Posts filed under 'Using Your HOA'

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.

Share

2 comments July 21st, 2010

Change the Timeshare Market in 3 Easy Steps

With recent disappointing timeshare news from Bloomberg and others, interest in timeshare is probably at an all-time low. While that might sound bad, none of us get involved with timeshare for short-term profits, and, as the economy recovers, interest in timeshare will return, as it has in the past. This brief lull in attention creates a unique opportunity for owners to affect real change in the timeshare market. One thing is certain: If timeshare owners take no action now, when the market rebounds it will continue to be defined by the resort developers, as it always has.

Change the Timeshare Market - HelpTimeshare.com
Below are 3 easy steps that, if owners take now, will lay the groundwork for a new and robust timeshare market, where owners dictate how our industry is perceived. With positive action now, timeshare’s inevitable resurgence will bring a new era of respect and opportunity for owners.

1. Fall Back in Love With Your Timeshare – Ok, so you’ve owned timeshare for a while, you’ve experienced the good, you’ve experienced the bad, your timeshare’s saved you money and it’s cost you money. Overall, surveys say you feel pretty good about being an owner, and you should. Now’s the time to go public – start talking about the good.

In this world of web 2.0, user-generated content is king. Maybe you’ve had a grudge against your resort, an exchange company, or a resale company. Maybe you’ve vented your feelings on a blog, a forum, or elsewhere. Start by deleting the negative: Aside from the release of some frustration, it hasn’t served you.

Next, contribute positive content now: If you come across a forum/blog/etc. where someone is slamming your resort (often posted by competing resort employees anyway) post a positive reply. In your spare time, post online about the things you like about owning timeshare. Let people know how great your resort’s amenities are, or how well your points system works.

I’m not suggesting you lie – If you fall into the minority (10-20%) of owners that are genuinely unsatisfied with your timeshare, why not hold your tongue and let the owners who are happy do the talking? Chances are, if you’re not happy, you want to sell. Let the conversation stay positive, and watch your resale values soar.

2. Act Now with Your HOA to Stop Give-Away Weeks – An unsettling phenomenon has been sweeping through the timeshare resale market, decimating values and demoralizing owners. In a nut shell, you can give your timeshare deed +$3,000 to a company for the privilege of walking away from your timeshare. These properties are then sold, generally in online auction sites, for pennies on the dollar. I won’t get into the reasons for this now, as they’re truly not relevant. The bottom line is that owners who give away timeshares=low resale values.

What if your HOA agreed to take paid-off units from owners that would give them away otherwise? Worst case scenario, your maintenance fees might rise slightly if the units couldn’t be sold or rented. Wouldn’t that be preferable to the alternative? The timeshare Home Owners Association is the best defense against low resale values – use it now! With the addition of a ‘First Right of Refusal’ clause to your HOA docs, owners that want to give away units will have to offer them to the HOA first. Problem solved.

3. Establish a Base-Line Value for Units at Your Resort – We’ve learned the hard way that paid timeshare appraisals are not worth the paper they’re written on, but that doesn’t mean there is no determinable value for your timeshare. Yet again, the baby’s been thrown out with the proverbial bathwater.

Many would have you think your timeshare is worth less than the fractional value of the unit you own. This is great for resale buyers, but it makes no mathematical sense. If a whole furnished condo is worth $300,000, how could its total value exceed the sum of its parts? Are we to actually believe that by splitting the deed into 50 +/- weeks, creating an HOA to manage the funds, and allowing exchange to other properties, the value of the property goes down?

If anything, the convenience of having the ownership split, and able to be sold/used as weeks, is probably worth a 10-15% premium at minimum. So, set a base-line value for your timeshare. The assessed value of your unit is a matter of public record: use that figure, allow for furnishings, add an appropriate premium for convenience, and divide by 50 – and don’t take less! (Many real estate appraisers actually recommend dividing the assessed value by .7 for an accurate market value.)

By now you realize that a large part of your initial sale price went to marketing – this truly plays no role in establishing resale value. If the entire unit you own is worth $500,000 for whole ownership, then your timeshare can’t be worth less than $10,000 for the week – no matter how many websites tell you it’s worthless.

In closing, caring about the future of timeshare can be heart-wrenching. This is why many owners have simply thrown in the towel. Now is the time to rethink your position: With rampant inflation all but guaranteed over the next few years, owning timeshare protects your ability to vacation. And although no one seems willing to say it anymore, Timeshare Saves You Money!

If you own timeshare, take a chance, take action, and take these 3 steps to change the market. You won’t regret it.

© 2009 HelpTimeshare.com, Please use contact form for permission to reproduce.

Share

4 comments October 14th, 2009

Previous Posts


Categories

Resources

Feeds

Blog directory