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Timeshare Resale Price Trends 2003-2012 Study

 

There are many reasons for the fall off in timeshare resale prices for the world as a whole in the last five years. Two of the biggest are the decline in the economy and the Relief companies that prey on timeshare owners. Another is the uncertainty about the future of the economy.

Buying timeshare vacations is buying future vacation accommodation rights with today's dollar.  If you do not know where the value of the dollar will be down the road it's hard to predict the savings today.  Additionally the proliferation of sophisticated online lodging rental sites that give consumers many different lodging choices at their finger tips did not help resale prices. They offer a wide variety of choices from the convenience of home, the office or even mobile that do not require long term commitment eliminating financial uncertainty in a short term lodging purchase. While many may prefer no commitment to second home ownership, for those that do, timeshare programs offer the simplest solution.

The following graphics use resale data for units sold by Timeshare-Resale-Broker.com in Conroe, Texas:

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Generally there was a poor economy and government business policy uncertainty from Washington that left many owners desperate for immediate financial severance from timeshare ownership responsibilities.

Relief Companies and the Timeshare Resale Market

Developers have disliked resale companies since the beginning. Even the ones that could help them solve their timeshare resale problem were not trusted.  It was like a conflict of interest, cats and dogs unable to co-exist. New car manufacturers went through the same problem in the early 1900s and eventually used car sales dealers became established and accepted. New car manufacturers finally concluded that there must be a resale market for cars in order to upgrade owners to new ones. The problem for timeshare developers was that there were also a lot of non-licensed scam timeshare resellers that clouded the market and some looked like they were legitimate. So timeshare developers rarely supported even the licensed resellers and the resale problem grew.

Online resellers backed by substantial capital entered the timeshare resale market over ten years ago and some have carved out a niche. They have reached high profit levels without solving the timeshare resale problem. The problem with using a website platform is that the timeshare product is complicated, the selling timeshare owner seldom knows what they own and to be able to successfully contract and close most timeshare sales involves a lot of research for product knowledge. Additionally you cannot get negotiation skills online at all like you can when you speak to a licensed REALTOR®. Developers seem to like the 100% online resellers as a necessary evil because they charge so little that timeshare owners generally do not complain when the property does not get sold. Everyone gets what they pay for!

Timeshare resale regulations sponsored by timeshare developers were introduced to eliminate the bad resellers. Some states even started requiring real estate licenses for the broker or agent negotiating the contract if their state was involved somehow in a timeshare resale transaction.  The trouble is that in a resale transaction you never know where the buyer, the seller, the property or the broker will be and trying to juggle all those regulations is a nightmare that makes a traditional broker's skin crawl. The effect of the various resulting onerous regulations did not change the scam resellers modus operandi. Instead it made it harder only for the legitimate timeshare resellers to have growth and attract investment capital because of increased regulation expenses and declining margins. This made licensed timeshare reselling less attractive as a business model because of lackluster returns. It was already hard to attract licensed agents to timeshare reselling. Traditional agents can make 5-7% on a home sale when timeshare resales commissions total a small fraction of that (about 1/12) for the agent making the sale.

Relief companies had been in operation for a few years after entering the timeshare industry as a type of resale option and were established resale business models by 2007.  The timeshare resale situation was ripe for them to grow.

The Relief company model operates without a real estate license. Sales people can be hired off the street. Some have branched out and operate for the same principal under many different names. They send out post cards and letters with an enticing meeting invitation (misconstrued for the most part) where a possible offer to buy their timeshare may result from the timeshare owner's attendance. The simple presentation conducted local to the owner is totally negative towards timeshare ownership by an individual consumer. They tell prospective owners mainly in an interactive group presentation that the resort is going to need repairs requiring special assessments and rising maintenance fees; that all resale companies are a scam and they will never sell it for you; that no one wants their unit anyway and that this may be the only opportunity to get rid of their timeshare to their corporate buyer who is only taking a few select timeshares today. The pressure is on the owner to make an immediate decision because he is told his property qualifies just before going into the meeting. The convincing presentation changes the perception of the value of timeshare ownership to a realization of a burden on a large percentage of the existing owners in attendance. The sales pitch works on the befooled timeshare owners and the Relief companies flourish.

If you have a lien on your timeshare you are out of luck unless you can pay off the loan too. They advertise that your timeshare must be paid off to qualify. Several owners however end up in the presentation because they are liquid and able to retire their note. After hearing the presentation and not wanting to throw good money after bad some begin refusing payments to their timeshare mortgage holder. Loan service companies have been affected as well.

Relief companies have since destroyed timeshare equity for tens and possibly hundreds of thousands of timeshare owners in the last better part of a decade.  Those timeshare owners that took the offer and dumped their equity for zero with an additional cost of around $3000 to the Relief company in processing fees rather than hanging on for the right buyer lost 100% of their equity plus significant transfer fees.  If the average resale price of a timeshare was $8000 and then they paid an extra $3000 in fees out of pocket then the average owner that utilized a Relief company lost $11,000. That is considerably more than the value of the timeshare.  A classic example where timeshare ownership ended in a tragedy for those consumers. Take 100,000 owners that paid to transfer through a Relief company and you multiply that number times the average loss of $11,000 per owner, you get a result of over one billion in lost equity!  It comes to more than that when you consider the resale price average was less than what the buyers paid to buy the new timeshare originally.

The market continues to be negatively influenced by Relief companies. Developers, timeshare management companies and timeshare resellers alike hear time and time again from owners that attended a Relief company presentation how they were shocked that anyone would suggest such an outrageous proposal. It makes them leery of timeshare ownership and causes repercussions at the timeshare resort.  Yet possibly over a million timeshare owners have been through a Relief company presentation to find out how to alienate themselves from their timeshare. They did so because they did not believe in the timeshare product anymore. It started when they read the letter. Then they had to call to make an appointment and the negative timeshare pitch continues to where it intensifies at the face to face meeting. There the Relief company salesman convinces some of the converted disbelievers to turn over their timeshare and put the transfer fee on a credit card, pay cash or write a check. The survivors that did not bite left horribly disillusioned at the timeshare product. They did not drown, they became angry at timesharing!

After collecting all the high transaction fees what happens to the timeshare is a mystery for most. The Relief companies' corporate buyer receives the timeshare and parlays the profits by selling the timeshares they received.  They sell the ones they can for as much as they can get before the next maintenance fee is due. Most of the dead beat timeshares that nobody wants end up in an offshore corporations where no maintenance fee is ever paid. The resort's only recourse for nonpayment of the maintenance fees is foreclosure. This can take a year or more to orchestrate while the expense to foreclose and the loss of maintenance fee revenues hurts the resort's cash flow.

The timeshares that do get put up for sale continue to flood the market at give-away to lower than average timeshare resale prices thereby reducing demand which craters prices for the remaining individual owners that do resale. It hurts onsite new sales to existing owners as well. It’s the talk around the pool and other amenities at most all timeshare resorts. The Relief companies were in position and pounced on the ripe opportunity. Their success has spoiled the timeshare resale market.

The second graphic is from 4 top major sales regions and uses timeshare resale average annual sales prices for the years 2008-2011.

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CA is California - CB is the Caribbean Islands - FL is Florida - HI is Hawaii - World is our Total World timeshare resales

Almost every year since 2007 the average timeshare resale prices fell except for Florida which had the lowest and the most stable pricing in the individual regions that were examined in the study. Unbelievably the island timeshares average resale prices have been hit the hardest.

The timeshare resale market will only return to the 2007 levels after the Relief companies go away if they ever do. Timeshare developers have been working on ways to shackle the Relief companies resale activities for years with little progress.  They have tried to restrict the transfer process and have succeeded in a few other areas. Some regulations have helped but enough said.

Smart owners use a REALTOR® to sell their timeshare and come out with more equity!

New Timeshare Sales and The Mortgage Debacle

Both the new and resale timeshare industries changed significantly since 2007.  Annual new developer sales dropped from ten to six billion and have risen again slightly in the last five years. 

When the mortgage debacle of the last decade hit at its hardest, new timeshare construction loans and consumer financing for individual timeshares were cut substantially and that was a major factor that reduced new timeshare development. Consumers' discretionary spending was deterred as well with the high unemployment and foreclosures so that many families had to put timeshare loan payments in a lower priority below groceries, gasoline and home mortgage payments.

The market for new Fractionals sales does not look good with the recent cancelation of the 13th Annual Resort Real Estate and Fractional Conference that was scheduled for March 2013 in San Diego.  They cited that "The last four years of a down economy have taken a toll on the entire resort real estate industry, especially the fractional interest component. Many of our long-time sponsors find themselves in a position where continued commitment is not practical at this time. The decision was made after much deliberation, and simply got down to a case of economics".

Some timeshare developers are reporting steady to strong sales in recent quarters. It may be a while before new timeshare sales fully recover to the highest level of sales achieved 5 years ago.

The Future of Timeshare Resales

What will the future be for timeshare resales? Will it come back strong in the next few years?  Stay tuned to the follow up articles where we will bring to you valuable analysis about the timeshare resale market. The details from the 2003-2007 Study can be found here: http://www.rpmls.com/timeshare-resale-study.aspx

Remember "Resale beats Retail" and to use a REALTOR® whenever you buy or sell.  The process of buying and selling is complicated and your trusted professional can be of assistance to buyers and sellers!

Use the licensed agents at www.Timeshare-Resale-Broker.com when buying or selling!

 

Written by: 

 

Wayne Stroman CIPS, TRC, President, Stroman Realty, Inc. 

Houston Association of REALTORS®, 2012 Chairman of the Board

Mail to: POB 2991, Conroe, Texas 77305

Deliveries to: 14500 HWY 105 W, Conroe, Texas 77304

Office: 936-588-4444

Fax:    936-588-4884

 

 

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Certified International Property Specialist

 

by the National Association of REALTORS®

 

 

 



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SERVICE DESCRIPTION: Condo Express a division of Ad-Net, Inc. operates on the largest timeshare resale computerized network in the world and on the Internet! Through this extensive network it advertises and promotes timeshare properties for sale and rent using the www.RPMLS.com, a specialized, computerized property matching software.

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