by Sherman Potvin
Participating in an Inspection Tour or Discovery Visit at a fractional resort allows you to “try it on” and make sure that the property is the right fit for you and your family. You will have the opportunity to experience firsthand exactly what you might expect as an owner. This is your chance to ask all the right questions, make note of the answers and come to an informed decision.
Below are the 13 essential questions that you should ask during your visit. The answers to these questions should be the foundation for any decision you may make.
1. Is this deeded property?
While most fractional properties are deeded, you still need to ask this question. Deeded property gives your investment a better chance of appreciation and allows you to leave or “will” it to a family member the same way you could a whole-ownership property.
2. What size fraction are you offering?
The size of the fraction determines how much time you will have guaranteed on the property. Properties sometimes offer extra weeks on a “space available” basis, but this is unpredictable, so you will want to make sure the number of guaranteed weeks meets your minimum requirements. You could always consider buying two fractions, if one doesn’t provide enough time for you. Also keep in mind that if rental income is a part of your over-all plan, the more weeks you have during peak periods, the higher your potential income.
3. What type of usage plan do you offer?
Some properties offer a “fixed” use plan where you get the same exact weeks each year. Others offer floating weeks, where your weeks change each year on a rotating schedule. For instance, if there are 6 owners, you would get Christmas week every 6th year. However, if there are 12 owners, you would only get Christmas week every 12th year. Usually, fixed plans are more expensive than floating plans, as parents like to secure their childrens’ school vacation time.
Many fractional properties offer a combination of both fixed and floating, with the floating weeks generally assigned through a priority reservation system or sometimes even an annual lottery. Some properties will offer additional time on a “space available” basis. Be sure to ask the right questions so that you completely understand the implications. Is there a certain time period in which the reservations must be made for a certain week? What if there the weeks that I need are not available?
Usage plans are becoming more and more varied as fractional properties try to meet their customers’ needs. The bottom line is that the usage plan will affect your enjoyment of the property more than any other factor, so it is essential you understand it completely.
4. Is it possible to have concurrent weeks?
The usage plans for most fractional properties spread the owners’ weeks evenly throughout the year. If you purchase a quarter-share, for instance, you would most likely receive one week each month. If you purchase a 1/12th share, you would normally get one week each season (winter, spring, summer, fall). Although not as common, some fractional properties do break up their usage plans in two-week slots, usually dependent on the typical vacation patterns for that particular location. Most fractional properties will allow and even facilitate internal exchanges between the individual owners, which will make the possibility of spending a two-week period at the property much more likely.
5. Are you affiliated with an external Exchange Company?
An exchange program can help you to trade some of your weeks for time in other properties around the world. If you don’t plan on spending your entire allotment of weeks in one location, then participation in an external Exchange Company such as RCI, Interval International or the soon-to-be-launched Luxury Fractional Exchanges, could be important to you. Understanding your options in an exchange program can be very confusing, and you should feel very comfortable in asking to speak with someone at the exchange program directly to answer your questions in more detail.
6. Can I rent out some or all of my weeks?
Many people want to rent out some of their time each year to bring in enough income to cover annual maintenance costs. If you are considering purchasing a share in a private stand-alone home, you need to be sure that renting is not prohibited by local ordinance or Homeowners’ Association rules. If you are considering a purchase at a larger development or resort, find out whether they have a realtor/broker or if the development itself will facilitate rentals. If they do, be sure to understand what share of the rental income will belong to you.
7. Is the construction completed yet?
If it is, be sure to take a thorough tour and look at more than one unit. If the building isn’t complete, they may have a model residence that you can view. Be sure to ask how similar the final product will be and what may change. If nothing else, visit the site where the building will be built to get an idea of the views, and examine the architectural plans. Ask about the developer as well. What other projects has he done? Does he have a website? Is he financially stable?
8. What percent of the total units have been sold to date?
This is important because there may be a chance to bargain for extras. Usually, you can negotiate the best price at the very beginning or very end of the sales cycle. For instance, if they are in “pre-sales” they often offer deals for “founding members”. If the project is mostly sold out, you may be able to negotiate pricing on one of the less-desirable units that is left. If the development has planned their construction in several phases, there are generally incentives in the form of price breaks, prepaid maintenance fees, etc., at the beginning and end of each phase.
9. How many price increases have you had?
Most completed projects will have a minimum of 12 price increases over an average 4-year life. Buying in when the property has had less than 8 price increases should enhance the value of your purchase. Resorts that are experiencing rapid price increases are fun to be a part of as they can quickly build you equity.
10. Exactly what does ownership include?
Be sure that you understand exactly what the purchase price includes. There is nothing more bothersome then to encounter “a la carte” fees that you were not aware of. For instance, if golf is a big reason for your purchase, find out exactly what is included for greens fees, cart fees and other services.
11. What other amenities are included?
Ask for a written list of amenities that will be included, particularly if you purchase in the pre-construction phase of a development. Make sure that they include the amenities that you may consider essential such as a washer and dryer, personal storage, maid service, etc.
12. May I see a printed list of the fees?
As with all other forms of real estate, there will be costs associated with ownership. It is very important that you ask for a list of the fees (such as housekeeping, maintenance, phone, etc.) and understand what each one is. Be sure to ask if your real estate taxes are included.
13. If I purchase, will you reimburse me for this visit?
Many developers will reimburse you for the entire cost of your trip to inspect the property if you wind up purchasing, so be sure not to forget this essential question!
Unlike the fast-paced sales pitches that timeshares are notorious for, inspection tours of fractional properties are generally much more low-key and relaxed. Your Property Representative should be willing to make sure that you have all of the information that you need to make an informed choice. So take as much time as you need during your visit to get answers to all of the above questions and any others that you consider important.
Sherman Potvin is a leading fractional consultant and the founder of Luxury Fractional Guide. Click here to view over 230 fractional property listings on Luxury Fractional Guide.