Fractional Real Estate Commissions

How to effectively sell fractional property in today’s marketplace was one of the most popular questions raised at Fractional Summit 2009 and every week we get asked the same question here at Fractional Life by developers so I thought I’d explore the fractional sales sphere more closely.

Amidst the oversupply and lack of whole ownership property sales in the market at the moment, which by default is one of the driving factors to the growth of fractional real estate in Europe, I don’t believe any developer has established an effective fractional sales agency network they can truly rely on.
True, market conditions are tough but it seems everybody has their blinkers on when it comes to real fractional ownership sales. The same ‘commission only’ agency network model so relied on for whole ownership sales is being adapted to sell fractions in the market– a dangerous and unproven option which is flawed in my view.

Talk to any overseas property agent who has the option of selling the same property either as whole ownership or as a fractional. Having little or no information prior to the potential buyer enquiry, the agent will always push whole ownership above fractional because:

Whole ownership commissions achieved are much higher.
Agents have made a decent living from whole ownership for years. Whole ownership is something they’re much more comfortable with selling It’s less hassle – the agent and client understands the whole ownership buying process. Apart from the early adopters, there’s a general lack of enthusiasm and perhaps a lethargy for integrating a fractional sales approach.

Very few seem to be taking into account the additional 20 – 40% of revenues fractional sales generate over whole ownership when marketed and sold effectively.

I don’t believe fractional will outsell whole ownership sales any time soon, but there are still too many developers and agents having entered the market in the rush to launch fractional, committing nowhere near the funds required to instill an effective sales and marketing plan for their fractional offering(s).

Because of this, many will fail or be withdrawn having not worked. An excess of developers and agents offer the fractional ownership option thinking it’s an easy sell to ‘scoop up’ those Clients who, for whatever reason do not make a whole ownership purchase – in other words, fractionals are perceived as a “poor relation” to whole ownership.

I’m always amused at the amount of developers that purport to offer fractional sales on their website using “THERE IS ALSO A FRACTIONAL OWNERSHIP PRODUCT AVAILABLE ON THIS DEVELOPMENT. PLEASE CALL US FOR MORE DETAILS” or the like, and when somebody telephones interested in a fractional ownership purchase, there’s a deafly silence on the line either because they don’t know they offer fractional as an option or they don’t know how to sell it. Either way, they haven’t been interested enough to give their product  a decent web page or two and any marketing literature is invariably non-existent.

To effectively market fractional real estate, some flexibility in enhanced remuneration packages less reliant on commissions will deliver more fractional sales, at a quicker rate and at a higher profit than whole ownership. Never before has there been the need for a continued focus on retaining quality sales people as the market continues to shake down in these challenging times. 
The fractional agent or developer who realizes this will prosper over the long term, whilst those total fractional sales commission operators will quickly wither and die.

-   Piers Brown

01/06/09

Posted:
24/09/09
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