sell (due to the type of financing and owner approval process) and not quite as simple as condos in terms of ownership and decision making.
Stock Co-Op:
Co-ops are rarer in San Francisco than in other places, especially New York, where they are much more prevalent. However, there are several Co-op buildings in the city, especially in places like Nob Hill and Russian Hill. Co-ops tend to be mid-size buildings, usually larger than TICs, but often smaller than condos.
In a co-op, the building is essentially owned by a company or cooperation, and you are buying a part (stock) of that corporation, hence the name “Stock Co-Op.” As with TICs, you don’t necessarily own your specific unit, but own a share of the building, and extras like parking or storage are allotted similarly.
Co-ops tend to be more expensive than condos or TICs and often have higher HOA dues, making them less desirable for the price-contious buyer. That said, they sometimes have more amenities like valet parking or a 24 hour doorman/concierge that account for the higher HOAs. There is usually a board, just like in a condo, but sometimes all owners are members of the board, often depending on the size of the building.
Because you’re buying into a company, the board or owners of the building often have a say in who can or can’t buy a unit, and there is sometimes an interview process along with the usual purchase procedures. This isn’t always the case, but can’t be in some buildings.
The benefits of buying a co-op are often the quality of the units, the amenities, and the location of the building, but the increased monthly dues can sometimes outweigh the pros for buyers.
Which is best?:
This is a question that is impossible to answer without a discussion with your agent first. If you want a clean, simple purchase with the easiest type of ownership, a condo is probably for you. If you’re budget conscious, you might want to go with a TIC, and if you have the availability for the additional monthly expenses in HOA dues, you might prefer the amenities of a co-op. Generally when a buyer wants an apartment, I suggest seeing all three types of buildings and making your decision based on the apartment you see that feels best to you. While the type of building you’re purchasing should definitely be something to consider, it shouldn’t be something to rule out a whole group of apartments right off the bat, unless you have specific financing or investing needs (something that you should discuss with an agent before purchasing).
When you find the apartment that’s right for you, go for it!