Since being introduced to this about a week ago, my mind has been racing with thoughts and questions.  What is this exactly? Why do real estate this way? Will there be a demand for it? Will there be a resale market when selling? How do you come to agreements on maintenance and changes to appearance to your purchase when you probably won’t know the other fractional owners (ex. who chooses furniture, wall color, replacement from wear-and-tear), how will neighbors receive these developments, What are financing options (are they similar to condo-tel financing options), What if one fractional owner defaults on their loan, how will it effect the others or the title of the property, or will it, how will the increase in the fractional inventory (reduction in traditional (wholly-owned) real estate inventory) effect the traditional real estate market and inventory and if they become very popular will it adversely effect the affordability of traditional residential properties, and would the city or state look restrict the number of fractionals allowed or come up with mandatory standards to protect consumers?  These are all questions that, come July 12th when I go to another class regarding Hawaii fractional ownership, I hope to be able to answer better.  Right now, I am ignorant to the concept except for the basic concept of how it works.  Anyone that knows me, though, knows that when it comes to real estate in Hawaii, I like to be as educated as possible and am open to new ideas and practices, so long as it does not harm the consumer or mislead the consumer.  So….I will try and give a couple of introductory points to all this. 

As Shermin Potvin  , founder of the Luxury Fractional Guide, said as a comment in another post, “It is apparent Scott that you have not yet done your homework regarding the fractional industry. I would suggest that all r/e agents get familiar with this concept as it will be the way most folks vacation in a few years!”

Maybe most folks will and maybe they won’t, but yes, I haven’t done my homework, and Shermin has put together a good site for fractional ownership.  I don’t endorse it, nor do I guarantee it’s accuracy, but definitely check it out to form your own opinions. He will have more answers than I will.

What I would like to do is understand fractional ownership in as much detail as possible in relationship to Hawaii real estate (each state has it’s own rules and regs for how fractionals are set up and handled), be able to relay to you the pros and cons and what to look out for, so you can make the most informed decision possible.   The introductory material is from Old Republic Title & Escrow, word for word.  Feel free to contact Julie Tumbaga  ( jtumbaga@orexco1031.com ) for more information on fractionals in Hawaii.

Introduction:
Fractionals have transformed the vacation ownership industry over recent years and are emerging as preferred alternatives to wholly-owned vacation homes.  Fractionals attract consumers who can afford luxurious vacation homes but can’t justify the cost and inconvenience of whole ownership when their use of the property is usually limited to only several weeks per year.  Consumers are also drawn to the extensive amenities, five-star hotel-like services, high quality furnishings, desirable locations, exclusivity, and maintenance-free lifestyle offered by fractional projects.

While Fractionals offer vacation home benefits at a fraction of the cost of owning an entire vacation home, the decision to purchase a fractional is significant.  Fractional prices range from under $50,000 to several million dollars, depending upon the “size” of the fractional and the related accommodations, the location of the resort, and the degree of luxury provided.  Consequently, your purchase of a fractional could prove to be a costly mistake unless you have sufficient information regarding a particular fractional project and ask the right questions of developers, salespersons, and yourself.  This brief guide provides you with some of the basic information that you will need in order to avoid the most common pitfalls and turn your purchase of a fractional into a successful, cost-effective, and worry free venture.

Basics to follow…