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:
- 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.
- 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…”
November 30th, 2010
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.
July 21st, 2010
Over the last few months, owners and management at the popular David Walley’s Resort in Genoa, Nevada have been at odds over a special assessment to the levied on current owners. A few of our clients who own there, have kept up informed as events unfolded. Initially, owners were asked to pay an additional $950 fee to cover budget shortfalls allegedly caused by owners in arrears on maintenance fees. Naturally, many of the David Walley’s Resort timeshare owners objected to the special assessment, and attended a meeting with resort management to discuss the matter.
According to an insider who attended the first of two meetings between David Walley’s POA (Property Owner’s Association) and resort management, owners demanded an accounting of the delinquencies, and pressed for alternates to the assessment. Resort management, consisting partially of the original developer Quintus Resorts, and partially of the latest owner Celebrity Resorts, was unable or unwilling to provide requested information. Following the meeting, an article in The Record-Courier, citing sources in the resort’s management, suggested that David Walley’s might actually close unless the owners gave in to the assessment. (Now that’s playing hard ball.) Frustrated owners decided to organize, and take action. The POA filed suit to have Quintus appointed as their “Receiver” in order to protect their assets while the financial situation with Celebrity was investigated. Complicating matters further, Celebrity Resorts filed for bankruptcy protection on March 5, 2010.
This is the point at which many timeshare owners, and sometimes their respective HOA’s and POA’s, typically make the mistake of bashing their resort, and its management, on forums and chat rooms, where their vitriolic diatribes remain in perpetuity, forever damaging resale values along with the reputation of their resort. Fortunately, cooler heads prevail at David Walley’s Resort. It is, after all, a beautiful property, located in the coveted Lake Tahoe area, and boasting a historic Hot Springs on site. (See previous post for resort info.)
The timeshare owners at David Walley’s Resort, along with their hard-working POA, were able to keep the property open and solvent. Informative websites were created, or updated, reassuring both owners and potential timeshare resale buyers that the beloved resort was now in good hands. Two Board Members were removed and replaced. And that $950 assessment? It’s now just $20-$40, based on the type of ownership!
To be sure, David Walley’s POA will face other battles with management, but it’s safe to say they ‘won the war.’ I would be remiss if I didn’t point out that POA/HOA Board Members are typically just owners volunteering their time, with little recognition… So Help Timeshare tips its hat to the POA Board Members on a job well done!
Search David Walley’s Resort timeshares for sale and rent.
Visit the new POA website.
April 8th, 2010
