The differences between Fractional Ownership and Timeshare Ownership

A common question home and condo buyers have in the North Lake Tahoe real estate market is what are the differences between Fractional Ownership and Timeshare Ownership?

While both are forms of “shared ownership” there are some significant differences between the two types.

Since both Fractional Ownership and Timeshare Ownership are both considered “shared ownership”, what are the differences between Fractional Ownership and Timeshare Ownership?

Fractional shared ownership verses Timeshare shared ownership

In the greater Truckee and North Lake Tahoe area here are some of the basic ownership differences between the two:

	Fractional Ownership	Timeshare Ownership
Deeded Title	Yes – recorded with county assessor	No – title to property is held with the general operating partner/developer
Individual Assessor Parcel Number (APN)	Yes – each share in a property comes with its own APN (Each property is assigned an APN by the relevant county in California).	No – While each condo, or home in the development may have a specific APN, there are not individual APN’s assigned to each owner.
Title Company	Yes – Buyers can use a title company to ensure clear title/title insurance to the property and proper recording	No – Since there is no individual APN number the option to use a title company to transfer ownership is not possible.
Equity Ownership	Yes – The value of your share should move up and down with the current market conditions/value of the property.	No – Buyers are purchasing the right to use the property at a specific time each year and the re-sale value of the share is not necessarily tied to current market conditions/value of the property.
Value	Fair Market Value – Market value of the property is based on recent, similar sales of shares in the complex and the over-all real estate market in that area. Fair Market Value for the fractional share does have a basis on the actual over-all property value.	Private Market Makers – Market value is established by a third party (private market maker). It is often a fraction of what a buyer paid for the share due to high marketing costs and a limited market for re-sale. Typically it is not tied back to the price new shares are being offered for sale in the development, or the fair market value of the property.
Re-Sale	Yes – Open market just like selling any other property. Can list with a real estate agent/broker and place the property for sale in the Multiple Listing Service (MLS).	Yes – Limited to either the developer/business owner, or specialty company that has chosen to make a market in the specific development. Typically not available for MLS*.

Costs	Yes – In addition to your annual property tax bill, fractional owners typically have a monthly home owners association (HOA) fee, along with periodic assessments. Fractional ownership tends to be more expensive because of the limited number of owners in a property. Tip – make sure the HOA fees cover the cost of unit cleaning and doesn’t come as a separate charge so you are properly comparing HOA fees between the different developments.	Yes – Timeshare owners can expect an annual maintenance/assessment fee. Depending on the development, you may also have a separate tax bill for your share of property taxes, so ask when you are buying what is included in your annual assessment. You may also have periodic assessments to improve the property. Timeshare ownership tends to be less expensive than fractional ownership because of the large number of owners.
Number of Owners per Unit	Limited/Small – Fractional ownership tends to have a smaller group of owners per unit than timeshare. Fractional ownership can be as small as 2 (1/2 ownership) owners to as many as 17 owners (1/17 ownership) in the North Lake Tahoe-Truckee area	Large – Timeshare ownership tends to have a much larger group of owners/users as many as 52 owners per unit (1 owner per week) in the North Lake Tahoe-Truckee area
Size of Complex	Limited/Smaller – Typically less than 50 units in a complex, but any size is possible.	Larger – Typically more than 100 units in a complex, but any size is possible.
Selection of Week(s) of Use	Flexible – Typically owners are on a rotation schedule and they get flexibility on what weeks they will use each year.	Fixed week(s) of use a year. You know when you’ll get to use your week(s) each year.
Location	Specific Location – The benefit of fractional ownership is getting more time in a specific location. While the option to exchange weeks of use through an exchange organization may be possible, fractional ownership is about the location of the property.	Variety of Locations – While timeshare owners are buying into a specific location and time of year to use the property most come with the option to use their time in other developer/sister properties giving the timeshare owner flexibility in the destination.
Property Exchange Options	Possible – Some fractional share ownership properties offer owners the ability to exchange/rent their weeks of use with other premier luxury destinations and/or developer affiliated properties.	Most Likely -Some timeshare ownership properties/programs offer owners the ability to exchange/rent their week(s) of use with other premier luxury destinations and/or developer – affiliated properties, or with other timeshare organizations.
Rental of your week(s) of Use	Depends – Depending on the development, some properties may, or may not allow you to rent out your weeks of use.	Depends – Depending on the development some properties may, or may not allow you to rent out your weeks of use.
Pets	Possible \| Not Allowed – Depending on the development, some properties will allow pets (non-service animals).	Possible \| Not Allowed – Typically pets (non-service animals) are not allowed.

* As a note in the Tahoe Sierra Multiple Listing Service (TSMLS), which covers North Lake Tahoe – Kings Beach, Tahoe Vista, Carnelian Bay, Tahoe City, Homewood, Tahoma and the greater Truckee area, when I searched for Time Share listings for sale, since 2006, there were only two properties that had been listed for sale indicating this is not a popular, or traditional method for selling timeshares in the greater North Lake Tahoe-Truckee area. You may find different results for the Incline, NV, or South Lake Tahoe CA-NV areas, which are covered by a different Multiple Listing Services.

Title:

Fractional Ownership – Is a deeded purchase and comes with a specific California County Assessor Parcel Number (APN) that is actually recorded at the county when ownership changes between individuals. Owners have a real equity stake in the property and are responsible for their own property taxes. If the over-all value of the property goes up or down, so does the value of the share they own.

Timeshare Ownership – does not come with an APN number. Owners purchase a right to use specific week(s), but equity (actual real estate) ownership is not given to the owner and there is no deeded title of the interest purchased. The title to the property is held with the principal/developer owner, not the individual week owner.

Title Company | Insurance – Escrow Company

Fractional Ownership – Most real estate agents will include in the purchase contract the use of an escrow company and title company that includes title insurance to ensure that the property is transferred to the new owner that the property is being delivered free and clear of any encumbrances, liens, or anything that could cloud title. In the future should an item come up that the title company did not show up in their original title search the new owner has an insurance policy to deal with any unknown problem that may have been missed in the future.

The title company will also make sure that property recording of the change of ownership is recorded with the county recorder that the property is located in.

Timeshare Ownership – The purchase of timeshare ownership does not involve a title, or escrow company. An escrow company may be used to hold funds for the third parties, but typically the purchase is handled all in-house.

Re-Sale:

Fractional Ownership – Similar to whole ownership, your fractional share comes with its own APN number and it can be marketed and re-sold through a real estate broker out on the open market. Title and escrow are the same process as if you were selling a whole home, or whole condo. You will often find fractional ownership shares for sale on the mega real estate websites. The demand for shared ownership may be limited depending on your local market conditions.

Timeshare Ownership – Selling is often limited to either the principal/developer and/or their in-house re-sale program, or to a specialty timeshare exchange group that makes a market in your timeshare development. If there is a resale market for your timeshare development, expect to sell your timeshare at a fraction of your original cost due to the high costs of marketing/selling. Your timeshare development may also charge a transfer fee. You typically will not find timeshares for sale on the mega real estate websites. The demand for shared ownership may be limited depending on your local market conditions and the sales|re-sales structure of the development.

Annual Costs:

Fractional Ownership – Expect to pay a monthly fee, along with a cleaning charge for each owner use if it is not already included in your monthly fee. Expect the possibility of period assessments for improvements, or renovations. In additional to these on-going expenses you’ll also have your individual property tax that the state/county will bill you on a semi-annual basis.

Timeshare Ownership – Expect to pay an annual fee and always ask if that fee is inclusive of the property taxes that may be due on the property, otherwise there may be another annual expense. Periodic special assessments may be necessary for major improvements, so be prepared for that possibility. Each timeshare ownership development is different, but timeshare owners can expect to pay some type of fee annually even if you don’t use your week(s) of use.

Benefits and Disadvantage of General Shared Ownership

	Benefits – Advantages	Disadvantages
Professional Management	Ease of ownership as someone else takes care of the day-to-day and long-term care of the property	Additional cost for professional management.
Limited Use	Fractional ownership typically provides enough week(s) of use to satisfy an owners’ use demands.	No full-time occupancy, or large blocks of high-season usage time (no one gets all summer, or all winter weeks of use) unless you are buying a specific week(s) of use.
Cost	Typically the buy-in is a fraction of the value of the property with the benefit of being able to use the entire property and complex.	On-going costs whether you use the property or not. Costs may be more than what you would choose to do as an individual owner as the costs typically include for long-term maintenance, replacement, reserves, and professional management fees. Costs also tend to go up each year for inflation.
Re-Sale	Fractional ownership or timeshare ownership is local. It may represent a small or large portion of any specific community/real estate market sales. Talk to a local real estate professional about the complex, property, and/or local real estate market conditions before buying, or selling.	Depending on the local real estate market conditions the re-sale of fractional, and/or timeshare ownership may have limit appeal, or demand for that product. Talk to a local real estate professional about the complex, property, and/or local real estate market conditions before buying, or selling.

There are many similarities between Fractional Ownership and Timeshare Ownership, but there are also significant differences. The Differences between Fractional Ownership and Timeshare Ownership and choosing the right one will be based upon your individual needs.

Have more questions? Call me 530.414.1260!

North Shore Lake Tahoe Fractional Share Condo Developments

Sweetbriar, 8000|8004 North Lake Blvd., Kings Beach, CA 96143

Tonopalo, 6750 North Lake Blvd., Tahoe Vista, CA 96148

Fractional Shares for Sale in North Lake Tahoe (condos, homes, Tahoe City, North Shore and West Shore)

Greater Truckee Area Fractional Share Condo|Home Developments

Olympic Valley |Squaw Valley Fractional Share Condo|Home Developments

This document is not intended to provide legal advice. All legal questions should be directed to a California real estate attorney.

Want more home buying options? Something other than fractional ownership. Lake Tahoe, California homes for sale here:

Want to see what condos are for sale in Lake Tahoe? Here are the current listings:

For all of your Tahoe real estate needs –

Laura A. Allen | 530.414.1260 | Laura@TahoeLaura.com
BROKER ASSOCIATE, Tahoe Real Estate Agent
CalRE# 01473598
Coldwell Banker, Tahoe City, CA CalRE#01908304

All information is deemed reliable, but is subject to change, and/or correction without notice.

The Differences between Fractional Ownership and Timeshare Ownership