You’ve Won the Condo Lottery–Now What?

The annual condo lottery took place in San Francisco earlier this year, resulting in suddenly lucky TIC owners winning the right to start the path to condo conversion. I thought it would be a good time to take a look at the TIC and condo markets and give everyone a heads up on what to expect–whether you’ve just won, or may be on track to win next year.

Things are a bit more complicated in the current economy, and that means buying and selling TICs or condos can present their own sets of challenges. If you’ve just won the lottery, you’re probably a couple months in to the conversion process. And all your TIC partners are excited about what they’ll be doing after you’ve converted the building. Many TIC owners have held their properties for far longer than they’d ever dreamed, so moving the family out of that one bedroom now finally feels possible. Others love where they live and will just appreciate owning their own condo.

It’s important not to overlook every detail as you take a step closer each month to conversion. For example, if more than half the units in your building are rented vs owner occupied, you’re going to have to work through that detail so it doesn’t become a roadblock during a refinance or sale. And everyone’s ability to refinance will depend on how much equity exists.

Both the TIC and condo markets are doing reasonably well, particularly in high-demand neighborhoods that provide easy access to public transportation, restaurants, retail areas and freeways. A total of 496 condos and 63 TICs sold in the first quarter of this year. Compare that with 403 condos/63 TICs sold in the same quarter of 2010, and we’re looking at some pretty respectable numbers. So I believe we’re heading into an increasingly better market where these types of properties are concerned.

The best tip I can give condo converters is to do your homework up front. You’ll need your resources up front (attorneys, contractors, surveyors, etc) and now would also be a good time to chat with your favorite Realtor and loan rep so you have a heads up on what to expect at the time of conversion. Get a sense for your building’s value, as well as what your own unit would be worth as a condo. And recognize that all TIC owners have to work together regardless of what happens. I often consult with building owners about these situations, and I have a strong team in place. So feel free to give me a shout anytime, and we can find a convenient time to talk details.

Sorting Out Post-Condo Lottery Confusion

Whenever San Francisco holds its annual condo lottery in February, the winning homeowners put their game plans together. Some immediately embark upon the condo conversion process, while others quickly decide to sell.

My colleagues and I have noticed a few listings coming on the market that are being classified as condos—but which are really TICs in buildings that recently won the lottery. It’s important to note that until a building is fully converted and all units are officially condos, you can’t call a TIC a condo. Even if everything is on track for condo conversion.

This is a good distinction to make if you’re a buyer who’s not interested in completing someone else’s condo conversion. And sellers, it’s important to recognize that condo conversion does incur quite a few fees, so expect buyers to factor those costs into the price they pay for your TIC.

More Condo Lottery Craziness

Tickets for San Francisco’s annual condo lottery go on sale Monday. And there’s something you should know, as per my friends at Plan C: The City may be denying additional lottery tickets to buildings that qualify with the minimum qualifications. (Generally, this means one owner-occupied unit for each of the last three years in 2-4 unit buildings, and three owner-occupied units for each of the last three years in 5-6 unit buildings.)

Historically, lottery priority and the issuance of additional tickets have required that one of the qualifying owner-occupants have been owners (but not necessarily occupants) during each of the previous lottery losses.

The change for the last couple of years and for 2010 is that the Department of Public Works (DPW) appears to have a new interpretation of written law. To establish priority credit (additional tickets), DPW is requiring that each of the qualifying owner-occupants be the same original owner occupants that were unsuccessful in past lotteries.

Simply put, your building might qualify for the 2010 lottery and receive one ticket, but unlike in years past, may not be entitled to additional tickets based upon unsuccessful previous lottery participation.

Plan C is reaching out to see if there are other TIC groups where this situation is likely to have an impact. If you’re facing the same issue, or would face this issue if one of your fellow TIC co-owners were to sell their interest, let Plan C know and they’ll put you in contact with other similarly situated people. Send them an e-mail at info@plancsf.org.