Time to sell your share?
Cindy Cooper is fed up with the $190 monthly payments and $465 in annual maintenance fees she pays on a timeshare she never uses.
The Westchester model scout said her $11,000, two-bedroom, two-bath Grand Pacific Resorts unit in Carlsbad is lovely, but she only purchased it because a salesman promised she could exchange it for weeks in Jamaica and Nantucket. If she didn’t like it, he assured her, she could easily sell her week back to the developer.
But exchange efforts have proven futile, and Cooper said when she called the resort about resales, “the tune had changed. They discouraged me and even got a little nasty.” She has been advertising her timeshare for sale online for weeks without a hit.
Cooper is not alone. Many disgruntled timeshare owners have a difficult time unloading their prepaid, one-week slots. And when they do sell, they typically receive less than a third of what they originally paid.
Although timeshares were routinely pitched as investments during the industry’s infancy 30 years ago, and since the 1980s only licensed real estate agents have been able to sell them, a timeshare is a vacation purchase, not a real estate investment. New sales are controlled entirely through resort developers.
But the market for previously owned timeshares tends to be fragmented and informal, leaving sometimes desperate sellers the targets for scammers. Unscrupulous resale agents may demand hundreds of dollars in upfront appraisal, listing or brokerage fees, claiming to have buyers “lined up,” then fail to deliver. In other cases, sellers forfeit their weeks when told interested buyers want to check them out, only to find later that a scammer rented out the unit, pocketed the week’s rent money and disappeared.
Many owners who can’t resell try to rent their weeks. Some even donate them to charity, hoping for a tax deduction, which is not always obtainable due to complex IRS regulations on charitable donations. Others abandon their timeshares to get out of annual fees. But defaulting on loans or fees can hobble an owner’s ability to get credit for more essential purchases such as a home or new car, according to timeshare law expert Robert J. Webb of Baker Hostetler in Orlando, Fla.
The undercurrent of resale difficulties and scams plagues the industry at a time when resort developments and new sales are booming. The industry experienced a net growth rate of 7.6% in 2002 (the most recent year for which figures are available) and the average price of a timeshare week sold was $16,050, an increase of 9.8% over 2001, according to a survey by PricewaterhouseCoopers hospitality and leisure advisory group for the American Resort Developers Assn., www.arda.org, a timeshare lobbying organization.
“Timeshare is tracking closer to trends in real estate sales,” said Scott Berman, an advisory group partner who helped create the study five years ago.
Like many in the industry, Berman attributes much of its success to consumer confidence buoyed by the influx of large corporations such as Disney Corp., Hilton Hotels Corp. and Hyatt Hotels Corp. into the timeshare market. Also, state regulations have stamped out many of the unscrupulous operators and scam tactics prevalent during the ‘70s and ‘80s.
But even as the timeshare industry outgrows what ARDA spokesman Howard Glassroth calls its “colorful past,” disgruntled owners like Cooper continue to put a black eye on the good face the industry is trying to show the world. (Calls to the owner of Cooper’s timeshare, Grand Pacific Resorts, were not returned.)
Harold Nazaroff, for instance, bought a $15,000 timeshare in San Francisco in the 1990s and calls it his worst mistake ever.
“I got sucked in by a salesman who was telling me everything I wanted to hear, like it was gospel,” said the 51-year-old Fresno businessman. “I got that old promise, ‘You can travel to 3,000 resorts all over the world.’ What he didn’t say was that 2,999 of them were unavailable.”
The timeshare concept arose in Europe in the 1960s and came to the United States a decade later as a means for condominium developers to unload overbuilt properties. The timeshare, typically a condo or cabin, is subdivided into 52 separate units of time and sold to 50 or 51 owners (leaving one to two weeks for maintenance), each of whom own 1/50th or 1/51st of the unit. Under some timeshare contracts, owners get a deed to back up their ownership rights. Others sell ownership as a portion of a timeshare trust or corporation membership and do not include a deed, said timeshare law expert Webb.
They are nearly always sold during on-site presentations that offer giveaways as attendance incentives and feature intense sales pitches. During the industry’s early years, many salespeople under tremendous pressure to close a deal inside of 120 minutes used the “promise them anything” method.
State crackdowns in the ‘80s required timeshare salespeople to get real estate licenses and gave consumers a cooling-off period during which they could back out of a purchase. California’s “subdivided land law” governs timeshares in the state and provides a cancellation period of three days, one of the shortest in the nation, Webb said.
The industry subsequently backed off claims that time- shares are investments that hold their value or appreciate over time: They don’t. In fact, at least half the price of a timeshare at a new resort goes toward the sales and marketing campaign waged to sell it.
Because timeshares traditionally involve deeds and salespeople are required to have real estate licenses, complaints are directed to the California Department of Real Estate. The agency can revoke or suspend licenses if the complaints are found to be justified, said spokesman Tom Pool. The department does not track complaints by property category, he said, and prosecution of fraudulent activity is handled by the state attorney general’s office.
Because of increasing annual fees and low resale value, Don Lucove, a Calabasas accountant, does not recommend timeshare purchases. “It’s not a good idea unless you can guarantee you’ll stay healthy physically and financially and you enjoy going to the same place every year,” he said. “You have time restrictions to deal with, and if you can’t use it, you lose it.”
Tax laws do not favor timeshare purchases either. Owners cannot deduct annual maintenance fees, which range from $300 to $1,000. Property taxes, if they are paid separately, can be deducted only if a timeshare qualifies as a secondary home for tax purposes. A profit made on a sale is considered capital gain, but a loss cannot be written off unless the timeshare has been used strictly for business.
Timeshare developers finance about 70% of sales at interest rates as high as 15% over seven years. The interest may or may not be tax-deductible, again depending on whether the timeshare can be considered a second home and how the sale is structured.
Yet timeshare saleswoman Lisa Ann Schreier, who works for AmeriSuites Vacation Club at Calypso Cay, in Kissimmee, Fla., does not blame financial disadvantages for unhappy owners. She traces the discontent back to those ubiquitous “free merchandise” sales pitches, which she says often push people to stretch beyond their means.
“Unless your family of four is spending $2,000 a year on vacations and plans to keep that up, a timeshare is not a logical financial decision,” said Schreier, who runs a website, www.timeshareinsights.com, and is writing a book aimed at educating would-be buyers.
Timeshares are not for everyone, Schreier said. For owners who get sick, fall on hard times, buy timeshares strictly for exchanges or buy in undesirable locations, the financial obligations of ownership quickly become a burden.
Yet, with the glut of resales on the market, timeshares can be a fantastic bargain for buyers who pick up previously owned weeks, enjoy visiting the same location every year and don’t mind the planning and paperwork the exchange system involves.
Richard Helton, 47, of Roseville, Calif., was a workaholic who never vacationed before he bought his first resale timeshare three years ago. Now he owns three -- in Hawaii, South Africa and Oceanside. He has been able to swap his desirable, high-season weeks for timeshares in New Orleans, Lake Tahoe, Israel and Gatlinburg, Tenn.
He has reservations for a canal boat tour of England this year and an African safari next -- trips he booked through the timeshare exchange network. He’s taken his elderly father to Hawaii and treated his daughter and son-in-law to a honeymoon in Maui.
“I tell people to think about their kids,” Helton said. “What better way to build up great vacation memories with them than to go to the beach every year, go swimming, go scuba diving.”
More good news: Fed-up timeshare owners no longer need suffer alone. Websites such as the grass-roots Timeshare User’s Group, www.tug2.net, offer information, resort reviews and do-it-yourself sales listings. EBay has also become a popular site for listing resales.
In addition, heavily trafficked online bulletin boards provide a place for “newbies” using such monikers as “dunce” or “got burned” to find advice on what to do if they’ve caved in to sales pressure or fallen prey to resale scams.
“Don’t pay an upfront fee” is TUG’s unofficial mantra, said Steve Kimble, a Murietta teacher, 34, who bought three bargain timeshare weeks as resales and dishes out cyber pointers. “Now that I know how the system works, I look at it like it’s a treasure hunt. I can go online, look at a beach in Cozumel and find something that I jump on.”
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Signs of fraud in the resale market
Hoping to sell your timeshare? If you are contacted by timeshare resale companies competing for your listing, be wary of the following:
* Up-front fees in excess of $100. Whether they are called “listing,” “appraisal,” “legal,” “security,” “registration” or other fees, don’t pay them. A legitimate broker receives a commission after the sale.
* Companies claiming to be banks or investment trusts.
* Companies claiming an inflated resale value or that they can recoup the loss you’re taking on the sale.
* Scare tactics from firms trying to persuade you to sell by claiming your association fees are going to skyrocket or that you face the loss of your exchange benefits due to new timeshare “points systems” becoming more popular.
If you suspect you’ve been defrauded by a resale agent in California, report it to the California Department of Real Estate. The agency’s downtown Los Angeles office is at 320 W. 4th St., Suite 350. The general number is (213) 620-2072.
For suspected fraud outside of California, call the Federal Trade Commission’s toll-free consumer help line at (877) FTC-HELP ([877] 382-4357). The line is staffed by counselors from 9 a.m. to 8 p.m. Eastern time, Monday through Friday.
For more information and consumer fraud awareness alerts, check the Timeshare Beat at thetimesharebeat.com/alerts.htm.
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When you are ready to move on ...
Unless you have a high-season week at a top-of-the-line resort in an underdeveloped area, a previously owned timeshare will probably sell for one-third to one-quarter of what you paid for it.
If your timeshare is in a premium locale that is hard to get, you may be able to sell it for a higher price or hang onto it and use it as a rental.
Experts say the best way to sell is to list it on Internet bulletin boards that cater to timeshare users. Look at how much comparable timeshare weeks are listed for and price yours accordingly. A few sites to try:
* The classified ad section of the Timeshare User’s Group, www.tug1.org/tugads/adshome.php3
* EBay’s Timeshare pages (search for “timeshare” at www.ebay.com)
* My Resort Network, www.myresortnetwork.com
* Redweek, www.redweek.com
With a do-it-yourself resale, you will need to complete a buy/sell contract with the buyer. You can download the paperwork from Timesharing Today, www.tstoday.com, an industry magazine, for less than $25 or order it by mail.
The link to download the contract is at https://shop.4penny.net/tstoday/dock itsonline.aspx.
You also will need a title company to complete a timeshare sale. Fees run about $200 to $300. Companies that specialize in closings for timeshares include Timeshare Transfer Inc. at www.timesharetransfer.com.
If you cannot unload an unwanted timeshare and are desperate to get out of the annual fees, an alternative of last resort is the Timeshare Dump at ww3.choicemall.com/timeshare. It will take the timeshare off your hands and assume maintenance fees.
Karen E. Klein can be reached at karen@kareneklein.com.
