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With housing prices still searching for their bottom, it’s no wonder that some buyers are planted firmly on the sidelines. But there is good news amid all the gloom. If you’re looking to buy a fractional residence, you have more options and negotiating power than ever. Keep these tips in mind during your hunt.
Search out lower prices
While there is no single index that tracks fractional prices, anecdotal evidence shows that developers are beginning to lower asking prices on projects. Take Resort Equities, the fractional residence developer that has homes Tuscany, Hawaii and Lake Tahoe, among other locations. This fall, it dropped the asking price on four shares of condominiums at the Lake Tahoe ski resort, Northstar-at-Tahoe, and managed to get several offers. Also this fall, the developer of the Ranch on Soda Rock in California’s Sonoma County lowered the price from $300,000 to $250,000 for a one-tenth share of a three-bedroom home set on a vineyard. The developer is also offering to cover taxes and dues for the first year, an incentive package totaling $15,600.
Negotiate on everything
It’s the fractional industry’s well-guarded secret. Prices are negotiable. Will every development be open to chopping the price of a share? No. But many of them will be amenable to tossing in financial incentives that can get buyers to the closing table. “It is a buyer’s market, and developments are willing to work with you,” says Paula Gold-Nocella, the owner of Global Quarters, a fractional real estate brokerage. She’s seen properties accept lower deposits, agree to stagger payments for a share or even offer to cover one year’s worth of dues in order to close the deal. The key? Ask for it.
Consider Europe
The dollar has been on a charge against the Euro since mid-summer, which is good news for buyers interested in fractional residences in Tuscany and Paris. Shares priced in Euros represent the biggest chance to save. Take Fractional Paris, which is now selling one-twelfth shares of a two-bedroom apartment in the Marais for €120,000. Earlier this year, the first six shares of the home sold for the equivalent of $189,600, but buyers now would pay just $152,400.
Fractional developers that price shares and yearly fees in dollars are also beginning to take steps to lower annual dues to reflect the newfound strength of the dollar. This fall, Resort Equities lowered the annual dues for its home in Tuscany from $19,000 to $16,000. If a European project hasn’t adjusted its annual dues yet, use that as a negotiating point, pointing out that the dollar goes more than 20% farther in Europe than it did this summer.
Look to bigger developers if you need financing
Securing financing remains a sticking point for fractional purchases, and companies like NextStar Funding are no longer offering mortgages for one-off fractional homes. If you need a mortgage to buy, your best bet is to look at larger fractional developments with multiple homes rather than small developers carving up slices of single homes for sale.
Get more tips on buying a fractional vacation home by downloading our Decision Guide to Fractional Residences.
Reader Feedback
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From: ChristineMonday, December, 08, 2008 at 05:14 PM
Do fractional homes need to be luxury only? Why not for the average Joe plumber?
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From: consultantMonday, December, 08, 2008 at 05:49 PM
While I am resisting jumping on the Joe the Plumber bandwagon, given that its wheels have clearly fallen off, I am working on a very large project in the Northeast that is, in fact, targeting a lower demographic than the current fractionals in existence. It will be a while yet, but we will let you know.
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From: rc memberMonday, December, 08, 2008 at 06:42 PM
Aren't "joe plumber" fractionals just called timeshares? Millions of them already exist...
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From: Randy BouwkampTuesday, December, 09, 2008 at 04:49 AM
A great example of a resort for "Joe the Plumber" is "The Beach House at Lake Street" in Holland MI. We have a 1/10th share available for 67,600. It includes RCI points, Golf, pontoon boat and more... Check out what the project looks like by visiting lakemichiganbeachhouse.com
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From: S CaseyTuesday, December, 09, 2008 at 05:47 AM
I think we need to increase availability for 2-week fractionals, what's that, 1/24th? I can't and don't need to spend 4 weeks/year in one place, would prefer 2 weeks in 2 places twice a year. Only option seems to be 'clubs' and they charge too much for all the "amenities". I want the location to be the amenity.
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From: Randy BouwkampWednesday, December, 10, 2008 at 07:11 PM
S Casey, I am not sure if The Beach House at Lake Street location is right for you...Holland, MI, but we are planning to roll out a new option the first of the year... it sounds close to what you are looking for. Feel free to send me an email and I can tell you more. Thanks.
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From: Vacation Yacht Club MemberFriday, December, 19, 2008 at 07:14 AM
Vacation Yacht Club is a relatively new Company in this mix. They offer a variety of 6 week memberships based on yacht "right to use". They are in contract review with The Registry Collection in order trade yacht time into their program. This give its members access not only to their yachts but also approx. 100 properties world wide. Not to mention the services that the Registry Collection provides. All without the massive overhaed that the destination clubs carry. I'm in it because I feel its more stable. The Registry Collection removes the burden of the properties from the club. Through an agreement with the yacht manufacturer VYC does not have to leverage the yachts in order to increase their inventory. This is a well managed company putting the Member first.
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From: lori GageTuesday, May, 19, 2009 at 02:34 PM
One area of the world that should be considered if you are looking for a Fractional Ownership club is Costa Rica. This country is rich in natural biodiversity and has an environmentally green approach to global tourism. Costa Rica is the jewel of Latin america. Costa Del Sol - An investment to truly balance a portfolio - Costa Del Sol Private Residence Club is a high quality income producing tangible asset that allows the investor appreciation in value. It can be assigned, willed, or sold at market value. Registered shareholders are provided with the member privilege of the right of occupancy for a period of time that directly corresponds to their level of investment along with tax benefits through our Harmony Foundation. You choose whether to enjoy your home or earn income in the global vacation property rental market. Each 1/12 share allows for 28 days of exclusive usage - (Based on share purchase allotment) Shares starting at 50,000 USD - (Based on 1/12 fraction) 1% discount for multiple shares purchased - (Buy one share at 50,000, buy two @ 99,000) The first 96 shares sold will receive a total project equity of .05% ROI - (per share purchased) For those looking to truly diversify their income portfolio with an investment that is smart, sustainable, simple and enjoyable. For more information on the Costa del Sol project and the Harmony Foundation or to receive a complete summary on this unique development contact lori@investcostarica.biz
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From: Fractional CommentWednesday, December, 03, 2008 at 05:37 PM
In addition to lowering prices, maybe they should actually come up with an exchange system that works well. Even trading within the RC or FS network can prove very challenging.