A few months ago, I received a call from a potential buyer about a 2 bedroom and bath condomonium for only $97,000 in downtown San Diego that was listed at Realtor.com. I’m thinking to myself, that’s not possible….real estate prices in San Diego are much higher than that amount!
After investigating, I found that it was for fractional ownership not the entire condominium. Needless to say, the buyer was disappointed; yet, asked what fractional ownership meant. Here’s the explanation:
Fractional Ownership vs. Time Shares?
- Fractionals tend to be more exclusive and built to a higher amenity level than traditional timeshares.
- Timeshares usually allow just one to two weeks use per year while fractionals may offer a percentage of ownership with any time period including in that ownership.
- Your fractional interest is an equity position in the property itself, the amenities and is evidenced by a real estate deed like that secured for any other type of real estate.
- Your deeded undivided interest can be mortgaged, willed, placed in a trust or owned by an LLC.
- Fractionals tend to appreciate over time while timeshares have historically done poorly. There are a couple of reasons for this.
- More of the buyers’ dollars go to high quality finishes and “bricks and mortar” with fractionals.
- Timeshares pay high sales commissions which can be as high as 30%-50%.
- Timeshare values have fared poorly because of the large number of re-sales on the market and the small demand for that specific time.
- Conversely, there are a limited number of fractionals on the market. Most likely, that number will stay small because fractionals are built in only the most highly desirable destinations. Therefore, demand outpaces supply.
Posted in Home Buying Tips, Real Estate Information
