Has anyone sold fractional interest in their house?

[iqueequeg]

Has anyone had any experience with selling fractional ownership of their vacation house? I?d be curious how people worked out the logistics of it, finding a buyer, and if people who?ve done it are happy with the arrangement.

We love our house but we can?t really afford to keep it on our own with insurance and taxes going up so much.

I apologize for the bland lack of emoticons, they don?t seem to work on my mac.

 

[Mermaid]

I don't know anyone who has, but when I was trolling through VRBO listings today, I noticed that someone who has a three bedroom condo at Seagrove Highlands was trying not only to rent his place but sell fractional interest in it. You could look the ad up and contact the owner if you were interested in how the concept works and if he's had any bites on it.

Never mind; I've looked it up for you.

http://www.vrbo.com/92859

 

[Smiling JOe]

The subject has arisen on SoWal previously. I think the consensus was that it may be best to sell shares of a corporation which owns the house.

 

[SHELLY]

I would imagine that getting a "fractional" started after-the-fact is a heck of a lot more complicated than starting out in a "fractional" in the first place.

(1) You sound "emotionally attached" to this house. So first you'd have to come to grips with, the fact that "your beach home" will no longer be "your beach home."

(2) You'd better get yourself a decent lawyer to draw up the contract and ensure that it addresses each and every contingency from how cleaning & service contracts are administered; to who secures it before (and cleans up after) a hurricane; and who has first dibbs should one of the partners die or go bankrupt. (Do you want Dr. Right passing the fractional down to his "out of control and now very rich and spoiled crack-addicted son?")

(3) If you decide to go in with "friends and family," be prepared to lose friends and alienate family--prepare for the worst case scenario, chances are you'll be glad you did. Squabbles from who let their dogs sleep on the cream-colored sofa to who is going to buy new dishes and appliances when they break down, will be the highlights of family picnics and holiday get-togethers.

(4) If you've had this home for sometime and you now find that you can't afford to keep the house on your own (because of increased carrying costs, low rentals, change in personal financial situation), or you just bought this house and realize you've bit off more than you can chew, you really need to sit down, do some soul-searching and re-evaluate your entire financial plan. Do you expect your financial situation to get worse, better or stay the same in the future? As hard as it might be, you really need to crunch the numbers and see if you are getting "value for money" by hanging on to this house.

(5) Realize that fractional home ownership may only be one answer to your problems---but then again....maybe it might not be the right answer.

There may very well be many, many "fractional ownership love-fests" going on in SoWal (none that I know of personally)--but as many here can attest, I'm wired to give the "other side of the story." <cue Donna>

Best of Luck

 

[pgurney]

Back in the 80's my parents and a group of their friends bought a condo in Hilton Head together. I don't know how they set up the ownership, but it seems like SJ's idea of a corporation or an LLC would work fine.

They split the condo into 10 shares, some people bought one share, some bought two. Each share was equal to 5 weeks. The remaining 2 weeks were left to do maintenance/repairs and they rotated the responsibility of doing the maintenance/repairs each year. So your year for doing the repairs also gave you two additional weeks.

Starting with the first week of the year, there were five 10-week periods for the owners to use. Owner 1 would get week 1, owner 2 - week 2 and so on. Each year that would shift a week, so everyone would get their shot at holidays. I don't believe they rented the condo, so that probably simplified it somewhat.

Shelly's right that you would want a good operating agreement to spell out the details, but that's not difficult to do. There are also companies that will manage the property for you and from what I've seen, the fees for that are not that expensive.

 

[spinDrAtl]

I've seen it done two ways, but both were done prior to purchase.

In the first, each fraction is deeded separately and sold that way. The owners don't necessarily even know the names of the other owners. When the share was purchased, everything was already laid out - each is responsible for their share of taxes, hoa dues, etc. The unit was under a management/maintenance agreement that you must sign on for - all decorating/repairs etc. come from hoa dues and must adhere to the 'standards' of the property. Owners can not change the decorations. This may not work for some but for those who want 'hands off' ownership, it seems to work pretty good. Each owner gets one week a month that rotates every year to accomodate for holidays and peak periods - this is basically a hybrid timeshare.

The other was a partnership that was entered into prior to purchase. One of the partners was an attorney and drew up the partnership agreement, which basically covered a lot of the points brought up above - rights of the other partners to purchase if one partner wants to sell, repairs/maintenance, etc. There was no mortgage as each owner was required to bring his portion of the purchase price to closing. Under this particular arrangement, the owners were not renting the unit - it was just for personal use and each got a week month there as it was 4 groups that did it.