One of the first questions our timeshare cancellation team are typically asked by owners, who are reviewing their options is this: “what do you think I could sell my timeshare for?” We often direct them to timeshare sales on eBay to show them the true value of a re-sell. Reselling a timeshare is a common-sense expectation, for lease holders. When you think about it, how difficult is it to imagine that you have paid for something for five, ten or twenty years or longer, without accruing some kind of residual value? Every mortgage becomes paid off eventually, and what is left behind is a lien free property, that you can sell for a profit, right?
While the timeshare resale market in the United States is constantly under legal scrutiny for consumer complaints and fraud, when a timeshare owner tries to sell their contract independently, that is when the full realization and the financial math of ownership becomes clear. With very few exceptions globally, timeshare owners can expect to receive little to no compensation or resale value for their timeshare.
In most cases, they have to ‘give it away’, if they want to cancel their contract by transferring the deed (and/or contract) to someone else. And then there is a sense of frustration and anger from timeshare owners, who believe that they’ve been mislead. In our professional opinion, they have.
Owners Find It Hard to Reckoning with the True Residual Value of Their Timeshare
If you really want to know what your timeshare is worth, try to sell it independently. That’s what we suggest to clients who are determined that they can get a good sale price for their timeshare. We understand where that determination comes from, because it makes logical sense. If you have owned a popular timeshare that you invested $25,000 or more to purchase, ten or twenty years ago, it’s hard to accept that as an owner, you may not see any residual value from the sale of your timeshare.
We are psychologically conditioned to believe that a timeshare will increase in value over time. How does that happen? It starts at the timeshare presentation.
Timeshare owners experience the most difficulty separating the difference between being liable for a vacation ownership lease, because it is always referred to in the sales and marketing language by the resort, as an ‘investment’. Under very few circumstances, does a timeshare qualify as an investment; in fact, for tax and accounting purposes, it is not even categorized as an asset, or something you can own outright.
Timeshare companies have known for decades, that positioning the ‘long term lease with no options’ as ownership of an asset, is a benefit to the resort. It keeps timeshare owners believing that the money they are paying in assessment fees, maintenance costs and membership fees, is building equity in the property they claim to ‘own’.
The only entity that owns the timeshare, is the resort. And that does not change, no matter how long you pay into your contracted lease for vacation time. In a timeshare contract, all you own the rights to, is using the allotted time you are given for your lease, the freedom to exchange that time for another resort (limited to rules and restrictions), and of course, the legal liability for all fees related to your ‘ownership’ of the timeshare.
Pros and Cons: How $1 Resale Listings Online Should Be Viewed as a Red Flag for Buyers
One of the first things that timeshare owners do, when they are considering their options to cancel their contract, or explore the options of timeshare resale, is to check out online listings to see if other units are being sold successfully, in their resort.
To say that a timeshare owner has no chance of selling their contract, and transferring ownership through a sale, is not accurate. There is always a chance that you can find a buyer, who is eager to gain access to vacation time at popular resorts. In some cases, vacation rental companies may also be eager to pick up a timeshare contract (if the price is right), as part of a network of available rental properties for their clients.
That method and scenario is also the approach that many fraudulent timeshare resellers use, to accept a payment for managing a sale, or finding a buyer. If you choose to explore this as an avenue to exit your timeshare, make sure you fully investigate the reseller, or the purchase offer with a real estate lawyer, before signing or paying any service fee. Protect yourself by scrutinizing and questioning any offer to buy or sell your timeshare carefully.
What are some of the red flags that timeshare owners (or buyers) should look for, in online sale listings that start at $1? There is always a good reason why the owner wants to walk away from their timeshare obligation, and it’s important to do the research carefully, to avoid any financial pitfall.
Here are some considerations to think about, when you feel tempted to browse the $1 timeshare listings on eBay:
1. Unpaid Back Fees for Assessment and Liens
Sometimes timeshare contracts are listed for sale on eBay or other online sites, because the owner has neglected to pay the fees, and there is a lien on the deed or contract. If you purchase the timeshare, all fees must be paid in full and current with the resort, before any legal transfer of ownership is permitted. If a new buyer signs a contract of sale or transfer, he or she may be asked to pay the fees first, before assuming ownership of the timeshare.
2. Maintenance Fees Have Gone Up (Or Will Go Up Shortly)
On our consumer resource blog, we’ve written extensively about how quickly timeshare maintenance fees can go up, without much notice. It is a compounding effect. For instance, many five-star timeshare resorts were damaged in the 2017 hurricane season. Timeshare owners will receive notices of increased maintenance fees and even special assessment fees, as resorts recover from the property damage and repair obligations to their members.
It happens so quickly, and timeshare owners can find that a previously affordable vacation contract, has become less affordable within a few months. That is when the timeshare owner will start to look at options like contract cancellation, or resale, as a way to exit their timeshare, and avoid the increased expense of ownership.
3. The Resort Is Going Downhill
In spite of the fact that the timeshare industry reports billions of dollars of annual income worldwide, it is getting harder to recruit new buyers, and retain existing ones. The cost of timeshare ownership is no longer competitive in most cases, thanks to the proliferation of other affordable vacation options (including timeshare rental). What we are starting to see low occupancy timeshares experiencing financial problems, and that is indicated first by increasing maintenance fees to cover operational expenses. The second indicator, is the lack of maintenance or improvements to the resort, which timeshare owners begin to notice.
What does poor maintenance or management of a timeshare resort look like? Pools and recreational facilities may not be repaired or serviced frequently. The grounds around the resort may not be landscaped well, and general repairs may not happen. Staff that are required for support, may seem inadequate or reduced, when a resort is trying to economize; this can impact both service, and safety for vacationers.
The potential for a new timeshare buyer to inherit problems, or increased costs by purchasing a discounted timeshare, is high. Yet many ‘timeshare’ experts and membership sites, promote the purchase of resale timeshares as a way to save money, without the balloon payment typically required for new resorts. The low buy-in cost of resale timeshares can be tempting, but its very much as case of “caveat emptor” or ‘buyer beware’. If you choose to buy, know what you are walking into, and get estoppel statements and financial records from the resort, to learn more about what that bargain timeshare may cost you in the future.
What is really behind the $1 timeshare sales on eBay? In our experience, it’s a timeshare owner who is looking for a way out.