San Francisco’s housing puzzle forces trade-offs between location, monthly cost, and long-term risk; this expanded guide provides practical paths, deeper technical checks, and negotiation tactics to make ownership attainable without surprise liabilities.
Key Takeaways Why creative strategies matter in San Francisco Understanding TICs: what they are, where they save money, and the risks to manage Condominium conversion: timing, vote mechanics, and consequences Below Market Rate (BMR) housing via MOHCD: an often-missed route to affordability Down payment aid: DALP, CalHFA, and stacking rules Neighborhood picks that balance price and livability Seismic risk, retrofit costs, and insurance: quantifying exposure HOA health, litigation, and financial transparency Rent control, tenants’ rights, and investor considerations Taxes, fees, and closing costs: realistic budgeting Practical due-diligence checklist and timing Negotiation and financing tactics that preserve affordability Common pitfalls and how they become costly Where to get professional help and authoritative public resources Example scenarios that illustrate trade-offs Final practical tips before making an offer
Key takeaway 1: Combining product types (TICs), public programs (BMR), and neighborhood choice can materially reduce upfront costs but introduces legal and financing trade-offs.Key takeaway 2: TIC ownership requires specialized lender pre-approval and a thorough legal review of the TIC agreement to avoid inheriting disproportionate liabilities.Key takeaway 3: BMR units provide deep discounts but include resale restrictions and program obligations that limit speculative upside.Key takeaway 4: Seismic risks (liquefaction, soft-story) and HOA financial health can generate large, unexpected costs; early engineering and financial reviews are essential.Key takeaway 5: Assembling a team of a TIC-experienced agent, real estate attorney, structural/geo engineer, and specialized lender significantly improves the odds of a successful, affordable purchase.
Anyone seeking value in San Francisco quickly realizes that market headlines do not describe the full set of opportunities available to pragmatic buyers.
By combining less-common product types (such as TICs ), municipal affordability programs (like BMR units and city downpayment assistance), and neighborhood choices outside the highest-demand corridors, a buyer can materially lower upfront costs and monthly payments. Each strategy introduces legal, financial, or lifestyle trade-offs that require rigorous pre-purchase analysis.
This expanded guide examines those trade-offs in detail, outlines how to sequence due diligence, highlights common negotiation tactics, and points to professionals and public resources that make complex transactions feasible.
TIC (tenant-in-common) ownership is a form of fractional co-ownership where each owner holds an undivided interest in the whole property and a deeded interest in an individual unit, rather than holding a separate condominium unit with a condominium declaration.
TICs historically provided a path to preserve multiunit ownership when condominium conversion either was infeasible or politically contested, and they often sell at price points below fully converted condos because of financing complexity and transfer friction.
A typical TIC governance package includes a master deed or declaration, an occupancy agreement, a participation or operating agreement that allocates maintenance responsibilities and voting rights, and rules for transfers and buyouts.
Key legal elements to confirm before making an offer include:
Transfer and sale rules: How an owner can sell: are there right-of-first-refusal clauses, approval thresholds, or required co-owner consents?Allocation of expenses: The method for apportioning mortgage payments, taxes, insurance, utilities, and capital repairs among owners.Conversion provisions: Whether the TIC agreement contemplates a future condominium conversion, and what vote threshold, financing, or allocation formula would apply.
Because TIC agreements vary widely, a buyer should never assume a given rule without a written review by counsel. A single ambiguous clause about assessments or conversion can materially change cost and liquidity outcomes.
Lenders treat TICs as higher risk compared with condos because of shared obligations and potential default impacts on co-owners. While a few secondary-market agencies have programs for TICs, many conforming products (Fannie Mae, Freddie Mac) have historically limited eligibility.
Common financing realities and strategies:
Portfolio and specialty lenders:Higher qualification standards: Lenders may require stronger credit, higher reserves, and larger down payments to offset shared liability risks.Blanket financing and cross-collateralization: In some arrangements, a building-level mortgage or a blanket loan encumbers the entire property and complicates individual sales; buyers should ensure title clarity and the lender’s stance on partial releases.Pre-approval specificity: A pre-approval that explicitly names the property type and the lender’s willingness to fund a TIC transaction is essential to avoid deal collapse under contract.
Because underwriting standards change, buyers should identify TIC-savvy lenders early, have the TIC operating documents reviewed by both counsel and the lender’s underwriting team, and budget for a narrower lender pool and longer loan approval timelines.
Beyond general inspections, TIC buyers should focus on obligations and coverage that affect the whole building.
Building-wide insurance: Verify the master insurance policy’s scope, deductible levels, and whether it covers full replacement for seismic events. If insurance is limited, co-owners may face large out-of-pocket bills after a loss.Title and fractional interests: Confirm that title insurance can be issued on each owner’s deed and that there are no unresolved ownership clouds, easements, or trust/estate complications.Capital needs analysis: Request recent reserve studies or financial forecasts that estimate near-term capital projects and how they will be funded.
Conversion from a TIC to a condominium can unlock access to conventional financing, broaden the resale market, and simplify owner responsibilities — but conversion is typically a multi-stage process requiring legal, engineering, and municipal approvals.
Typical conversion elements to investigate:
Co-owner agreement thresholds: Conversion often requires a supermajority or unanimous owner vote; the TIC agreement will state the required approval level.Municipal entitlements and filings: City planning and building departments may require specific documents, condominium plats, and compliance with local codes that did not apply under the TIC structure.Costs and allocations: Conversion costs (surveying, legal, engineering, title changes) can be material and typically are allocated across owners per the TIC agreement.
Because conversion changes tax, financing, and governance profiles, any buyer banking on conversion as an exit strategy should insist on documented conversion timelines, cost caps, and contingency arrangements in the purchase contract.
The Mayor’s Office of Housing and Community Development (MOHCD) administers many city-sponsored affordability programs including Below Market Rate ownership units, resale-restricted offerings, and lotteries for newly produced units.
BMR units can offer a substantial price gap compared with comparable market-rate units, but they carry eligibility rules, occupancy requirements, and resale formulas designed to retain affordability over time.
BMR programs are designed with tiers and strings attached to ensure units remain accessible to households with specific income levels.
Income bands and household size: Each unit is assigned to an income band (e.g., low, moderate) and a household size that determines maximum qualifying income; applicants must provide documentation that demonstrates compliance.Local preferences: Some lotteries give preference to residents, city employees, or other categories; these preferences can affect chances in a competitive pool.Lottery and waitlist dynamics: Demand typically exceeds supply, so buyers should prepare documentation in advance and maintain alerts for new offerings.
Because MOHCD rules change over time, applicants should consult sfmohcd.org for current program descriptions, income limits, and application windows.
BMR resale formulas often restrict appreciation to keep the unit affordable on resale. This can take the form of a fixed percentage appreciation, a formula tied to area median income, or a city first-right-of-refusal that gives the agency time to locate the next eligible buyer.
Buyers must consider trade-offs:
Lower purchase price vs. limited upside: BMR buyers gain immediate affordability but may face constrained equity growth and restrictions on renting or subdividing the unit.Monitoring and reporting obligations: Some programs require periodic household income attestations, occupancy certifications, or city approvals for refinancing and sale.Exit flexibility: Selling a BMR unit typically requires coordination with MOHCD or a designated broker to confirm buyer eligibility under program rules.
Down payment assistance programs reduce the initial cash barrier to purchase, but they create additional liens and program rules that interact with first-mortgage underwriting.
Assistance typically appears in three forms: forgivable grants, deferred-payment loans (interest-free until sale), and low-interest second mortgages.
Important considerations when using assistance:
Stacking limitations: Not every lender or first-mortgage product permits layering multiple assistance programs; CalHFA and local funds may have specific stacking rules and required subordination agreements.Program timing: Assistance approvals can add time to closing; buyers should secure conditional approval well before escrow deadlines.Homebuyer education: Many assistance programs require completion of approved counseling or education courses before funds are released.
For current program specifics and to begin application steps, see CalHFA and MOHCD .
Neighborhood selection is a powerful lever for affordability. The guide previously highlighted Excelsior , Visitacion Valley , and the Outer Sunset ; this expanded section adds context about changing infrastructure, demographics, and relative value drivers.
When evaluating neighborhoods, a buyer should watch for signals that indicate durable value rather than short-term headline movement.
Transit investments: Planned or completed transit projects can improve access and increase long-term demand.Commercial corridors: Revitalized retail and restaurant strips often accompany rising neighborhood desirability.Zoning and planned development: City zoning changes and targeted development incentives can affect supply, density, and future neighborhood character.
Because neighborhood transformations take years, buyers assessing value should weigh the expected timing and the likelihood that planned investments will be realized.
San Francisco’s seismic reality is a financial issue as much as a safety issue. Liquefaction zones and soft-story vulnerabilities can create immediate safety concerns and long-term cost obligations.
Costs vary widely by building size, condition, and the retrofit scope. Typical cost categories include engineering reports, permit and plan fees, construction contractor costs, and temporary tenant relocation if needed.
Practical steps to quantify exposure:
Obtain a scoping-level engineering estimate early: A focused structural assessment identifies primary vulnerabilities and provides a ballpark cost range to include in negotiation or contingency planning.Check permit histories: Confirm whether previous owners completed retrofits and whether those retrofits were permitted and inspected by the San Francisco Department of Building Inspection (DBI) .Budget conservatively: If an estimate suggests material retrofit costs, assume the higher end when comparing alternatives and calculating debt-service coverage.
Because retrofit costs can become a shared special assessment in multiowner buildings, a single buyer’s economic exposure can exceed the initial purchase price if they inherit large pending projects.
Standard homeowners insurance generally excludes earthquake damage. Buyers concerned about seismic events should explore earthquake policies through the California Earthquake Authority (CEA) as well as private market options.
Insurance considerations include:
Deductible structure: Earthquake policies often have high deductibles based on a percentage of dwelling coverage; buyers should model out-of-pocket exposure after a large event.Loss-of-use and liability coverage: Some policies provide temporary living expense coverage and limited liability protection for common-area failures.Availability and premium volatility: Premiums and underwriting criteria can change after major seismic events, so buyers should include ongoing insurance affordability in long-term budgeting .
For general guidance, see the California Earthquake Authority site for policy mechanics and FAQs.
A poorly governed HOA can impose special assessments, sue contractors, or become entangled in internal disputes that stall common projects and impair financing.
Beyond the basic HOA packet, buyers should request additional materials that expose the association’s trajectory and likely near-term budget needs.
Detailed reserve study: Confirm the reserve study’s date, assumptions, and whether the board has followed the recommended funding schedule.Contract history: Review warranty terms and recent contractor agreements for roofing, plumbing stacks, foundations, and seismic work.Assessment history: Ask for records of past special assessments, the reasons they were levied, and whether the association has repaid any emergency borrowing.
If litigation is disclosed, counsel should quantify potential exposure, whether insurance will likely cover judgments, and whether the litigation makes the property ineligible for certain loans.
San Francisco’s tenant protections and rent regulation significantly affect investors, owner-occupiers who plan to rent, and buyers of buildings with existing tenants.
The Ellis Act permits landlords to exit the rental business under state law, but local implementation in San Francisco imposes obligations like relocation assistance and re-rental restrictions that buyers must anticipate.
Practical buyer actions:
Review tenant histories: Obtain lease copies, rent rolls, and any pending tenant complaints or notices that could trigger administrative scrutiny.Estimate relocation liabilities: If an eviction is contemplated under owner-occupancy or redevelopment scenarios, calculate relocation assistance obligations and the time required to comply with local rules.Consult the San Francisco Rent Board: For authoritative guidance on eviction protections, rent increases, and allowable grounds, see sfrb.org and the Rent Board’s guidance on the Ellis Act .
Buyers often focus on purchase price and monthly mortgage payment while underestimating transaction taxes, recording fees, escrow, and immediate capital needs.
Items to include in the acquisition budget:
Documentary transfer and recording taxes: Municipal and county transfer taxes and recording fees vary by jurisdiction and transaction structure; buyers should request an estimated closing statement early.Property tax base and reassessment: Under Proposition 13 , assessed values typically increase slowly year-to-year, but a change in ownership can trigger reassessment to market value — a buyer should model near-term property tax implications.Title insurance and escrow fees: Title premiums and escrow fees are routine costs that should be included in the closing budget.Immediate capital needs: Set aside reserves for immediate repairs, appliance replacement, or cosmetic updates that lenders and buyers often overlook.
The San Francisco Treasurer & Tax Collector site provides resources on local tax rates and payment processes; escrow officers can provide a preliminary closing-cost estimate based on the deal structure.
Sequencing due diligence reduces the risk of surprises and preserves negotiating leverage when issues are uncovered.
Get program-specific pre-approval: Obtain written pre-approval that explicitly covers TICs, BMR requirements, or use of DALP/CalHFA funds.Request preliminary HOA and TIC documents: Review summaries and flag items that require deeper legal review before making an offer.Confirm eligibility for BMR or assistance: Pre-qualify with MOHCD or CalHFA where possible to avoid losing an offer to a buyer who is already certified.
Open title and lien review: Order a preliminary title report early to find encumbrances that could block financing.Commission structural and geotechnical scoping reports: Obtain targeted reports if the property sits in a liquefaction zone or appears to have soft-story vulnerabilities.Obtain HOA packet and litigation disclosures: Have counsel and a CPA review financials and tax implications.
Finalize stacking of assistance: Ensure the lender has accepted DALP/CalHFA second note terms and that documentation is ready for escrow.Confirm insurance and escrow contingencies: Secure proof of homeowners and earthquake insurance as required by the lender.Budget for holdbacks and reserves: Where work is incomplete, arrange for escrow holdbacks or seller-funded warranties to protect the buyer post-closing.
San Francisco buyers can use targeted negotiation tools that preserve affordability while addressing the seller’s needs.
Contingency specificity: Include contingencies that name the program or lender (for example, “Buyer’s loan contingency: X Bank for TIC mortgage”); this clarifies which financing the buyer will use and prevents last-minute lender refusals from killing the deal.Seller credits and closing-cost assistance: Ask for seller credits toward closing costs, escrow fees, or HOA arrears rather than a lower purchase price—credits reduce the buyer’s immediate out-of-pocket need while preserving mortgage qualification.Inspection and repair escrow: Where retrofit or repair work is required, negotiate a scoped escrow holdback to ensure work completion after closing without delaying the sale.Escalation versus flexibility: In competitive situations, offering favorable terms (shorter inspection periods, higher earnest money) can win an offer, but buyers should never waive lender or seismic contingencies without fully understanding potential exposure.
Many affordability-seeking buyers encounter the same traps; understanding these common mistakes helps avoid late surprises that erode value.
Relying on assumed lender acceptance: A verbal assurance from a lender is not a substitute for written pre-approval that explicitly covers the transaction structure.Ignoring reserve adequacy: Buying into a building with an underfunded reserve can result in sudden special assessments that materially increase monthly costs.Underestimating retrofit and insurance costs: Budget both the capital cost of retrofits and the ongoing cost of obtaining sufficient earthquake coverage.Misunderstanding BMR resale mechanics: Accepting restricted resale without modeling potential mobility and equity needs can trap a buyer in a unit that is hard to sell at market rates.
Complex transactions benefit from a coordinated professional team and direct contact with public agencies.
Real estate agent experienced in TICs and BMRs:Real estate attorney: Essential for TIC agreement review, HOA disputes, BMR resale clauses, and negotiation of conversion terms.Structural and geotechnical engineers: Provide reliable scopes, cost estimates, and retrofit plans that lenders and permitting agencies accept.Specialty lender or CalHFA-approved loan officer: Finds acceptable mortgage products and navigates stacking rules for downpayment assistance.Housing counselors: For buyers using MOHCD or CalHFA funds, approved counseling both satisfies program requirements and clarifies long-term obligations.
Key public resources include the MOHCD for BMR and city assistance, CalHFA for state programs, the San Francisco Rent Board for tenant- and rent-related guidance, and the San Francisco Department of Building Inspection for permit and retrofit records.
Three illustrative, anonymized scenarios highlight how different priorities and constraints lead to distinct outcomes.
A buyer prioritizing commute time finds a 3-unit TIC close to a major Muni corridor. The purchase price is significantly below comparable condo listings, but the buyer secures a TIC-specific portfolio loan with higher down payment requirements.
Outcome considerations include a narrower refinancing window until conversion occurs, shared retrofits possibly imposed by co-owners, and a resale pool limited to TIC-aware buyers.
A household qualifies for a BMR lottery and purchases a unit at a substantial discount with an enforceable resale price cap. The buyer benefits from low monthly costs but accepts restricted ability to extract equity, and sale requires coordination with MOHCD.
Long-term planning for mobility or expanding household needs should account for resale rules and possible buy-out formulas.
An investor purchases a market-rate condo in the Outer Sunset with a moderate purchase price and plans to upgrade interiors and hold long-term. The investor budgets for higher maintenance due to coastal exposure, secures appropriate earthquake insurance, and verifies rent-control status before listing for rent.
Small tactical moves can save time and money.
Get document access early: Request HOA minutes, TIC agreements, and recent financials before writing an aggressive offer.Pre-clear assistance: Obtain any needed MOHCD/CalHFA confirmation letters or pre-approvals and attach them to the offer where allowed.Plan for contingency windows: Make contingency periods realistic for lenders and inspectors; rushed inspections often miss structural issues.Keep reserves post-closing: Maintain emergency savings for unanticipated special assessments or retrofit notices.
Buying in San Francisco without jeopardizing financial stability is feasible with disciplined preparation, the right professional team, and realistic expectations about product trade-offs. A buyer who ranks priorities — lowest monthly cost, shortest commute, or building quality — will choose differently when presented with a TIC in the Excelsior, a BMR in a newer development, or a condo by the beach.
For targeted assistance on stacking DALP/CalHFA funds, structuring a financing contingency for a TIC, or building a property-specific due-diligence checklist, a buyer should consult a TIC-savvy agent and a real estate attorney to create a written plan tailored to the property.
