Thursday, November 04, 2010

Need to Get out of a Timeshare - It's Easy
- If You're Dead

I was forwarded a link to a fluff piece from television station WPTV6 in Palm Beach Florida. The purpose of the article is to warn viewers against scam artists who want you to pay money to sell your timeshare. That's good, but ending advice is very misleading. They quote a well-circulated 2006 article from SmartMoney magazine titled Escape from Timeshare Hell that says it's easy to get out of a timeshare. Here are the 4 steps that SmartMoney says you can use to get out of a timeshare:

* Ask the condo developer if it buys shares back.
* List with a Realtor.
* Rent it out.
* Donate it to charity, for a tax break.

Great advice, too bad the chances of it working are about the same as me flapping my arms and flying home from work. I've never seen a condo developer buy a timeshare back. I've never seen a reputable Realtor list and sell timeshares. The covenants generally keep you from renting it out; however for additional fees, you can enroll in a swap program. The few charities that dabbled in taking timeshares have largely stopped, and to the extent they take them now, you have to have everything paid and pay an outside company a service charge to take the timeshare.

The Great Recession has really hammered timeshares and timeshare investors. Many of the "resorts" are on the Gulf of Mexico. Between oil spills and hurricanes, the resorts have faced huge capital expenditures and reduced tourism. This results in higher annual assessments. The annual assessments as well as a poor economy cause owners to default on their timeshare payments. This, in turn, can result in a death spiral where more and more expenses fall on fewer and fewer owners.

I've had more and more clients call with vexing timeshare problems, and I am convinced that there is no difference between a timeshare and a roach motel. You can get in, but you can't get out. The best solution that I've found is, believe it or not, to give the timeshare to a dying relative, a relative who isn't going to leave an estate, make sure the timeshare is transferred on the books of the resort to the relative, and when the relative dies, the timeshare problem dies too.

In my opinion, when it is up and running, the Consumer Financial Protection Bureau should take a very close look at timeshares. The ownership interests actually have more in common with securities than traditional land ownership. The perpetual obligations of timeshare ownership are unconscionable even if the other terms aren't.

Instead of the bad story from WPTV, I'm embedding a youtube video of a Nightline feature on the problems with timeshares.

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