Time shares are tough to sell, even in the best of times. But now the shared vacation properties and their hefty annual fees have become nearly impossible to unload and are breeding a horde of scam artists preying on eager sellers.
Nearly 8 million people -- about 7% of U.S. households -- own a time share, a vacation property owned by many people who take turns using it.
The slow economic recovery, and the fact that the first generation to buy time shares 35 years ago has been retiring, means many people are looking to sell. Craigslist, EBay and specialized listing service RedWeek.com are chock-full of offerings.
But how much they're worth is a different issue. One Florida listing service estimates that most time shares are selling for no more than 10% of the original price. Some owners are lucky to get pennies on the dollar.
"We've never seen the resale market where it is now," said Brian Rogers of the Timeshare Users Group, a consumer advocacy group in Jacksonville, Fla., that runs the listing service. Most owners "huff away mad" when told their time share has depreciated like a Yugo, he said.
Then there are the scams.
Resale scammers feeding on desperation have run so rampant that the Better Business Bureau named time-share resale swindles one of the top rip-offs of 2010.
One such scam goes like this: Someone tells you they have a buyer lined up and to just pay a flat fee. In another, some company says that for an upfront fee that can be thousands of dollars, it will take your unwanted time share off your hands and sell it. The swindlers take the fee and don't follow through. Many advertise by postcard.
Florida has launched a statewide crackdown on time-share resale fraud. Its attorney general's office is investigating at least a dozen companies.
Even the top industry group, the American Resort Development Assn. in Washington, D.C., has issued five consumer advisories on resale scams in recent months.
"In a down market they come out of the woodwork," Chief Executive Howard Nusbaum said.
Time-share sales sank 35% to $6.3 billion in 2009, the latest year for which data are available, according to the resort development group. Sales have dropped 40% from the 2007 peak.
Owners continue to fall behind on time-share loans, although overall default rates are down from their peak in January 2010, when 1 in 10 time-share owners was in default, according to Fitch Ratings, which tracks securitized time-share loans that are bundled up and resold to investors. The annualized default rate was 8.51% in December.
Nusbaum blames the current trouble on the recession and credit freeze, as well as the demographics of retiring baby boomers. Cash-strapped consumers have cut back on luxuries, and resort developers have found it harder to line up credit for would-be buyers.
There are just not as many consumer protections in the secondary market, where time shares get resold, he said. "We're kind of where the used car industry was in 1962."
People have to give up thinking that time shares are a financial or real estate investment, Nusbaum said. It's a lifestyle investment, and its real value is the use owners get out of it.
But Bernie Wiklund hasn't been to his Cape Cod time share in nearly seven years. The retired engineer who lives in Ramsey, Minn., is working as a security guard to make ends meet and can't afford to fly out to Cape Cod or fork out $1,000 a year in fees.
He's advertised his two-week time share on Craigslist for nearly six years and marked it down to $5,000, a fraction of the more than $14,000 he paid in the 1980s.
"I'd like to retire," he said. "I'm 72."
Kim Holbrook knows the feeling. The 56-year-old Brooklyn Park, Minn., resident has been trying for six years to sell the four time shares she and her husband bought years ago when they lived in the South.
Her advice for first-time buyers: Don't. "There isn't a market. You can't resell," Holbrook said. "Everything I've seen ... it's for pennies on the dollar."
That's great news for buyers, of course. Mike Spillane, 67, picked up his eighth time share weeks ago: a one-week stay in a four-bedroom, four-bath unit in historic Williamsburg, Va.
"We know if the market doesn't fully recover that we're not going to get a lot of money for some of them," he said. "But we've gotten use out of them for many years."