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🏡 Offer and Closing Process
🏡 Offer and Closing Process
Carlos Trevino avatar
Written by Carlos Trevino
Updated over a week ago

Once your investment proposal reaches enough funding and all funds from members are received, Fractional will begin the offer and closing process. This process can be an exciting, yet stressful time. But don't worry - Fractional will be here every step of the way.

We've outlined the major milestones and what to expect during this process:

1. Co-ownership Legal Agreement 📚

  • It is important to set up a governance model for a successful partnership that allows for both flexibility and protection of all members. Before making an offer for the property, Fractional will help your group align on how to manage the property and work with you to customize a co-ownership legal agreement. Read more about our customizable co-ownership legal agreement here.

2. Make an offer 🌱

  • We will work with your group to finalize the offer price and terms to be competitive against other offers. Please note, like any traditional or corporate buyer on the market, Fractional offers are not guaranteed.

  • [Private Groups ONLY]: Get a pre-approval letter from Fractional if you’re working with your own real estate agent to make an offer. Schedule time with the Fractional team to discuss your project and begin the pre-approval process.

    • All members of your private group will need to verify their identity (profile page), connect their bank account (preferences page), and provide financial statements in order to get pre-approved.

      • Verify Identity

      • Connect bank account

3. Inspect and Negotiate 👀

  • Once the seller has accepted an offer on the property you are officially “under contract,” but the sale is not final and there is room for negotiation. Fractional will immediately begin the due diligence process. We will send an inspection company and termite inspector to the property, and provide information on cost of repairs from our contractors and present any defects to you. Our agents will then use this information to negotiate with the seller to either address any issues, make a price adjustment to the offer, or contribute to closing costs.

4. LLC Incorporation 👩🏽‍⚖️

  • After due diligence, Fractional will set up an LLC designed for co-ownership in the state of the property. The LLC will be member-managed meaning you and your fellow co-owners have direct ownership of the property and complete control over how to operate the property. While Fractional does not charge any asset management fees, we serve as an admin and will still handle all the busy work from obtaining an EIN to managing the filing and operating agreements of the LLC.

5. Mortgage Financing 💰

  • Fractional partners with lenders to offer short-term and long-term loans for properties under an LLC. Our exclusive partnerships allow groups to acquire LLC loans with no personal guarantor needed from any co-owner. Fractional does not require any co-owners to be a personal guarantor for the entire loan of the whole property. You will only be solely responsible for your part of the loan based on your share of the property.

  • This is a huge value-add since traditionally it is almost impossible to acquire commercial loans with no personal guarantor, and rates are often very high (6%+). Without Fractional, most commercial lenders will require a personal guarantor to assume all the debt even though they only own partial equity of the property.

  • If your group wishes to really optimize on interest rates, you can nominate a co-owner to use their personal credit to acquire a conventional mortgage such as an investment home loan or second home loan and close with your personal names on the title**.**

  • Our co-ownership legal agreement allows the debt-taker to be compensated and owners can choose to quitclaim the title to an LLC after closing at their own risk.

  • You are welcome to bring your own conventional lender or find a conventional lender through Fractional’s network.

  • Read below about the benefits of Fractional’s mortgage financing and other financing options

6. Bank Setup 🏦

  • Fractional partners with Increase to create a business banking account for your LLC in seconds. We operate and automate all money transfers from monthly distributions to capital calls for expenses, and we maintain the required reserve for the property.

  • We handle all of the necessary bookkeeping for your property from managing K-1s and all other tax and accounting paperwork.

7. Property Insurance and Home Warranty ☔️

  • Fractional has a network of insurance and home warranty companies offering the best coverage at the best rates that investors can pick and choose from. You can get quotes immediately to find the best options that work for you. Our partners help protect your property and its systems and appliances from unexpected events and unexpected repair or replacement costs.

8. Close the property 🏠

  • Fractional works with title companies and notaries across the United States to close the property on the group’s behalf. The title of the property is held by the LLC.

  • We will take care of all the busy work - it usually takes hours for people to organize with notaries and deal with hundreds of pages of documents. Fractional handles all the closing complications so that you and your co-owners don’t even have to show up at the closing office.

  • All co-owners are due their share of closing costs on the day of close.

9. Begin Renting and Earning 😀

  • As a Fractional user, you have access to discounted rates provided by our property management partners. Leave it to them to find a high-quality tenant and take care of all the day-to-day operations throughout the lifetime of your investment.

  • You are also welcome to bring your own property managers and vendors to manage your property. Simply introduce them to us so we can onboard and integrate them into our Fractional platform. We want to make sure they’re properly set up to deposit your rent, withdraw funds for any expenses, and keep your ledger in sync on the Fractional user portal.

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