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Home Dave Ramsey Do You Remember? No Way Out! Resorts Creating Problems Timeshare Is Obsolete
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Problems With Timeshare Resales
By Jerry Wilkes
Everyday I get asked the question, Why I can’t sell my timeshare, we have tried everything. We have even paid Companies to sell it for us!
First let me give you a little background about myself and the qualifications I have to answer you intelligently. I have been in the resort business for 20 years. I’ve done reloads, resales, track sales, marketing and been a broker for several resorts. I’ve published articles and have been an expert witness in lawsuits. I have worked with the Georgia Real Estate Commission on numerous resort situations.
In 1988 when I started selling timeshare weeks, we primarily sold on an Investment pitch. I didn’t know any different and I don’t think any salesperson at the resorts around the country knew any different either. Resorts make you sign a form now saying you aren’t buying for investment. It also is illegal to promote timeshare as an investment.
You may have heard this before. “We will be sold out soon and the price will go up, this is real estate. You’ll be able to use your timeshare and when you can’t or don’t use it anymore you can resale it for a profit and your vacations will be free.”
It sounded good to me. But there are several problems with this and I’ll try to explain it as simple as possible. If I hadn’t been in resale business for 20 years I would never have know any different myself.
First, Developers are in the Development, Building and Selling business. They make their money by selling their units. Resales are major competition. Think about it like this, If you are trying to sell your house do you tell your prospect about one down the street at a lower price, of course not – Neither will they! Developers do not want you to offer your unit to anyone, hence they tell their owners, You “Once we have sold out we will start a resale program.” It never happens. . .
The second problem that arises with trying to resell is the high cost of obtaining a prospect and then converting them to a buyer. Did you buy your timeshare out of a newspaper? Maybe one in a thousand did but most owners had to be bribed with free gifts. What did you get? In 1995 the Industry Association ARDA (American Resort Developers Association) conducted a survey about the cost involved in marketing. It is exorbitant!
There are several ways Developers market and sell. Letter drops, telemarketing, OPC, welcome centers, referral programs and in house reloads. In 1995 the average cost per prospect was $385 per person that toured the resort. That doesn’t sound so bad but it’s the number of prospects that adds up. 15 years ago 1 in 12 people that took a tour purchased, the cumulative cost was $4620 per unit week sold. Add sales commission of 12% + 6% for Broker and pit boss and the cost just increased again. The average week in 1995 sold for $8000 that comes to $1440. The cost of selling and marketing alone is over $6000. Will you pay $6000 to get your unit sold? Today’s cost per prospect is about the same but the numbers have changed a little. In Orlando, Westgate Resorts reports that it now takes 22 prospects to find one buyer. Timeshare weeks now start at $17,500 each. How would you like to try and sell a timeshare for $17500 and you can find them on Ebay for a dollar?
In 2005 I did a resale proposal to the Indian Chiefs at Westgate Resorts in Kissimmee, Florida. They were looking for a real estate company that would help their owners re-sell without charging an upfront fee. After I explained the only way I could make it work was to be on site and do in house reloads, they rejected my offer. David S… said that they did not make a profit on the initial sell. In order for Westgate to make a profit they had to reload or sell the new owner a second week. They would not allow anyone to do resales on their property. If a company as big as Westgate loses money on the first sell and can’t make a profit until it sells its’ owners another week how can you get out of yours?
The third problem is undesirable time at undesirable resorts. Many owners were sold weeks in off times such as winter weeks in Daytona or summer weeks at ski resorts. It doesn’t work and you can’t give those things away. 60% of a resort’s weeks fall into this category. Many Resorts are not located in vacation destinations.
Timeshare is not real estate, it is a prepaid vacation. There is no MLS, you can’t hang a sign on it and conventional real estate agents have no idea how to sell it. To make matters worse you can’t contact any other owners, except the ones you meet during your week. People purchasing have no idea about buying on the resale market. Did you?
The fifth problem with trying to resell is the economy. Travel and vacationing is down 58% according to AAA Motor Club. Consumers are having a hard time and many are over extended. Prospective purchasers are not spending.
Competition is killing the prices of the ones that do resell which is less than 1%. The lack of a viable resale market has created a tremendous glut. It is estimated that 50% of timeshare owners want to sell or get out. Auction sites such as EBAY are loaded with Timeshares for a dollar. Developers created this problem by not addressing the resale issue years ago. It has now come back to haunt them.
In summary if you have a Disney Week and are willing to settle for half of what you paid, your chances of getting out are pretty good. Don’t have a Disney or Marriot, Well there’s always your least favorite child, leave it to them.
Home Dave Ramsey Do You Remember? No Way Out! Resorts Creating Problems Timeshare Is Obsolete
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