Fractional Real Estate
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Yahoo Finance and Realty Times
By Melissa Wirkus
The real estate
market is constantly changing and evolving in order to keep up with
the consumer’s different preferences, likes and trends.
The newest trend in the real estate market comes from the sector
of luxury second homes or
vacation homes. Nowadays, when people are looking to purchase a
second home to spend their relaxation time, they want the most luxurious
amenities available. But having the best of the best obviously comes
with a price tag.
That is why a relatively new concept of “fractional ownership”
has been developed that gives buyers a chance to own a piece of
a lavish property in popular vacation or resort towns.
An October 25, 2006 article by Amy Gunderson of The New York Times,
“Selling a slice of luxury,”
looks into this new real estate trend.
The easiest way to grasp the concept of fractional real estate is
to think of them as a time share’s cousin.
“It is almost too easy to be charmed by the latest trend in
time shares, what is called fractional real estate. After all, who
wouldn’t be wooed by amenities like ski-in/ski-out access,
granite countertops and outdoor fireplaces?”
“A high-end spin on the traditional time share, fractionals
typically entitle users to multiple weeks’ stay, and the developments
themselves have decidedly luxury touches, with up-market appliances,
finishes and linens, as well as amenities like spas. In short, developers
say, it is a way to get access to a million dollar-plus property
for much less than the full price of ownership.”
Since this type of property ownership is relatively new, there is
little data on how these properties will fare in the resale market.
Most of the areas that are selling fractional real estate are more
up-scale areas that still have relatively strong housing markets
and have not been affected by the downturn that many other markets
have recently experienced.
But a recent development planned for Las Vegas was recently canceled
because they did not have enough units secured as sold.
“But in La Scala, a fractional development planned for the
Lake Las Vegas community in Henderson, Nev., the sales shop was
shut down at the end of September. ‘We didn’t meet pre-sales
requirements so we had to cancel the project,’ said Melissa
Clancy, the director of marketing for Storied Places, the developer
of La Scala. After a year-long sales push, only 30 shares were sold.
Storied Places also recently cancelled a fractional project in Mammoth
Lakes, Calif.”
The main catch with fractional real estate when it comes time to
resell would be if the developer has already sold all of its own
inventory. It can take years for a developer to completely sell-out
a fractional real estate project; thus making it very difficult
for homeowners
to resell their own fraction.
“Dennis Jung, an agent with Frias Properties of Aspen, has
several fractional listings, including units at the Ritz-Carlton
Club Aspen Highlands. ‘They still have a few interests left
to sell,’ Mr. Jung said. ‘That would set the market
in that case.’”
“And it can take years for the developer to completely clear
their inventory. The Timbers Club in Snowmass Village, Colo., took
about four years to sell all of its shares, while the residences
at Esperanza resort in Cabo San Lucas in Mexico,
sold out this year, three years after sales began.”
