PROView - January 2008 - (Page 10) Finance Essential Guide to Fractional Ownership by Mathias Bergendahl, Director of Marketing & Communications A new type of property ownership appears to be on the rise in our area. While fractional ownership is increasing in popularity, especially in our tourism-intense area, there appears to be uncertainties as to what this relatively new ownership truly is, and what impact such a transaction would entail for a Realtor®. I had a chance to discuss fractional ownership with Marge Coffing of Beach & Luxury Realty who specializes in this growing niche to sort out the concept. Q - What does fractional ownership mean? Q - How can I sort this out? A - Vacation products can generally be classified into 2 distinct categories based on the criteria of time and equity – i.e., the right to use time at a property, vs. having an ownership stake in the underlying real estate. Three vacation ownership concepts that are based on TIME as the key parameter include: vacation rental, timeshare, and destination clubs. Five vacation ownership concepts that are based on EQUITY as the key parameter include: A - Fractional ownership simply means the division of Sole ownership, private co-ownership, fractional any asset into portions or shares. When the “asset” is ownership, private residence clubs, and condo-hotels. real estate or property, the title or deed can be legally Equity-based offerings hold that appreciation exists divided into shares. The in the underlying vacation purchaser owns part of the real estate and consumers “While fractional ownership title. Assets are valuable upon should be “equity owners” to purchase, get taxed, represent participate in that growth. is increasing in popularity, equity, and can appreciate. Q - Where are fractionals If the property appreciates especially in our tourismlocated? in value, so will fractions or shares. A - The concept of fractional intense area, there appears to ownership has always existed, Q - Isn’t that just a timeshare as when family and friends be uncertainties as to what at a glorified price? have grouped together to buy this relatively new ownership A - Timeshares for the most expensive items. Fractional part are not assets, but ownership as a commercial truly is.” privileges – the right to use enterprise is only about something, for a specific 10 years old in the US. The period of time, for a specific purpose. What’s being sold first fractionals were in major ski areas, particularly is a unit of time. The major benefit of most timeshares Colorado and California where real estate was so costly is use, not property value or likelihood of appreciation. that wholly-owned second homes were out of the Timeshares lose approximately 70% of their value upon question for most people. Eventually the idea spread to initial sale, continue to depreciate, and are very difficult northeastern ski areas, then golf-oriented communities to resell. like Hilton Head and beach and golf states like Florida. And now, in Pinellas County. Q - Why do some definitions and labels seem confusing and conflicting? Q - Do I need to know about fractionals? What’s all the fuss about? A - Today’s vacation home market is evolving quickly, which means that consumers are faced with an increasingly diverse marketplace and a variety of options in leisure travel. No clear distinctions exist among the various models because rapid innovation, when combined with a variety of choices and poorly defined labels, has led to consumer confusion. 10 PINELLAS REALTOR® ORGANIZATION A - Do you want to get in the game? Fractionals are here. Internet savvy buyers know about fractionals, as do second home buyers, international clients, and buyers who have traveled abroad. Q - Who buys fractionals? January 2008
Table of Contents Feed for the Digital Edition of PROView - January 2008 PROView - January 2008 Contents Chairman's Notes Feature ProActive Marketing Finance Marketplace Analysis Home Sales Report MLS Update MLS Mind Your Manners Education Calendar of Events & Programs PROBiz Special Feature Brokerage Design New Affiliates and Members for 2008 PROView - January 2008 PROView - January 2008 - PROView - January 2008 (Page Cover1) PROView - January 2008 - PROView - January 2008 (Page Cover2) PROView - January 2008 - Contents (Page 1) PROView - January 2008 - Chairman's Notes (Page 2) PROView - January 2008 - Chairman's Notes (Page 3) PROView - January 2008 - Feature (Page 4) PROView - January 2008 - Feature (Page 5) PROView - January 2008 - Feature (Page 6) PROView - January 2008 - ProActive (Page 7) PROView - January 2008 - Marketing (Page 8) PROView - January 2008 - Marketing (Page 9) PROView - January 2008 - Finance (Page 10) PROView - January 2008 - Finance (Page 11) PROView - January 2008 - Finance (Page 12) PROView - January 2008 - Finance (Page 13) PROView - January 2008 - Marketplace Analysis (Page 14) PROView - January 2008 - Home Sales Report (Page 15) PROView - January 2008 - MLS Update (Page 16) PROView - January 2008 - MLS Mind Your Manners (Page 17) PROView - January 2008 - Education (Page 18) PROView - January 2008 - Calendar of Events & Programs (Page 19) PROView - January 2008 - PROBiz (Page 20) PROView - January 2008 - Special Feature (Page 21) PROView - January 2008 - Brokerage Design (Page 22) PROView - January 2008 - Brokerage Design (Page 23) PROView - January 2008 - Brokerage Design (Page 24) PROView - January 2008 - Brokerage Design (Page 25) PROView - January 2008 - New Affiliates and Members for 2008 (Page 26) PROView - January 2008 - New Affiliates and Members for 2008 (Page Cover4)
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