Buyers of fractionals typically want to own a luxurious vacation home in a fantastic destination but don't want any of the hassles of ownership. They want someone else to deal with upkeep and maintenance.
They also recognize that they're likely to only use the vacation home for 4 to 12 weeks a year, so fractional ownership better suits their needs and makes more economic sense, than whole ownership.
The process is fairly straightforward. The buyer selects a unit, easily done in person or over the phone, and signs a contract.
This is no different than buying any other form of real estate, unless you're buying in preconstruction and need to wait for the building to be completed before you can close on your purchase.
For the most part, the process is easy. To summarize: 1. Review property information 2. Decide to buy 3. Select specific unit. 4. Go to contract. 5. Close.
Fractionals are sold in parts; one-fourth, one-sixth, one-eight, one-twelfth, etc. A fractional buyer for one fourth of a unit need not wait until the other three fourths are sold. He is buying a separate deed for only his one-fourth portion. Until the other fractions that make up his unit are sold, they remain part of the developer's unsold inventory.
Payment is made in the same way as for any other real estate. Buyer puts up a down payment at contract, usually 20%, and then either pays the balance at closing or, if he can, gets financing for it.
Fractional financing is getting easier to find. However, it is still harder to come by than condo hotel financing. Often buyers pay cash for their units or choose to get a home equity loan (HELOC) on their primary property if they don't want to pay cash.
Usually 20% is required.
Not that I can think of except possibly default by a developer that prevents a project from ever being built. In that case the buyer would get any deposit he'd made returned to him.
Some do. Some don't. Often your best purchase will be made in early pre-construction, and in those cases, often there is so sales center to visit, no models to see, sometimes no brochures that can be reviewed.
But buyers who know what to expect of a Ritz Carlon or Four Seasons need not see and visit the actual property to know what they are getting. These purchases can literally be decided upon over the phone for many, and then the paperwork can be completed and sent by fax or overnight mail.
If they have cash to purchase a property, then they are approved. Seriously, there is no approval process.
We started our main website, www.CondoHotelCenter.com, in Oct. 2002 and then added fractionals to our offerings sometime in 2003.
It had been slow going for us because most of the fractional are out west, and we are located in South Florida. We just weren't finding much inventory to offer when we first got started.
Now in 2006, we are seeing more and more fractionals finally making their way to the east coast, so we do see the interest in these units as likely to heat up, just as our condo hotel business has been doing for years.