If you’ve taken a trip to Orlando, Florida, or Las Vegas, or vacationed at a resort in Mexico or a Caribbean Island, chances are you’ve been approached by a sales rep promising a $150 gift card or discounted tickets to Disney World or a free dinner for two in exchange for you and your spouse attending a 90-minute seminar (breakfast included).
In that case you’ve heard the time-share spiel. But once you sign on the dotted line, in most cases you’re locked in for life.
That’s the time-share dilemma. You sign on to a contract so restrictive some compare it to signing your soul away to the devil.
Back in the ’70s when time shares were first offered, these properties were pooled as available for six-week intervals primarily in the Northeast as well as in Florida. Since then they have expanded into a lot of different variations, but the one thing all time shares have in common is that these are contracts of perpetuity. Walking in is easy; walking away is a dogfight.
There are few industries, if any, that bind a client to a contract that, apart from the rescission period, admits no formal term or condition that will allow an owner to easily walk away from the lifetime obligations they have entered into.
In order to spare you the frustration and heartache of trying to get out of one of these contracts, BlackEnterprise.com spoke with Greg Crist, a consumer advocate for time-share owners who’s with the National Timeshare Owners’ Association; and Patrick Kennedy, an attorney with the Finn Law Group, a real estate law firm that specializes in time-share litigation.
Crist tells us, “If you take a look at the way that time shares have been historically sold up till today, a time-share is a product that is sold, not purchased. You don’t typically wake up and decide to buy a unit. It’s usually a purchase made after listening to a sales pitch.” He says, “There are tremendous benefits for those that can use the product the way it is intended. Where things go awry is when people cannot get the benefit of the bargain or use the product as it was sold to them, and yet they are still obligated to maintain their portion of the interval.”
And that’s the dilemma thousands of Americans are in, including the elderly, who are often too old to travel and unable to continue ponying up maintenance fees and mortgages on property they haven’t used in years.
Crist says, “When this industry started getting cranked up in the ’80s, these were baby boomers in their late 30s or early 40s. They had disposable income and frankly, I’m not certain that the industry looked down the road 20 years and saw that life requires a lot of change when you become elderly, and they do in fact create legitimate hardships.”
Kennedy says, “Hardship is not a legal defense. These contracts are restrictive because of the way they are packaged and sold and because they are a form of real estate that requires you to join an owners association who, in fact, share an obligation with that resort. For example, there are 3,000 owners in a 50-unit resort, and those 3,000 owners share the maintenance fee obligation.”
Here’s one tip. Although the industry has not taken a unified approach, that’s not to say that some developers have not created some deed back programs. It’s never published and never publicly stated that these are available and on the table.
But there is a pattern of it and it’s a problem because many owners don’t know what to do. They’ve turned to resale entities, but unfortunately there are a lot of retail scams, so if they get taken by one of these scams they get shell-shocked and don’t know how to search out legitimate resources in which to divest themselves properly, either through a sale or through direct connection to the developer.
So why won’t the resorts just take back the property, especially when the mortgage is paid in full, and resell it to someone else?
Kennedy says some resorts do have an interest in their reputation management and may end up working things out with the client and negotiate a reduced debt settlement or a walk-away agreement that benefits both sides. But he says to remember that this is a contract of perpetuity. It is a valid binding document. It’s just not as simple as walking away.
Crist explains it this way. “If it’s a desirable location, some resorts are usually more willing to negotiate some type of walkaway because they
know that they can turn over the inventory quickly. But if it’s an undesirable location, it takes them longer to flip that inventory and guess who has to pay those maintenance fees. Their owners association has to pay for upkeep rates on the property. They are unwilling to accept back properties knowing that they have to fork out the maintenance fees to pay the association or developers.”So what are the red flags or warning signs to look out for if you are in the market for one of these properties? Here’s what the experts say.
Don’t buy into salesman sizzle:
They are commission sales reps and are making money if you buy. They are going to make a lot of promises which most likely will not be in the contract. If you’re relying on anything that has been said, make sure it is spelled out in the contract and make sure they highlight it, they point to it, they write it down, and make sure it’s in the contract.
A time share is not an investment:
If you are relying on this as an investment, don’t. It’s not an investment. They sell you on the fact that you can resell this and make money down the road or if you can’t use it one year you can rent it. However, most of the time either those options are not allowed or there’s a fee to to exercise them and you don’t end up breaking even.
Scrutinize the point system
Remember that the points being sold to you at that resort may not translate one for one to another resort.
Don’t fold under pressure:
Always ignore the line, “today only.” It’s just not true. It’s sold as a today only offer but you can always take some time to reconsider. If you are willing to go back they’re always willing to sell it to you.
Location:
Always look to see if your resort is in a prime location. Remember this always makes it easier for the developer to let you walk away. Make sure that when it is time to sell the product it is a branded product that has a good reputation to make it easier to sell.
Current versus future income:
Check out the mortgage and maintenance costs and compare with your budget. How much do you routinely spend on a vacation? You may find that fixed costs with a time share over a long period of time makes economic sense, especially when you consider a future in which you won’t be earning quite as much.
The N.T.O.A. has a toll-free hotline available for all time-share owners, not just members, to help them with issues they may encounter. You can call 1- 844-ASK-NTOA.