Financial Facts: Financing fractional ownership properties |

Financial Facts: Financing fractional ownership properties

Bob Kieber
Special to the Daily

In the past few years a new form of ownership has evolved into a viable marketplace, that being fractional ownership. Simply put the property is deeded in shares and each owner is in title to that share. Another way to understand this type of ownership is that a home’s ownership is broken into quarter shares. There can be four owners and if there are four different owners they are in a contractual agreement on when and how they may use their part of each year.

Take the example of Preston Folded and the home he owes here in the High Country. Mr. Folded has determined that after years of owning the home he and his family do not use the home more than three months a year. In fact he has rented the home out on a short term basis to offset his expenses but the time involved in doing so has just not been worth the effort. So Mr. Preston Folded has decided to sell three quarters of the ownership out to others.

His first step was to call me and we went over the financing options that he can show to potential buyers. There is always cash but with tax deductions as they are he feels that most buyers would like to have a mortgage on their share and use the federal tax deductions available to them.

He then sets up an association that describes how the quarters are defined as to taxes, expenses and if the unit can be rented by that share owner. In this document there are also preset calendars showing each share owners usage schedule all the way down to cleaning the unit and costs associated with normal wear and tear on the home and furniture.

Finally, Preston Folded advertises that three quarters of his home is for sale. Prices are set and financing options are detailed.

Once a buyer’s signs the contract to purchase a share I jump into action. I take a formal mortgage application and I compile a complete loan package and submit that package on to my underwriter. The documents are essentially the same as those used if a buyer where buying one hundred percent ownership in a property. Title insurance and an appraisal are necessary and I handle those items.

Hopefully the buyer is approved and we close the mortgage. The home now has two owners, Preston still owns three quarters and the new owner owns one quarter. We will do the process two more times once buyers are found for the other two shares.

The nice thing about fractional share mortgages are that one owner can sell their share without having to bother the other owners. Each owner is in title to their share and can hold or sell. Simple, easy and new in the marketplace of mortgages.

For answers to your mortgage related questions call Bob Kieber at (970) 453-4700 or email him at Bob is a local mortgage lender with Millennium Bank. He has 30-plus years of professional experience in real estate, finance and investments, and is a longtime resident of the High Country.

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