By Heather Struck
NEW YORK, May 25 (Reuters) – What do you do with that couch
change that turns up every few months? How about buying a
timeshare?
If you are savvy on the Internet, you can find timeshare
owners who are eager to sell their well-loved vacation spots for
$1. That is, of course, if you will pick up the annual
maintenance fees. And therein lies the problem.
The housing crunch has hit timeshares hard, as sales have
fallen, expenses have risen, and older developments have aged
ungracefully. Tight vacation budgets have dampened interest,
with sales at resorts tracked by the American Resort Development
Association falling almost 40 percent (from $10.6 billion to
$6.5 billion)between 2007 and 2011.
As people default on maintenance fees, older timeshare
companies are struggling to operate with lower cash flows right
around the time when they need additional maintenance and
repairs.
As a result, maintenance costs have increased to an average
$776 a year in 2011, u p from $575 in 2007, according to ARDA,
straining owners who may have tired of their annual week in
paradise, or may not be able to afford their timeshare in
retirement or unemployment.
Disenchanted, many owners just want to get out from under
the maintenance fees, but they are discovering that it may be
even harder to sell a timeshare than it is a single family house
in Detroit. And that’s why they are putting their units on the
market for the equivalent of pocket change, or trying to fob
them back on the original developer.
“We never saw this coming as an industry,” says Robert Webb,
an attorney with Baker and Hostetler who represents timeshare
resellers in Orlando, Florida. “Timeshare companies just kept
building more and more before the recession hit, and now we do
not have an easy legal solution to it.”
Timeshare associations are fielding – and declining – more
and more requests to take the units back, according to Howard
Nusbaum, president of ARDA. A 2011 study conducted by ARDA found
that of 134 homeowners association-controlled timeshares, 56
percent said they did not have a resale program for owners who
wanted to sell.
Resorts owned by large companies like Walt Disney Co. and
Starwood Hotels & Resorts Worldwide Inc. have management
companies to organize sales, so they are more likely to offer
resale problems. But many owners say they been sent to third
party sales firms where they found poor communication and
procedural delays.
SELLERS OFTEN ASKED TO PAY
Bob and Amelia Yarbrough, retirees in Oak Ridge, North
Carolina, had owned their Wyndham Resort timeshare for fifteen
years when they decided to sell in October of 2011. (Like many
timeshares sold by major resort companies, Yarbrough’s unit was
denominated in points that he could use at a variety of Wyndham
locations.) He placed an ad on the selling space of the
Timeshare Users Group’s website (TUG –
), offering
his 40,000 points — usually enough for a week in Daytona Beach
with his wife — for $500.
No buyers emerged, so he bumped the price down to 1 cent
and offered to pay some of the closing and transfer costs,
leaving the buyer with only the $455 in annual fees for the
timeshare.
Even that second ad was met again with silence. “I couldn’t
understand why it wasn’t selling,” said Yarbrough. “Apparently
not enough people know about TUG and the secondary market. But
when that fails to generate a sale, what’s the next step?”
Yarbrough spotted a company on eBay that seemed to be
selling timeshares left and right. That company deflected his
inquiry to a company called Timeshare Refuge in Branson,
Missouri that bills itself as the “home of the timeshare dump.”
The company offered to transfer the timeshare out of
Yarbrough’s hands if he would pay them $690 u p front. A fter
searching the internet for any references to the company, and
finding nothing alarming (the firm has an A+ rating on the
website of the Better Business Bureau), he paid.
More radio silence. “You kind of reach a point where it’s
been a month and you never heard anything,” said Yarbrough.
After many calls, he was told that the timeshare had been
sold to a buyer in Los Angeles, and that Wyndham was in the
process of drawing up the deed transfer. He is still waiting for
written documentation from either Wyndham or Timeshare Refuge,
but the bills for the maintenance fees stopped coming, and
Wyndham has cut off his access to the website its owners use, so
he assumes he is free of the timeshare.
Ray Hinkle, a representative for Timeshare Refuge who helped
Yarbrough, said “as with all our customers, I have kept them
updated on all activities of the transfers.”
THE POSTCARD FLOOD
Owners of older timeshares are used to a pile of postcards
being pushed into their mail slots every day, all offering
much-needed solutions to offloading a timeshare. These are often
sent by organizations that ask for $5,000 or more in advance to
sell a timeshare and transfer the deed to the new owners.
Groups like TUG and AARP have used the internet to spread
awareness that many of these are scams. In Florida, the state’s
attorney general logged 12,257 complaints about timeshare fraud
in 2010, up more than fourfold, from 2,929, in one year.
Florida’s attorney general has targeted boiler room fraud
operations that have victimized many timeshare owners, and in
particular, elderly ones.
Owners who feel stuck with timeshares they can’t afford or
don’t want may not have many options, but they can at least
avoid scams by using websites like ARDA’s
or TUG
to find advice on selecting reputable timeshare resale realtors.
Here are a few other tips:
-Talk to the resort manager: The resort may be willing to
sell the share for a commission. If not, they also may be
willing to accept the share in a deedback, which would remove
the ownership from you, as long as all maintenance payments are
up to date.
-Rent it: The money raised by renting a week at a timeshare
will pay some or all of the annual maintenance fees. To get a
good idea of potential renters, ask the resort manager for the
names of travel groups or retirement communities that have
rented at the resort in the past. Sales sites like Redweek.com,
Ebay or TUG are good places to list them.
– Walk away. You could just stop paying your maintenance
fees, just like homeowners defaulted on mortgages that were
bigger than the houses they secured. But the consequences could
be similar. Just because your monthly payments never showed up
on your credit score doesn’t mean the delinquent payments will
not, said Gerri Detweiler, a personal finance expert at
credit.com.
The resort can turn you over to a collection agency, which
might submit your nonpayments to a credit reporting company. “On
a good credit score, this could prompt a 100 point drop,” said
Detweiler. Furthermore, if the debt is ultimately cancelled, you
could end up owing taxes on it.
– Use it. Thinking about all of that stress may send you
running back to the timeshare for your week away. If you can
afford to keep it, you may be able to trade it for a different
location, donate it for a year or two to a charity, or simply
suck it up and enjoy the view until the market improves.
