Posts filed under 'ARDA'

Timeshares Still Not An Investment? Simply Not True.

An interesting article appeared in my RSS feed recently; making the claim that, according to “legal experts,” timeshares are still not an investment. Having spoken to thousands of owners about their timeshares, I have to take issue with this perspective. Timeshare itself can be hard for even experts to quantify, and the view that it is simply “not” an investment is not only an oversimplification; it can pose a danger to timeshare owners’ interests. At the core of this issue there are actually two separate arguments:

  1. In the past, timeshare developers have come under fire for allowing/ignoring sales reps who “pitch” investment potential to consumers. The idea being that buying timeshare is akin to buying whole ownership real estate, and that the owner should expect the timeshare’s value to rise dramatically over the years. These sort of “pitches” are clearly unethical, possible illegal, and damaging to the timeshare industry as a whole. Fortunately today, this practice has been largely eliminated (at least in the U.S), and developers now openly deny timeshares’ investment potential.
  2. The secondary argument is more subtle: Timeshare itself is not an investment, should not be considered real estate, and costs of ownership will soar unchecked in perpetuity. Sadly, this argument seems to be gaining ground with myriad disenchanted owners, who find selling at a fair price can be difficult in the current market. There exists a real danger that, if enough owners believe timeshare is not an investment and act accordingly, this idea could become a self-fulfilling prophecy; leaving timeshare in the “ash heap of history.” (Along with over $100 Billion of Americans’ hard-earned dollars.)

Just what constitutes an investment anyway? According to the Merriam-Webster Dictionary, an investment is

“the outlay of money usually for income or profit: capital outlay; also: the sum invested or the property purchased.”

Even the developers agree that timeshare should not be bought “for profit,” but timeshare does involve a “capital outlay” and is a “property purchased.” Thus, I think it safe to conclude objectively that timeshare is, by definition, an investment. As such, it carries with it both rights and responsibilities: You have a right to use your timeshare during the designated time period, and you have a responsibility to pay for the maintenance of your timeshare property. Beyond these basic concepts, you have a right to expect to recoup a “fair value” for your timeshare when you decide to sell, and you have the responsibility to ensure your resort is properly managed – including closely monitoring increases in your maintenance fees.

Ironically, the thing timeshare owners must do to protect their investment, is the very thing denying timeshare is an investment discourages: Take Ownership of Your Timeshare.

Like it or not, if you own timeshare, you have invested in real property. It will not go away; you will pay property taxes, you will pay maintenance fees, you will pay to insure your property, and you should attend HOA/POA meetings, you should take an active interest in the operations at your resort. Protect your timeshare investment as you would any other – and be leery of headlines that begin with “Legal Experts…”

3 comments November 30th, 2010

Are Timeshare Owners Dummies? Part 5, Selling Your Timeshare for Less than Zero

The continuation of our series examining the battle for timeshare owners’ hearts & minds: As fraudsters of all varieties work in the shadows to exploit the timeshare owner, it’s clear that some see timeshare owners as dummies, but are they? HelpTimeshare.com doesn’t think so.

Less Than Zero – No, It’s not the popular Bret Easton Ellis novel I’m referencing, it’s the value of your timeshare…  At least, that’s the value according to the latest fad to hit the secondary timeshare market like a storm: The “Relief,” “Exit,” or “Transfer” company. These firms have been quietly traveling the nation, advancing a notion that defies all logic. The Relief/Exit/Transfer crowd doesn’t just think your timeshare is worthless, oh no. These companies think your timeshare has a negative value – try -$3,000. (or if you prefer, -$5,000 – That’s a lot less than zero!)

At this point most owners probably think I’m joking, and I wish I was. After all, your timeshare is essentially just a 1/52 share of actual real property. In a mathematical feat exceeding those of even the savviest politicians, Relief companies are buying timeshares from owners every day for thousands less than zero. How many timeshares have been sold for less than zero? No one knows for sure, but well into the hundreds of thousands per year! To put this into perspective, ARDA reports the average sale price for one interval of timeshare was $20,468 in 2009, and there are 7.2 million intervals currently owned by Americans. That places the retail value of all timeshares owned by American citizens at over $140 billion. If the Relief companies succeed in “relieving” Americans of the “burden” of timeshare ownership, they will have “transferred” up to $160 billion in real estate and cash from hard-working timeshare owners to themselves… Bernie Madoff’s got nothing on these guys.

Once your timeshare mortgage is paid-in-full, the lender (usually a subsidiary of the resort) must file a “Satisfaction of Mortgage” or “Release of Deed of Trust” in the jurisdiction where the property is located. Once this document enters the public record, the Relief companies send you a postcard inviting you to a meeting. (Some even state they will be “buying timeshare” at the meeting.) What happens next remains a closely guarded secret. According to a WFTV Orlando investigation, owners are told the resale market is bad, maintenance fees are going up, and if you die with a timeshare your heirs will be stuck paying for it. Elsewhere, owners have reported being shown slide-show presentations of timeshares for sale on eBay for $0.01. The bottom line: In short order, owners are coerced into believing their timeshares are worth less than zero, before paying thousands to be “relieved” of them.

Why haven’t you heard this story? The State of Florida issues a flamboyant press release every time it succeeds in fining a small-time boiler room operation with dubious timeshare resale practices, while numerous Relief companies, far more damaging to consumers, operate with impunity. It could even be argued that the success of Relief companies in Florida is the reason why resale companies there are failing at selling timeshares for market prices.

A Victimless Crime?

Okay, disgusting as this scheme is, if a timeshare owner wants to pay thousands of dollars to transfer their timeshare, who does it hurt?  On the surface, it may appear to be a victimless crime, but that’s only half the story. All of these freshly transferred timeshares don’t just disappear – they are, after all, deeded real estate. What exactly does a Relief/Transfer/Exit company do with the timeshares it collects? As largely privately held companies, they don’t have to say… What is clear from public records is that they don’t hold onto them for long. Remember those slide-shows of timeshares on eBay for a penny? You know, the Relief companies’ “evidence” of how worthless timeshare is. Maybe it’s just coincidence, but the larger the relief companies get, the more penny timeshares appear on eBay. Insidious is an understatement; the relief companies liquidate valuable timeshares for pennies, thereby reinforcing their assertion of worthless timeshare. So, who does it hurt? If you own timeshare, the answer is you.

We all know the real estate bubble burst, and many of us are anxiously waiting for homes in our neighborhoods to start selling again – without recent “comparable sales” it’s nearly impossible to know what your home is worth. What would it do to your home’s value if your neighbor sold for negative $50,000? The same is true for your timeshare property. The ramifications are even bleaker if you want to sell your timeshare: Even if you ask just a fraction of retail value, you cannot compete with Relief companies selling for a penny.

Let us Not Forget, There is Hope.

All is not lost. Many of what we consider “high-line” timeshare properties already have “First Right of Refusal” clauses. These require owners that want to sell, first allow the resort to buy at the agreed sale price. (Hopefully your resort will not turn down an offer of -$3,000.) If your resort does not yet have such a policy, attend a HOA/POA meeting and suggest one. This is the single best protection against poor/non-existent timeshare resale values. Check auction and classified sites for resales at your resort priced at near-zero; if you find a listing, contact your resort immediately.

States’ Attorneys handle all types of civil and criminal cases, with few if any having specific knowledge of timeshare. Contact the Attorney General where you live, or where your resort is located, and ask why they are not pursuing Relief/Exit/Transfer companies – Take a few minutes to help them understand the problem. ARDA (the American Resort Development Association) is hard at work drafting misguided legislation aimed at regulating timeshare resale companies. If the Relief/Exit/Transfer companies are not stopped, they needn’t worry: there won’t be any timeshare resale companies left to regulate. How do you compete with a penny?

Lastly, be careful! There are scams in every industry: You need to fact-check and investigate any company before doing business with them. Legitimate businesses have nothing to fear from you taking a few moments to investigate their practices. Pressure to act right now is sure sign of trouble.

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2 comments July 21st, 2010

Has Timeshare Lost Its Message?

"It's The Savings Stupid" - The Right Message for Timeshare

Any of the numerous published histories of timeshare will tell you that, at some time during the 1960’s, a developer in the French Alps began selling the first of what would become known as “timeshares.” His message was sticky – within 10 years over 1,000 timeshare resorts had opened across the globe. Just what was his message? In researching this post, I found it often misquoted; omitting the last, and most important two words. Here’s what he said:

“stop renting the room and buy the hotel – it’s cheaper!”

During the last decade, Resort Developers have introduced dozens of new timeshare products, and dozens of new timeshare sales pitches: We now have myriad points-based ownerships available, “Vacation Clubs” and now “Vacation Trusts”, new classes of ownership like Gold, Silver, and the almighty Platinum. While these options might be appealing (like watching Wall Street Warriors in 2006) they are expensive luxuries: they do not save you money. Without the benefit of being “cheaper,” timeshare quickly looses its relevance (like watching Wall Street Warriors in 2010.)

Many timeshare owners, and timeshare resale companies, tend to think that if the developers fail, those would-be buyers will flock to the resale market. Unfortunately, however, the timeshare industry has always been a “top-down” system: The developers with 7-figure budgets to do so, tour thousands of families each week, pitching them on the benefits of buying timeshare. Only one in ten will buy on-site, leaving 90% of the people who take timeshare tours and don’t buy with a thorough education in timeshare. These people share their experiences with their friends, and so on… The bottom line is that for timeshare to have a strong resale value developers must continue to educate new consumers, and sell new timeshares.

Right now the Resort Developers are struggling. In a recent interview, ARDA’s Howard Nusbaum stated that developer sales during 2009 plunged 40%. While the recession can be blamed for part of that decline, studies show that Americans are still vacationing – some even more than before. The logical conclusion is that vacationers just don’t see the savings in buying timeshare; it’s no longer the cheaper option. Its message has been lost.

Save Money by Owning TimeshareNow, this blog is obviously not the “Help Timeshare Developers Blog,” but as I’ve pointed out, the symbiotic relationship between Resort Developers and owners that want to sell timeshare, cannot be overstated. That said, here’s some real-world suggestions to make our product relevant again:

  • Return to the message that works, and resonates today more than ever: It’s Cheaper.
  • Give an honest pencil pitch that includes the cost of financing, maintenance fees, and exchange fees. (If the numbers don’t add up, LOWER the interest rate.)
  • Focus on bringing new owners into the fold, rather than inventing ever-more-absurd upgrades to sell existing owners (who don’t need or want them anyway.)
  • Stop berating timeshare resales – It’s irrational: A strong resale market for homes has not eliminated the market for new homes and communities. While I don’t think developers should endorse specific timeshare resale companies, simply remaining neutral about resales will show today’s younger, web-savvy buyers that you’re sincere. (When your sales reps are asked about resales on tour, using the word “scam” hurts you more than us.)

It’s not too late for Resort Developers to change course; the owners and resale market want you to succeed. The day’s of conspicuous consumption, of Platinum-VIP-Charter-Presidential-Upgrades are behind us, but I believe our best days are still ahead. Find your message again, show families a real savings, and sales will pick back up!

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2 comments March 4th, 2010

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