Condo Conversion

Condo Conversion & Home Financing

Typically lenders do not require refinancing if a condo conversion occurs. Most owners prefer to refinance though and for good reason, including:

  • Refinancing makes the process of selling a converted unit separately or transferring ownership to an individual owner more simple.
  • Refinancing a converted unit reduces the default risk associated with sharing a mortgage with other owners.
  • If an owner is able to get better financing terms now, waiting to refinance means assuming risk of future job loss, income change, or credit issues that could make refinancing problematic or impossible.
  • Refinancing may qualify a unit for future exemption from San Francisco's rent control rules.
  • A smaller unit with one owner may offer lower interest loans with better terms than a group loan for multiple units.      

Condo Conversion & Property Taxes

The assessed value of your property will not change with a condo conversion. The existing assessment value will be allocated proportionally among each unit. A separate tax bill will be generated for each unit based on this allocation.

Condo Conversion & Insurance

Depending on the number of units in a building, condo conversion may increase home insurance premiums and/or require switching to different carriers.  It is advisable to consult an insurance agent prior to converting to avoid unforeseen surprises.

Condo Conversion & Home Value

While condo conversion will not change the assessed value of a home for property tax purposes, this does not mean the actual market value of a home will go unchanged. In general, a unit being converted to an individual condominium is viewed favorably by the real estate market. Individual units are easier to buy/sell as well as finance which will often translate into higher demand from buyers.  

Benefits of Converting

The main benefit of condo conversion is simple: With conversion, a property's value tends to increase. Why? A condo is easier to buy/sell than a TIC. This ease of acquisition or disposition mediates some of the risk associated with owning a home. Therefore mortgage financing for condominiums will often have more favorable terms than will TIC or co-ownership financing. Lenders have only one borrower to consider and that borrower has no other parties with whom they must share ownership responsibilities.