Selling Fractional Ownership – Top 10 Tips
Fractional Ownership Sales Tip #1: Be Realistic About The Time, Effort and Cost of Selling Fractionally
Even the best fractional vacation homes do not sell themselves. Fractional selling means identifying more prospects, making more sales presentations, signing more sales contracts and closing more transactions. Essentially, instead of selling the home once, you need to sell it many times. There is generally an initial burst of interest that is likely to generate a small number truly committed prospects who will eventually close. After that initial burst, it is probably overly optimistic to expect to locate more than an average of one truly committed prospect every 30-60 days.
Expect to continue to invest in marketing, whether in the form of advertising, holding open houses or other events, trips to show the property, or web development, throughout the sellout period. If using a real estate agent, be prepared to pay an elevated sale commission that reflects the additional time, effort and cost that the agent will expend in the fractional marketing and sales process. If you plan to make your first buyers wait to close, consider having an interim usage program so they can enjoy the property at a reduced cost while they are waiting for you to fill out the group.
Fractional Ownership Sales Tip #2: Start By Creating and Understanding Your Product
Almost everyone recognizes that owning a vacation property fractionally is a good idea. But that recognition is generally not enough to generate a signed contract and a closed sale. For sales prospects to really assess their level of interest, they need specifics. The fractional ownership sale least likely to close is the one where a group of prospective co-owners gets together and then tries to figure out how to structure their co-ownership.
If the main elements of the offering are not fully developed, it is impossible to distinguish real buyers from those who are simply intrigued by the concept. As a consequence, you will end up wasting time on prospects that will not close, and paying insufficient attention to others because you mistakenly believe you have more interest than you really do.
Once you tell a real buyer something about usage, pricing, number of owners or anything other significant issue, it becomes part of their decision-making process. If you later make a change, even a minor one, there is a very high probability you will lose the prospect (even if the changed aspect would have been acceptable if you had presented it that way originally). For this reason, it is never a good practice, even with friends and family members, to discuss pricing or other elements of the fractional offering that remain uncertain, even if you explain that everything is preliminary and subject to change.
The nine key elements that you need to be able to explain the first time you present a fractional vacation home ownership offering are:
- Annual dues and the budget on which it is based
- Number of shares/owners
- Usage plan
- Guest/rental policy
- Availability of financing
- Whether there will be a loan secured by the entire property
- Management plan
- Ability to resell/exit strategy
Fractional Ownership Sales Tip #3: Keep the Offer Simple and Easy To Explain
You need to be able to explain each of the nine key elements in two minutes or less—including the usage plan (especially the usage plan!). Practice and time your explanation on your spouse and friends (see Tip #10). If some aspect of the plan is too complex to be explained quickly, change it; the fact that you cannot explain it easily probably means it is too complex to work in practice anyway.
Fractional Ownership Sales Tip #4: Make A Personal Connection
When speaking with prospects, avoid spending the bulk of the time discussing the property. Some topics to discuss instead:
- Recent trips they have taken to the area where the property is located
- What they do when they visit; where they like to eat
- Other things they do for vacation
- What they would like to be doing for future vacations
- Their kids
- The economy and how it is affecting them
- All of the above, but with regard to your own life
Remember, you are not selling a place to live or another necessity. You are selling a dream, a luxury, a lifestyle, and a relationship.=
Fractional Ownership Sales Tip #5: Qualify Your Prospects
Determining the interest level of your buyer is critical to efficient sales. Interweaving and balancing personal connection (see Tip #4) with qualification is one of the two most difficult aspects of the sales process. The other is asking for the sale in a non-threatening way (see Tip #6). Some non-threatening qualifying questions are: So, why haven’t you ever bought a vacation home? What would make you take the plunge? If you ever decided to buy a second home, where would you buy? What would you buy? Have you ever thought about co-owning a vacation home? What do you think of the idea?
Fractional Ownership Sales Tip #6: Be Ready To Explain Why They Should Not Wait
Expect to hear your buyer say: “I plan to go to [the location of the fractional property] next [month, summer, winter etc.] and I would really like to come by and see it then” or “Next time I get over there, I’ll give you a call and we can set something up”. Most sales prospects will want to visit the property before they buy. Before speaking with someone who is not near the property, consider having an enticement to get them to visit in the near future. This could be an event you are hosting, a discounted stay, a travel cost credit if they buy, or all three combined.
Expect to hear: “If it looks like it’s starting to come together, give me a call” or “Let me get back to you after the holidays”. Since this is a luxury that nobody needs, there is no obvious reason to buy now instead of later. This is particularly true in fractional sales, where buyers perceive that many different facets need to fall into place before the deal will happen. Be ready with a reason or two not to wait. Consider planning to raise prices after each sale or group of sales, and explaining this plan to the buyer. Another option is to incorporate a usage plan that somehow favors the earlier buyers, at least for the first year or two.
When listening to a prospect explain why he/she is not buying, it is usually not productive to respond with counter-arguments. It is better to listen, take notes, and ask follow-up questions. Use your counter-arguments as a basis for a follow-up call or email, which you can introduce by saying: “You know, I was thinking about what you said and I had an idea . . .”
Fractional Ownership Sales Tip #7: Identify Your Best Sales Prospects and Allocate Your Marketing Resources Wisely
The best prospects are those who know the property or know you. If the property has been rented, begin your sales effort with renters. Prioritize, starting with those renters with whom you have developed a personal relationship, then move on to those who have visited most regularly, and then to the rest. Next, make a list of friends who have visited the property as guests, and then a list of family members, neighbors, friends and business associates who might be interested. Consider other aspects of your social circle: schools your children attend (or attended), alumni organizations, charities, religious groups, clubs, etc., and determine how you might reach the members. Some ideas: advertise in a newsletter, donate a stay for a charity auction, sponsor a class, speech or other gathering.
The next best prospects are those who regularly visit the area. Affiliate with local hotels, restaurants, marinas or clubs under an arrangement where you can post a sign or leave a pile of brochures, and the organization will receive a commission of finder’s fee each time these generate a buyer that closes. Affiliate with other property owners or management companies that provide vacation rentals, and offer a generous commission of finder’s fee each time these generate a buyer that closes.
The next best prospects are those who are who currently visiting the area. Hold open houses. Post signs at the property and on bulletin boards. Consider serving food of some kind (e.g. barbecue, wine/cheese). Host an event that may draw people such as a show for a local artist, or performance by a school or church choral group.
The lowest probability prospects are strangers who find your property online. In my experience, the most common mistake in marketing and selling fractional ownership is over-reliance on the web. Anyone with experience in web-based marketing already knows that is can be challenging and expensive to draw search-engine traffic to a website, and that new sites take significant time to find traction. What is less frequently understood is that it is very difficult to convert eyes on the website into signatures on a purchase contract. I do not mean to suggest that you avoid creating a website and/or advertising on an existing fractional sales website. But recognize that the prospects generated from these sources are less likely to close that those generated from past renters, people in your circle of families, friends and acquaintances, and people who are generated from local marketing. This means you will spend more time and effort per closed sale, and that if this is your only source of leads, it will take much longer to sell out the fractional shares.
Fractional Ownership Sales Tip #8: Focus On A Few Prospects At A Time To See What Works
This Tip follows from two important principals of selling. The first principal is that the initial contact with a particular prospective buyer is the most important one. If that first contact does not generate interest, later contacts with the same buyer are likely to be ignored. The second principal is that you are not likely to identify the most effective sales approach on your first, second or third effort. Determining what works for you and your property will require trial and error. Taken together, these two principles suggest a “go slow” approach with your sales leads, especially your first and best ones.
After generating a list of prospects, do not send an email to everyone on the list simultaneously. If what you send turns out to be ineffective, you will have wasted your most valuable opportunity with each prospect that receives the email. Also, if you send email to too many prospects at once, you will not be able to make follow-up calls in a timely fashion. Pick a manageable number of prospects to contact with each wave (such as 10), so that you can adjust the content of your mailing and contact each person soon after they receive your email.
Fractional Ownership Sales Tip #9: Follow Email With Telephone or In-Person Contact
Even prospects who respond favorably to an email contact will often put off, and eventually forget about, following up. If you rely on buyers responding to email, you will sell very few (if any) fractional shares. Mention, in your initial email contact, that you will be calling in a few days to get the prospect’s reaction. Explain that, even if he/she is not interested, it will be helpful for you to know why. You need telephone or in-person contact to make an effective, properly tailored presentation. You also need it to learn what will sell your product. You will not learn this from sending email that 99% of recipients never respond to.
Fractional Ownership Sales Tip #10: Prepare For Your Telephone or In-Person Contact
When speaking with a possible buyer, even if that person also happens to be a friend or family member, there are four specific things you are trying to accomplish:
- Explaining the offering (Tip #3)
- Making a personal connection (Tip #4)
- Qualifying the prospect (Tip #5)
- Creating urgency (Tip #6)
The order in which you accomplish these tasks will be influenced by your communications style, your relationship with the prospect, and the natural flow of the conversation. But it is nevertheless critical to keep the four goals in mind and to have some idea of the phrases, transitions, and explanations that you feel comfortable using to guide the conversation. For most people, this requires preparation and practice.
About The Author
SirkinLaw APC has focused on real estate co-ownership since 1985, and has been involved in the creation of more than 5,000 co-ownership arrangements throughout the United States and the world. This breadth of experience allows us to draw on a huge library of fractional project documentation as well as extensive knowledge of marketing and registration requirements for virtually any location where a project might be located or potentially marketed. We pride ourselves on our ability to write legal documents in plain English, develop simple and elegant usage and organizational structures, and offer efficient, reliable and cost-effective services for fractional projects ranging in size from a single house or condominium up to hundreds of factional interests. Our firm currently has offices in San Francisco California and Paris France.
D. Andrew Sirkin is a recognized expert in fractional real estate ownership, residence and destination clubs, and other shared vacation home arrangements. Although his practice includes some large fractional real estate projects, he frequently advises and prepares contracts for small groups of families and friends who buy and share vacation homes as partners, and for fractional sales of individual vacation homes and condominiums. He has worked on homes all over the world, including most U.S. States, as well as Italy, France, Spain, Portugal, Ireland, Argentina, Nicaragua, Costa Rica, Panama, Dominican Republic, Nicaragua, Belize and Mexico. He is an accredited instructor with the California Department of Real Estate, the co-author of ten editions of The Condominium Bluebook, published by Piedmont Press, and the author of The Equity Sharing Manual, first published by John Wiley and Sons in November 1994. Andy can be contacted via our contact form.