Basics of Fractional Real Estate

What is Fractional Real Estate?

To understand Fractional Real Estate, it makes sense to think about real estate that you already know. A standard subdivision is simply a division of land into separate parcels. A condominium is simply a division of the air space above land into separate parcels. Fractional Real Estate is simply a division of the time that a building can be used into separate parcels.

My realtor says – “Oh, you don’t want a Fractional property” – what does THAT mean?

If you are considering buying a lake cottage, you are VERY valuable to realtors who represent lakefront property. Unfortunately, there are realtors who feel like their number one task is to convince you that they are THE EXPERT on everything. They feel like if they don’t convince you that they are THE EXPERT, you are going to take your buying power to another realtor. After all you have many realtors to choose from.

Fractional real estate is quickly dismissed by some realtors because:
1. Real estate professionals have certain geographic areas and types of properties they specialize in. If they do not see a business reason for learning about a new type of property or a new area, they won’t – it’s not personal, it’s just business. They should refer you to a realtor that does have expertise with this type of property – even if it means they won’t get a full commission. If they don’t refer you, they aren’t being a true professional.
2. Understanding Fractional Real Estate requires learning something new about real estate. Once again, this learning may detract from their current business emphasis. A true professional will learn about new trends to keep their clients happy.
3. If they haven’t taken the TIME to learn the DETAILS of Fractional Real Estate, the easiest thing is to do is to try to “scare” you so you don’t ask more questions. It is very easy to concoct a hearsay story that is told second hand (if necessary) to “scare” you. Once again, this is not the way a true professional acts.
4. Finally, because the purchase price is lower, their commission will be lower. Once you reflect on this, you can begin to understand why the problems of #1 through #3 above are so prevalent – especially when you consider how valuable you are to them.

Does Fractional Real Estate work for everyone? No.
Will Fractional Real Estate work for you? Maybe. You should find a true professional realtor who is willing to find the DETAILS and spend the TIME to understand your needs and the different properties that are available. If they aren’t a true professional or if they seem more interested in finding you something they “like” – THAT is when you should be “scared”.

Why was Fractional Real Estate created?

Fractional Real Estate was created for the same reasons that jets and yachts have been fractionalized. Simply stated, there are some luxury assets that you can’t use 100% of the time and therefore it doesn’t make financial sense to make 100% of the payments on those items while also performing 100% of the maintenance. The first Fractional Real Estate development was created at Deer Valley Resort in 1993 and today Fractional Real Estate is found throughout the US and around the world.

What is the Declaration of Fractional Ownership?

When you buy Condominium Fractional Real Estate, you get a condo Declaration and a Declaration of Fractional Ownership. This is the document which is recorded with your deed and defines who can use the cottage at what time. Think of it like the similar agreements that family members have when they buy a cottage together. This document is a defining feature of your cabin – just like the number of bathrooms, the square footage, or the lakeshore. You should buy a cabin with the Declaration of Fractional Ownership that makes sense for you and your family.

Is this property fully deeded?

Yes. You may sell, gift and will this property just like any other property. You will receive a full warranty deed that may be registered as joint tenants, tenants in common or to other entities like trusts.