Arguably the most valuable service provided by any reputable real estate consultant is the ability to prevent costly mistakes for their clients. Not only does this apply to the fractional consulting industry, it's magnified.  Our industry is still relatively young compared to its predecessor, the timeshare, and the majority of real estate developers have yet to embark on the development, sales and marketing of any type of fractional ownership real estate.

If I had a nickel for the number of times I've heard this: "We're going to sell this project out through the local real estate community", I could retire and buy fractional interests around the world! This brings me to the list of most common mistakes made by new fractional real estate directors.

Mistake #10: "We're going to go with Super Duper Advertising Company because they have sold more than $10 Billion in luxury real estate."

Not so fast. It might sound logical at first, but selling out a project in 2004 was about as difficult as selling a cheeseburger at McDonalds. Look for companies that have had some traction this year - yes they do exist.  The ability to defy the odds and sell real estate today indicates that the advertising company has the ability to adapt to different markets and reach out to buyers no matter how difficult.  This quality is very valuable so pursue these companies even if they have never heard of fractional ownership.  The fractional expertise is what you have fractional advisors such as Pierce Group for!

Mistake #9: "It didn't sell wholly so it will sell fractionally."

Not Really.  Is there a chance that your stalled condo project could sell fractionally?  Of course.  Is it a lock?  Absolutely not.  Often times a traditional real estate development won't sell because of traditional issues, or traditional errors.  If the project is a mile and a half from the beach and all you have is a tennis court then it probably won't sell fractionally.  Before you convert it, seek out an expert opinion.

Mistake #8:  "We've set aside the traditional 5% for sales and marketing."

Wrong.  A fractional real estate sale is a different animal.  No longer are we selling marble countertops and hand-crafted cabinetry.  This is a lifestyle message that requires more explanation around the effortless experience and practicality of ownership.  When was the last time you saw the explanation of a reservation system on the web site of a typical whole ownership gated community?  Your costs will be significantly higher for more advanced brochures and web content.  Additionally, more outreach is required.  The MLS (in most cases) won't even bring 5% of your sales.  The real estate community won't be your answer either - reference Mistake #2 - so a full on-site sales team is needed and there are plenty of extra costs associated with that.  Don't worry developers; the difference will be made up in higher sales revenues.  We'll leave that for a different article.

Mistake #7:  "We've decided to leave out the exchange program; it sounds too much like a timeshare."

Incorrect.  The key difference between timeshare exchange and fractional exchange is that timeshare buyers more often make their purchase decision based on the exchange component.  The reverse is true for fractional buyers - they purchase because they love the location - the exchange is simply a bonus.  Your sales team understands this and never leads a conversation with an explanation of the exchange benefit.  The exchange affiliation is a tool that can add credibility to your project and help get your prospects over the goal line.

Mistake #6:  "One sales team will be responsible for selling all of our residential products."

Don't do it.  One team should sell your fractional product; another should sell your whole ownership product and so on.  Each team should be masters of their own product and be able to handle product specific objections.  A little competition is healthy.  Of course, gun slinging and infighting among sales teams doesn't do any good so set the ground rules from the start, put together a good internal referral program and it shouldn't be an issue.

Mistake #5:  "We are hiring local real estate agents to run the sales office."

Not so fast.  While some local real estate agents might be well qualified, many are not - I've seen both.  The fractional sales position requires skills like... listening.  This is not an easy skill to learn and many sales people will simply never be able to grasp this concept.  Vomiting features and benefits all over prospective fractional buyers is as effective as a two for one special at a super-yacht dealer.  Reach out of the box when hiring your sales team and don't concern yourself so much with whether or not the candidate has a real estate license.

Mistake #4:  "We have rock solid legal documents that protect us no matter what!"

Go easy here.  Typically, legal documents are written by attorneys hired by you, the developer.  So it is your attorney's job to protect you, their client.  This is completely understandable but at the same time it is to your advantage to make sure the documents are sales friendly - i.e. free of sales land mines.  In the case of fractional sales, the documents are lengthy and include things like Public Offering Statements and references to timeshare.  Our industry still falls under timeshare regulation; actually a good thing for the buyer but can look scary nonetheless.  Buyers will have their own attorney's, accountants and/or financial advisers look through them.  So get those sales land mines out of there by having your trusty fractional consultant review them.

Mistake #3:  "We already know our ratio is 8:1 and what our price will be, we don't need a feasibility study."

Never skip the feasibility.  Why did you choose 8:1 and not 6:1 or 10:1?  What criteria did you use in setting your price?  There are reasons why we come up with the appropriate owner to residence ratio as well as the reservation system.  These reasons come out of research performed during valuable feasibility studies.  Remember, a project cannot be sold by even the most skilled sales people if the product is structured incorrectly or priced incorrectly.  Spend a few bucks up front to ensure that you are starting off on the right foot; it will save you oodles in the long run.  We like to say it this way: "Foresight Costs Less Than Hindsight^SM"

Mistake #2:  "We're going to sell this project out through the local real estate community."

No you're not.  Don't confuse this with Mistake #5; here we are referring to spending very little on traditional marketing avenues and re-directing those resources towards educating the local real estate community to sell for us.  Sounds decent in theory but never works.  To go this route assumes that the real estate community is willing to spend their valuable time and energy learning a new product with a sale price equivalent to a "fraction" of a traditional whole ownership sale.  Commissions are lower so an agent's interest and excitement is usually lower as well.  This is not to say that there are not local agents that will understand the product and embrace the opportunity to offer a practical alternative to their trusted client list.  It is simply not a strategy that can be used to sell an entire project.

Mistake #1:  "We've read this article, bought a couple fractional books and have now gathered all of the information we need.  We no longer need a professional consultant."

Not so fast.  First of all, we have just scraped the surface in this article.  You will be faced with hundreds of decisions that can prove costly if not handled correctly.  The majority of what you will face throughout the project development, sales and marketing lifecycles cannot be found on the internet.  Second, selling this product requires extensive training, followed by more training and then additional reinforcement training.  Explaining the fractional concept to buyers is an art and must be done at the right pace as to not confuse them and send them away without completely understanding what you have to offer.  See To Vomit or Not to Vomit.  Third,   every project is different and you should not be expected to understand the intricacies of how each reservation system is designed and why.  Stick with what you do best, find attractive properties and put together the right team that can work interdependently to create something special.

In summary, eliminate mistakes and save money by reducing costly expenses associated with errors that could have been prevented at the start.  Fractional ownership is not only a practical decision for your buyers but for you as well.  Learn it, love it, embrace it; do it right the first time and watch your profits grow!

More information here:  Pierce Group Feasibility Study and Pierce Group Project Development Services

Eric Pierce is President of Pierce Group, LLC a full service fractional ownership consulting firm. Pierce Group specializes in the design, sales and marketing of upscale Private Residence Clubs. Our clients are developers, land owners, senior lenders, and private equity firms involved in the development of fractional real estate projects. We have consulted and managed properties from Florida to Flagstaff, Chicago to Cabo and Idaho to Israel.