What is Fractional Ownership?
Fractional ownership is a timeshare product, with little difference other than it is usually of a more extended usage period each year. Fractional ownership may also include owning a share in the legal title of the property, whereas timeshare does not. Both, however, fall within the same laws and guidelines.
With the increasing negativity surrounding the phrase ‘timeshare’, many companies have begun using fractional ownership as a phrase the rebrand their timeshare products. So, consumers are advised to read up and investigate any companies using the title of fractional ownership to ensure they know exactly what type of product they are paying for.
Moreover, many timeshare traders promote fractional ownership products with the claims of high resale values. This lures buyers in with the belief they are investing in a product. However, contracts inspected show that the original purchase price of the individual fractional ownership is much higher than the current open market price. This means when people come to sell their ownership they are losing money from what they originally bought the share, rather than making the profit they were promised.
Some schemes even promise a form of rental income paid to the purchaser that can be used to cover any management or maintenance fees they contractually have to pay. But, promises like this should not be relied on as they are sales tactics used to sell fractional ownership shares. Therefore, caution must be upheld when facing these claims, observing and investigating them at all times.
With some timeshare companies distancing themselves from the term ‘timeshare’, it is likely that certain companies will also step back from ‘fractional ownership’. Facing other terms such as ‘group ownership’ and ‘destination clubs’, consumers must be careful in thoroughly investigating the terms of the contract for these various companies before they sign.
Recently, some resale brokers separate from the timeshare industry hope that fractional ownership can be given credibility as a mix of investment and high-quality holiday destinations. However, whether they will succeed in influencing a market heavily dominated by the timeshare industry is questionable.
The biggest concern for consumers is that fractional purchases cost much more to buy than a timeshare. This is perhaps due to the longer usage periods and legal title ownership of the property, but like timeshares, people can often tire of their holiday home. This leaves them with the difficult task of selling it on, and consumers can find themselves making a significant loss come resale. Therefore, it is essential that prospective purchasers of fractional ownerships take legal and professional advise beforehand. They can help consumers understand their contract and any potential taxes, fees and losses before signing the contract.
So, if a timeshare owner is faced with an offer to exchange their product for a fractional ownership scheme, they should be very wary. With so many risks associated they need to be aware that such a system could potentially leave them with years and years of expense and a loss come to an eventual attempt at resale.
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