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San Francisco Home Sale Data

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Wrap-Around Financing

What is it? Wrap-around financing is a type of seller financing that is common for TIC sales. In wrap-around TIC financing, the owner of a given building will have a mortgage loan that pre-dates the formation of a TIC. The owner then sells the building to the TIC ownership group. The seller “lends” the funds to the TIC owners who then pay back their mortgage loan directly to the seller. The seller than uses a portion of the payments he/she receives to pay the original mortgage on the building.

TIC: What Is It?

TIC stands for "Tenancy In Common". It is a form of concurrent estate where each owner is the legal owner of separate and distinct shares of a given property. These shares may differ is size and value. A TIC will also be referred to by the terms "fractional ownership" or "cotenancy". Tenants in common have no right of survivorship. This means that if an owner dies their TIC shares will be passed to their heirs (or whoever they designate in their will) as opposed to the other TIC owners. Do not confuse a TIC with a "joint tenancy" as a joint tenancy HAS rights of survivorship, meaning of course that upon death the ownership shares pass to the other owners.

TIC Ownership Percentages - How Are They Determined?

TIC ownership percentages are the percentages shown on the recorded deed of the property, TIC owners can define ownership percentages in any number of ways. These include:

  • Equal Share - Each owner owns an equal percentage of the property regardless of the size of each owner’s living space.
  • Perceived Value – Percentages are allocated based on the mutually agreed upon value of each owners living space. For example, a 3 unit building may have one unit with the least square footage but which contains an amazing view of the city. The other units are larger in size but have no view. The owners may allocate percentage ownership based on the additional value the view adds to the smaller unit.
  • Size – The owners may note the exact square footage of each unit and allocate ownership percentages exclusively based on this. Common areas would be allocated equally.

Uses of Ownership Percentages

TIC Agreements and What Goes Into Them

The TIC agreement should spell out the processes and parameters that determine all pertinent issues relating to TIC ownership. It should be clear, detailed, well organized, and written with the assumption that the worst case scenario may actually occur.

Taxes and TIC

Property taxes are allocated among TIC co-owners based on the total amount each owner paid for their interest in the property. Keep in mind that a TIC is not legally defined as multiple separate properties, it is one property collectivelly owned. As such the entire property will receive one property tax assessment for which each TIC share owner shares equal responsibility.