In today’s economy, many luxury homeowners have changed financial habits since the onset of the recession. Some are selling a beloved property in a down market for minimal profits with hopes to free up capital and alleviate debt. Others are being forced into listing a second home for short-sale, with no guarantee of bank approval, just to avoid foreclosure.
Regardless, this new economy has changed our views on what it means to invest wisely. For the homeowner who does not wish to compromise lifestyle, selling 50 percent interest in a second home makes more sense now than ever.
What is 50 percent co-ownership?
The concept is simple. Two owners each purchase a half interest in a resort home. It’s best explained by using an example: let’s say you have a $5 million listing and you’re carrying a $2.5 million debt. You can list and sell 50 percent interest for $2.5 million. You’re now debt-free and responsible for only half the cost of maintaining the home. You can sell the remaining 50 percent interest now or at leisure, if indeed you choose to sell at all.
What services do you offer?
Co-Ownership Solutions is NOT a real estate company. We work as an intermediary and specialize in marketing the 50 percent co-ownership concept and creating the partnership agreement between the two owners. We work to expertly profile sellers and their properties based on a unique set of profiling criteria. We match them with well-qualified co-ownership buyer candidates, resulting in a customized comprehensive co-tenancy agreement.
What is a co-tenancy agreement?
The term “co-ownership agreement" or “co-tenancy agreement” refers to a binding contract between parties who own property together as “tenants in common.” Our agreement is designed for people who do not know each other, so it covers just about every scenario imaginable. For example:
· Provisions to protect a co-owner in the event of default of another co-owner;
· Policies for dividing up any profits or losses accrued from ownership of the property;
· Usage schedule and provisions for owners and people other than the owners to utilize the property;
· Policies for each co-owner to pay their proportion of the maintenance, repairs and pre-agreed upon future replacements and upgrades, plus rules on splitting the operating expenses of the property;
· Ways of selling out, either collectively or individually;
· A provision relating to determining fair market value in the event that a co-owner is looking to sell their 50 percent interest;
· A dispute resolution clause to quickly resolve disagreements between co-owners.
How would property usage work?
While the agreement is very detailed, the co-ownership concept is very simple. Unlike timeshare and other fractional programs, with 50/50 co-ownership it is relatively easy to agree upon usage. This is one of our key profiling criteria used to match prospective co-tenants. Usage possibilities range from six-month increments, quarterly, monthly, weekly and/or holiday rotation. Every owner’s profile is different. We match sellers with qualified co-owner candidates that share similar usage preferences.
What if one co-owner damages the property?
Each co-owner is responsible for any damages they inflict during their exclusive period of use. If the repair is not completed within the pre-negotiated time frame stated in the co-tenancy agreement, then the “Substantial Default” provision will apply. This provision protects the non-defaulting party by allowing them to exercise the buy-out option, thus resulting in the purchase of the defaulting party’s interest at a discounted rate. It is also good leverage to prevent default.
What does it cost?
There are no upfront fees and no cost at all unless a partial interest sale occurs (ideally 50 percent). There are two fees due at closing. The buyer and the seller each pay 0.75 percent of the total purchase price for marketing of the property as 50 percent co-ownership, profiling, matching and the facilitation of the co-tenancy agreement.
For more information about offering your Maui resort property for 50 percent co-ownership, please contact Amy Webb, President of Co-Ownership Solutions, at (808) 283-6087 or firstname.lastname@example.org.
100 Pulelehua St. in the Pineapple Hill Estates is available for $2.5 million (50 percent interest).