When It's Time To Move On
Savvy second home investors prefer to invest in a second home ownership structure designed to preserve resale value while ensuring they can get their money out when its time to move on. Reciprocally, savvy investors also prefer to invest in an ownership structure designed to protect their enjoyment and continued ownership of the home if their co-owner decides to sell. A sound operating agreement will always cover these possibilities and more in a way that is transparent and fair to both parties.
The existence of such an operating agreement is also essential to the value of your 50% TIC share because no new investor is going to want to fill the shoes of a departing investor where the terms of the operating agreement aren’t transparent and fair.
Savvilla elegantly handles this process in accordance with TIC operating agreement best practices. The process works roughly as follows:
Name Your Own Price: Just like a whole home real estate transaction, you choose your agent and you name the price for your 50% interest.
Right of First Refusal (ROFR) #1: Your operating agreement requires you to give your co-tenant 14 days written notice of your intention to sell. The notice must include your asking price. During the 14-day notice period, your co-tenant may elect to purchase your half of the home from you at your asking price. If they do not exercise that right and remit payment in full to the escrow agent you designate, then you are free to market your 50% interest on the open market and sell it if you get an offer for the full asking price.
List On MLS*: In most jurisdictions, you can list your 50% TIC interest on the local Multiple Listing Service (MLS). Additionally or instead, your agent may use other marketing channels. Your agent can also authorize your 50% interest to be advertised on Savvilla.com
Right of First Refusal: Your co-tenant may not have exercised their ROFR to buy your half at your original asking price. Now you have an offer you would like to accept that is 5% below the asking price you presented in your first ROFR notice. Before you can accept this offer, you need to give your co-tenant another ROFR notice at the revised price. This time, your co-tenant only has the greater of 2 business days or 72 hours to exercise their ROFR including payment in full to an escrow agent you will have designated. If they have not made payment within the specified time limit, you are at liberty to accept the offer. Note: This ROFR protects both parties, but it also means your listing description for your 50% share needs to articulate that any offer needs to be open for at least 4 days to be eligible for consideration.