September 12, 2017
Many people buy timeshare properties and wish to resell them later. The “secondary market” for reselling timeshare properties can be difficult to navigate, even for those experienced in this unique industry. Perhaps the most challenging aspect is knowing which sources and information one can rely upon as trustworthy. While using the Better Business Bureau (“BBB”) is sometimes helpful, often it is not enough to fully protect yourself against the types of entities that populate the timeshare resell market. Please continue reading for a discussion of this market and tips on how to facilitate a sale of your timeshare in a safe and cost-effective manner.
OPTIONS FOR DIVESTING TIMESHARE, GENERALLY
Obviously, one can contract with a third party to sell or rent this asset in exchange for either a fee or commission, but there are other options available. For example, an owner could attempt to sell or rent the property without the help of outside parties, or the owner could donate it to a charity to reduce tax liability. Please be advised that this industry (the secondary market/ resale market) is notorious for being deceitful. Many consumers have lodged complaints with the BBB claiming to have been defrauded by one of these companies, and many have alleged that a company has misrepresented the costs involved and the services they would provide. A common complaint is that a company will take a large fee, imply that the asset will be sold or rented quickly, and, subsequently, that asset will either take years to sell or will never be sold by that company.
Furthermore, it is strongly recommended that you do not enter into contracts whereby you pay an “up front” fee to the resale company. This type of fee is typically charged by title transfer companies. For more information on title transfer companies and the resale process, please see the “analysis” section below.
- Research your asset. Understand your timeshare product type. Its age, the location, costs of ownership and restrictions—all will impact the price. There is a lot of information about timeshare listings available online to use for comparison pricing.
- Consult your resort. Contact your resort to see what kind of programs they have in place for owners who wish to exit, such as give-back or buy-back programs. They may also recommend in-house services or preferred resale company partners.
- Seek assistance from a third party. There are three types of companies in this industry: resale advertiser, licensed reseller, and other resale companies. Resale advertisers are companies that only help you market or advertise your timeshare. Licensed resellers have licensed real estate agents and help with all aspects of selling and renting. Other resale companies can offer to buy your timeshare interests, take it away for a fee, help you give it to a charity, put your timeshare in a travel club, or some other workable solution. Use caution with these companies—the other resale companies—because they are notorious for using deceptive practices.
- Sell it yourself. Owners can post their product listing with as much detail as possible on free listing websites lie eBay, Craigslist, or through your resort newsletter or message board. Keep in mind that you will be responsible for handling the entire transaction, including transferring documents, transferring title, etc.
- Donate to charity. Some charities accept donated timeshares. Fees are likely associated with the transaction. Contact your CPA or tax advisor before beginning research on this option.
- Beware of scams. If someone contacts you (via phone, mail, email) in an unsolicited manner and offers to help to sell or transfer your timeshare product, use caution. This is a common scam tactic to get money from you without providing any services.
If you wish to sell your timeshare, you may want to check with your resort developer, resort manager, or homeowners’ association to see if they offer a resale option. Be sure you have exhausted all other inexpensive or free methods of renting, selling, or giving away your timeshare before considering a transfer company. Using a transfer company will probably be the most expensive and uncertain way to dispose of your timeshare. As with any service that requires an up-front fee, paying a company to transfer ownership out of your name can be a significant risk. There is no way to guarantee the transfer will take place.
If you decide to use the services of a transfer company, you should research that company before listening to any sales pitches. Begin by checking with your resort manager to see if they have had any interactions with the transfer company to find out if they have had positive or negative experiences. You can also call the American Resort Development Association Resort Owners Coalition to learn more about transfer company activity and to see what other owners have reported about that company.
You can search the Internet for the company to read any negative or positive information available online. Don’t be influenced just because the company has a professional-looking website or claims to be a member of a professional organization. Look at consumer reviews and other news stories about that company.
You may also want to do a search on the Better Business Bureau (BBB) website. However, keep in mind that the BBB is not a government entity but is a private business whose ratings are partly based on consumer complaints and may not tell the whole story about a business. In the case of fraudulent transfer companies, owners may not know for a year or longer that the company has defrauded them or that the timeshare was not transferred properly and, therefore, would not complain to the BBB until long after the transaction. Also, a positive BBB rating does not necessarily mean that the company is ethical.
In many states, transfer companies may be required to hold a real estate license. Check with your state’s Department of Real Estate or Real Estate Commission to find out whether a transfer company is required to hold a real estate license before doing business in that state. If a license is required in that state, you should not do business with an unlicensed transfer company.
You may wish to check with your state Attorney General’s office or the Attorney General’s office in the state where the company’s headquarters is located to see if that company has any complaints filed against it or if the AG has filed any actions against that company.
If after doing your homework you still choose to use the services of a transfer company, you need to know the right questions to ask to protect yourself. You can use the ARDA’s Transfer Company Checklist as a start.
Remember, if you choose to pay an up-front fee, there is no guarantee that the transfer will happen as promised. It certainly helps if your money is going to go into an escrow account (or to another independent third party) to be held there before the transfer takes place. But, you also need to make sure you can trust that escrow or third party. DO NOT fall prey to a high-pressure sales attempt to get you to pay an up-front fee until you are entirely comfortable with whom you are doing business. You may be offered a “one-time special” or a deal that “expires at the end of the presentation.” Rest assured, if you want to do business with a transfer company later, they will be happy to take your money at any point in time.
Make sure to check with the resort to see if they have heard of the transfer company and to let them know you plan to make the transfer. Some resorts may offer a dissolution arrangement or make a counter-offer to take back the timeshare. This could be a better option for you.
Also check with your resort manager to determine if there are any rules and regulations in place that would affect your timeshare transfer. Knowing these rules will help you avoid frustration if you pay a transfer company and later find out you are not able to transfer your timeshare for one reason or another.
If you are thinking of signing an agreement with a transfer company, do not accept tax or other legal advice from that transfer company. Before signing anything, check with your own legal or financial advisor(s). If a company claims to guarantee eligibility for tax deductions or offers other tax, investment, or inheritance advice, use caution and walk away.
If you are asked to sign a power of attorney or other document in order to transfer your timeshare, have your own legal advisor review any such documents first. Also, beware of anyone telling you that you don’t have to read or review legal papers before signing them.
Finally, never provide credit card information, your social security number, information to perform a bank transfer, or any other personal financial information over the phone or during a high-pressure sales seminar to any company you have not thoroughly investigated.
The information contained herein is not comprehensive, and those involved in any aspect of this process should consult with an attorney before making any substantial decisions. Again, this industry does not have a great reputation for honesty and transparency and a thorough vetting process should be realized before taking any meaningful step. There are many companies that appear very trustworthy and professional, and perhaps even have positive reviews. Often, however, this façade of reliability can be shattered with careful research.
If you need assistance navigating this complex process, please call King Law Offices, PLLC, for a free consultation at 828-286-3332. Please be advised that this article is intended for informational purposes only and is not to be considered or substituted as legal advice.