If that timeshare no longer suits your vacation plans and you're thinking of selling it, beware of timeshare resale scams. A federal court recently acted to halt a timeshare resale operation at the request of the Federal Trade Commission. According to the FTC this operation scammed thousands of timeshare owners of millions of dollars.
The operators are accused of several fraudulent, deceptive or misleading acts. It's alleged the operators contacted timeshare owners and claimed to have buyers lined up for timeshare units. They got owners to pay fees in advance, supposedly to be refunded at closing. They had owners sign "sales agreements" that were only marketing agreements. They falsely stated the sales would be reviewed by the FTC. Of course, the buyers never existed and the owners never were refunded their advances.
If you have a timeshare to sell, don't get ripped off by this type of scam. Before you do or agree to anything, read the FTC's Consumer Alert: Selling a Timeshare Through a Reseller: Contract Caveats.
Although a "timeshare" can be for any type of property, including residential and commercial properties, the term is generally used to describe vacation properties. In essence, with a timeshare, you (along with a group of other timeshare owners) buy the right to use a particular piece of land- typically a condominium or some other type of dwelling- for a certain period of time. The idea is simple: it's usually cheaper and easier to buy time in a condo in Hawaii than to buy the actual condo.
If you're thinking of buying or selling a timeshare, however, be careful not to get too caught up in the grand notion of having a guaranteed, relatively inexpensive place to vacation every year. There are some things you to need consider seriously before you buy or try to sell a timeshare.
Types of Timeshares
Timeshares can be for a specific length of time during the year, like one or two weeks, sometimes for only a certain number of years, or sometimes for the life of the owner. Also, you can buy a timeshare for the same time period every year (called a "fixed timeshare"), or for the same length of time but at different times each year (called a "floating timeshare").
There are several two main types of timeshares:
- Deeded timeshares, where you buy legal title to the land and get a deed that's good for a certain number of years. You own the property during that span of time.
- "Right of use" timeshares, where you buy the right to use the property, but don't get a legal deed to the property. Typically, these timeshares expire after a certain number of years.
Tips for Buying & Selling
When you're considering the purchase or sale of a time share, there are a lot of questions you need to ask, or be ready to answer, and, particularly for sellers, there are some laws and requirements you need to know about:
- Know what you're buying: are you getting a deed, or is it a "right to use" ("RTU") the property? If it's an RTU, how many years are left?
- Are there any liens on the property, maybe for non-payment of taxes? If so, you want the seller to pay them before the sale, or maybe ask for a reduction in the sale price to cover the lien.
- Are there any restrictions on if, when, and to whom the timeshare can be sold? If so, potential buyers might not like it.
- Are there any maintenance fees, and if so, how much are they, how often are they due, and are they paid up to date?
- How much are property taxes, who's responsible for paying them?
- Find out whether timeshare owners have any voice in management of the facilities.
- Are there any rules, usually called "covenants, conditions, and restrictions ("CC&Rs"), which limit or restrict how a buyer can use the premises, like "no pets?" If you're buying, make sure you read all CC&Rs and are comfortable with them. If you're the seller and the CC&Rs are numerous and stringent, you might have trouble selling.
The seller should have idea of some legal aspects of a sale. For example, you should check to see if your state has a "cooling off period," which is a law that gives a buyer a certain number of days to change his or her mind and cancel a timeshare contract without penalty. Many states have such laws.
In addition, many states have laws on what needs to be included in the sales contract. The requirements vary from state to state, but generally it must include:
- The names and addresses of the real estate developer and time-share plan
- The initial purchase price and any additional charges that the buyer will be required to pay, such as an annual assessment for common expenses and financing charges
- A brief description of the nature and duration of the time-share interest being sold, including whether any interest in real property is being conveyed
Also, in many states, if the buyer is being offered an "incidental benefit" together with the timeshare, you have to give the buyer written disclosure that contains, among other things:
- A description of the benefit
- A statement that the buyer's use or participation in the incidental benefit is completely voluntary
- A list any fees that buyer must pay to use the incidental benefit
An incidental benefit includes things like travel insurance, bonus weeks, referral awards, golf packages, and exchange programs.
In many timeshare plans, the owner is given the opportunity to participate in an "exchange" plan or program, where you can exchange your timeshare for a timeshare in another place. Typically, such programs are run by an exchange company for a fee. The value of your timeshare on the exchange market depends on the time of year and the location and the size and quality of your timeshare.
To successfully exchange your timeshare:
- Read the exchange company contract carefully before signing it to make sure you understand exactly how properties are rated and what you are obligated to do
- Find out about membership fees and other expenses before you commit
- Submit information on your timeshare and the location you'd like to visit up to one year ahead
- Don't try to trade your timeshare in an undesirable location or season for a timeshare in a very popular location at the peak of the season in that area
Questions for Your Attorney
- Can I require a buyer to have pre-approved financing before we negotiate a sale of my timeshare?
- What happens if I buy a timeshare in Mexico and the seller refuses to follow through after the contract has been signed? Can I sue him in the United States?If I exchange my timeshare, can I let someone else use it? Can I sell it to someone else?