NOTE: Timeshare owners looking for a legitimate, licensed timeshare resale broker can refer to the Licensed Timeshare Resale Brokers Association as a good place to start.
The secondary market for vacation ownership arose gradually at first, fueled by timeshare owners who wanted to sell their timeshares for a variety of legitimate reasons: Divorce, lifestyle changes, death in the family, financial reasons and so on, along with a largely ignored percentage of owners who simply never learned how to use the product effectively and became disenchanted with it.
Because the numbers were not significant in the early days, and because timeshare developers were short-sighted, nothing was done to address the need for an organized resale venue within the industry. Today, decades after the first timeshare resale companies began to emerge, the problem has escalated to the point that it has become a major issue both for owners who want to sell and for developers who are trying to sell new inventory.
Timeshare owners need to understand a couple of things about timeshare resales.
- Because the “retail” price for timeshares (buying from the developer) includes a sales and marketing cost averaging 50% of the sales price, once it has been purchased its financial value drops by at least that much.
- Partly because the timeshare resale industry is not set up to sell unwanted inventory in the same way it was originally sold, (inviting people to attend a presentation and convincing them to purchase), and because the timeshare industry as a whole never did what was necessary to create a widespread interest in vacation ownership, no significant secondary market was ever developed to help sustain a reasonable price.
- Because of the two primary reasons above, the vast majority of timeshare inventory available today on the resale market can be had for pennies on the dollar. If you are trying to sell, you should not expect to get anything close to what you paid for it, and any resale company (or timeshare sales representative) that tells you different is lying.
Most of the first timeshare resale companies that came into being were relatively small, and most of them made an honest effort to sell inventory. They generally charged a reasonable up-front fee for their efforts, or collected a commission once a sale was made. Many of those companies are still around, and others working on the same model have arisen in the years since.
But it didn’t take too long for some entrepreneurs to recognize that big money could be made by promising to resell the growing amount of inventory that began to hit the market, without actually making any effort to do so. Such companies, which now include some of the biggest resale companies in the industry, were/are actually nothing more than “listing” companies; they sell owners on their ability to sell the inventory (“for CASH!”), but in reality merely add the new inventory to an existing list of hundreds or thousands of weeks that they then post on websites, often using advertisements in newspapers (and now in search engines such as Google) to draw attention to that website. The problem is that such ads don’t try to sell YOUR timeshare; another is that they draw more people who want to sell than who want to buy.
And they charge large up-front fees, often more than the timeshare is actually worth.
One of the early companies operating in that mode is ERA Stroman, a Texas-based company that has offices in several states. Stroman is an important example because of some legal decisions that have been handed down over the years based on lawsuits filed both against the company and by the company.
In 1998 Florida regulators sued Stroman Realty, Inc. in Leon County Circuit Court, charging the company with breaking a 1995 Florida law that prohibits collecting advance fees to list a timeshare for sale. The lawsuit also accused the company of operating without a Florida broker’s license, and asked the court to stop the company’s activities in the state.
In response, Stroman filed its own lawsuit against Florida, in U.S. district Court in Houston, TX. Stroman argued that Florida’s statute is “an unconstitutional burden on interstate commerce”, saying that because its business involves buyers and sellers from all states, it shouldn’t be required to be a licensed broker in every state, nor to abide by the local laws of each state. Instead it should be enough that it abides by Texas law, where it is licensed as a broker and where its fees are permitted. (Stroman only had its offices in Texas, but it did business in other states by marketing through the Internet and through direct-mail and newspaper advertisements.)
Making a long story short, after eleven years of wrangling, in 2009 Leon County Circuit Court Judge P. Kevin Davey ruled that a Florida real estate license is required for all transactions involving timeshare real estate property located in Florida and where the seller of the timeshare real estate interest resides in Florida. The court also ruled that the collection of advanced listing fees from Florida residents, regardless of the location of the property, and owners of Florida timeshares is prohibited.
Since some of the biggest resale companies in the country are based in Florida, this ruling caused some shockwaves. But almost overnight they adapted by changing from “resale/listing” companies to “advertising” companies. Apparently there is no law against charging for advertising.
The general rule of thumb today if you want to sell your timeshare is the same as it has been for decades: Avoid paying hundreds to thousands of dollars upfront to any resale/”advertising” company that cold-calls you, promises quick results or tells you they already have a buyer, etc. And before you pay a company anything, do some research on the Internet to find out about their reputation, their BBB rating, complaints, and so forth. A little research can save you a lot of money and grief.
There are other/better and less costly ways to rid yourself of your timeshare, including the last resort of simply giving it away. The main thing to remember is that in almost all cases you should NOT expect to get anything close to what you originally paid for it if you purchased from the developer, especially in the current financial climate.