Realtors and Fractional Vacation Homes

By
Home Builder with Cobblestone Design Group

Every day we turn on the radio or television and hear more bad news about the economy, new lows on property values and many more foreclosures hitting the market.  Not all realtors are in the business of selling vacation homes, but at this point in time they may be the ones that would consider fractional ownership as a choice to their clients?  I have had the opportunity to speak with many realtors across the US and have heard their thoughts on this option. Let's take a look at some of the reasons they may not be interested:

It's too much work:   Granted is a bit more of a tough sale but one must consider any deal in this economy is a hard sale. The days of buyers flocking to your door to purchase vacation homes are over for awhile. The days of buying a home in South West Florida or Las Vegas, just to name two locations, with hopes of getting high double digit appreciation are gone.  The days of the no doc and no income verification loans are done.  So deals are going to be tough regardless, so why not consider another option.

If someone goes into foreclosure all parties suffer.  Simply not true. Each person has a deeded interest in their portion of the home. As the stand alone fractional vacation homes emerged, there were very few funding options.  Also, there were very few mortgages on these shares anyway, most were purchased with cash. The same holds true for cash buyers, if a judgment is taken against them it attaches to their 1/6 share, not anyone else's.

The buyers will not get along.  The buyers generally will never meet each other. Each buyer has his/her own usage schedule, ensuring that they will never have a need to meet. The operating agreement will spell out his/her duties and use time so that is not an issue.

Usage will be an issue.  This is about the only circumstance I can somewhat agree with.  Lets look at a 1/6 share. To make things simple, each buyer would get every 6th week throughout the year, with a 1/6 ownership model.  There is an exit strategy and the end of 6 years where all owners will collectively sell, but through a usage schedule each owner will get at least one of the major holidays through out their ownership.  A buyer who is considering this form of ownership will understand this, (and know that there is some trade off) however, they own a 1/6 of a million dollar property for an estimated $299,000.00. It seems worth it to me.  With that being said, the other thing to consider is this; you may have a buyer who buys a 1/6 and is not concerned about being there on Christmas, so then, maybe another Christmas opens up.  Every purchaser does not want to be away from family on holidays so it is something to consider.  People always buy for different reasons.

Those are just a few of the concerns I have heard.  Now let's take a look at some of the benefits.

 

I have a home owner that does not want to sell but has to.  Now you can go to him/her and give them the option of keeping 1, 2 or 3 shares of a 1/6 ownership and sell off the other 3.  They keep their vacation home and lessens their financial burden. You now have a happy client that may refer you more clients and you still make your commission money.

Your area of operation it is oversaturated with homes in the 750,000.00 range. Take the time to examine your sellers and pick out the exceptional homes. These are the ones you'll present to your seller as an option.  Maybe he or she owns the home free and clear and does not need the money, but still wants to sell.  They could finance the fractional shares and turn dormant cash into an income stream.

You have a home that you feel would make a great candidate.  Simply leave it on the market and advertise it as a fractional home opportunity as well.  Is it easier to find a buyer with $200,000 versus a million plus?  Most likely it will be. Maybe we would consider a joint venture with the owner.

In closing, I would, like to say these are just a few points to consider.  There are many more advantages to this form of ownership and as time goes on, especially after this economic downturn, people will appreciate what they have even more.  Even if you could afford a vacation home worth a million dollars, maybe you would consider fractional ownership for only $299,000.00 and still receive all the benefits.  If the property appreciates, you still share in the appreciation, however, if circumstances turn, your depreciation is hedged amongst five others.  You do the math.  After all this economy has been through, this form of ownership is here to stay.  Share sizes will fluctuate and prices will be all over the board, and as more realtors get involved, it will continue to grow.  We are preparing properties for launch in Las Vegas, Nevada and on Lake Keowee in South Carolina.  Desert Quarters is currently seeking brokers in these areas.  We are also seeking any realtors or brokers who wish to learn more about fractional vacation homes or to pursue a fractional project in their own area.  I would enjoy hearing from you, so feel free to call or email me with your questions or thoughts.  Also, if you would like to discuss a property in your area and to see how we can help one another.  Jeffrey@desertquarters.com  Also please feel free to sign up for our newsletter as we will be releaseing some fractional projects in South Carolina and Las Vegas Feb. 1 2009 Sign up here  http://visitor.constantcontact.com/email.jsp?m=1102372204856&p=oi

Thank You

Jeffrey Cerra

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