Time Sham

Timeshare companies make buyback offers you should refuse.

There are over 9 million timeshare owners in the United States alone, according to a 2017 Vacation Timeshare Industry study.

74% are locked into lifetime contracts with perpetuity commitments that can pass on to their next of kin.

85% of owners have buyer’s remorse.

What happens when you want to get rid of this money pit?

Here is the sequel to my original post.  A friend of mine recently told me his tale of timeshare woe.

In 2007, he purchased a one-week stay at an Aruba-based property for a price of about $29,000.  Annual maintenance fees came in at $1,600. Since the purchase, the fees have increased significantly.  Declining to finance his purchase at the 23% annual rate the company was offering was the only saving grace in this deal.

He decided to sell this “investment” in 2018 and went to the company to see if they would repurchase it.

Their offer was: “Sure, we will take it back- for free!”  My friend declined their “generous” proposal and decided to explore the resale market.

Eventually, he found a buyer for $3,500. I consider this a minor miracle. Many timeshares sell for pennies. 

This deal resulted in an 88% loss (not including years of maintenance fees and travel expenses). Still, it was $3,500 more than the Timeshare company’s offer. He decided to take it.  Here is where the story takes an even more sleazy turn.

After filling out the appropriate paperwork, he went back to the company for their approval.  They told him that,  according to the signed purchase contract, they have the “right of first refusal.”  This meant they could turn down this deal and instead pay my friend the $3,500 instead.

The company activated this clause.  He decided to accept their offer and tell his prospective buyer their deal was off.

There are several things wrong with this unholy process:

  1. Why did they offer him nothing? They knew full-well a bargain-basement price was at least $3,500.
  2. Their offer was misleading. Many prospective sellers most likely fall for this tactic and give their property back to the company, thinking there is no valid resale market.
  3. If the management company took the offer, what is the true value of the property? Since they aren’t a charity, I am certain they know they can sell the property for several thousand dollars or more above their purchase price.

He could have declined their offer; but, after a decade of misery, he just wanted to stop the financial bleeding.

There is nothing illegal about this transaction. All of these stipulations are hidden under mounds of legalese.  Ethically, this really sucks.

It’s bad enough timeshare companies take advantage of customers in the original purchase. It is unbridled greed when they attempt to repeat the process.

Be smart – don’t ask timeshare companies what they think the property they sold you is worth.

Be smarter – don’t buy one in the first place.

Airbnb anyone?

 

 

 

 

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Please see disclosures here.