Selling a TIC Interest
Selling a TIC interest is common. Some common issues involved include:
Right of First Refusal - TIC agreements often contain language giving the other co-owners in a TIC first rights at buying the interest at market rate.
Buyer Approval - Co-owners often have language in their TIC agreement that defines pre-set parameters that a new buyer must meet. This can include financial considerations such as a loan to income ratios, minimum down payments, and such. This allows the existing owners to filter out prospective buyers that may be higher risk. After all, they are joining THEIR loan so this issue is one of high importance.
TIC Co-Owner History - When selling an interest in a TIC, a new buyer will likely want to know the history of the the ownership group. Do they have a history of financial and/or property management disputes? Have they been partners for 6 months or 6 years? Why is the seller selling? A buyer wants to review this type of information so they don't join an ownership group burdened with financial, management, or personal problems.
Appreciation/Depreciation - If the TIC interest being sold has appreciated or depreciated significantly there will likely be a large difference between the sale price of the TIC interest and the sellers loan percentage (the percentage of the common group loan they owe). In these instances, the buyer would be assuming a different loan percentage than the seller held previously. As such the common group loan may need to be refinanced to reflect these changes. Conversely, the seller may need to be flexible and accept a note payable (secured by the property) as a part of the buyers down payment.
TIC Agreement Must Address Resale Processes - A new co-owner in a TIC can result in refinancing and/or a change in equity ownership percentages among the co-owners. As such the TIC agreement should specifically address the processes involved so that refinancing costs are assigned to the owners receiving cash, equity percentages protected, and the non-selling owners can;t unfairly impede a sale through voting rights.