Timeshare Sales Laws That Regulate the Industry

Timeshare Sales Laws That Regulate the Industry

The timeshare business has been booming for quite some time now. But demand hasn’t necessarily been the driving force. Since the 70’s, a nearsighted salesforce has been at the wheel despite a diminishing reputation and an increase in competition. At the same time, timesharing isn’t the only travel option that takes advantage of impulse buyers.

Nearly every industry requires a set of laws to keep greedy businesses from taking advantage of customers. There’s always someone who ruins it for everyone. Helping you understand what a purchase of this magnitude entails is important to us. Now that we’ve pointed out the challenges of regulating timeshare marketing tactics and advertising lingo, we wanted to shed light on some of the timeshare laws that protect consumers from misleading sales strategies.

Understanding What Timeshare Sales Laws Regulate

In the early stages of timesharing, when expansion was occurring rapidly, many resorts utilized “misspeak” to promote products that didn’t actually exist yet. Like we mentioned in an article about timeshare history, travel solutions were kind of made up as they went along. Consumers were inevitably left hanging while timeshares figured things out. Without regulations, developers were able to take risks at their customer’s expense. This eventually caused regulatory and consumer protection agencies to form and spring into action.

Even though consumers have become more informed over time, a layer of protection is needed now more than ever before. Since the internet provides a boatload of inaccurate information, it’s important that people can make educated decisions before signing over tens of thousands of dollars. While most of society is aware of what timeshare ownership can entail, not everyone is. Besides, the internet is flooded with sales jargon, so consumers are still easily swayed by the craftiness of timeshare sales teams. In order to combat misconduct in the industry, more and more timeshare laws regarding sales practices have been implemented, revised and reinforced.

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Unlike unethical marketing campaigns, sales presentations and conditional offers are easier to regulate. At this point in the sale, marketing tends to reveal its hand and misleading transactions begin to take place. In some instances, it’s where salesmen are caught in their bluff. No matter what is said to get people to attend an initial presentation (or ownership update meeting), it’s not as damning as the terminology used right before the contract is signed. Sales teams realized that this may be their only chance to lock in a new fractional owners. In other words, desperate times (in their minds) call for desperate measures (to make money).

Why Some Timeshare Salesmen are Motivated to Say Anything

There is an awful lot of pressure to sell intervals because the financial reward is tremendous. Timeshare resorts are always looking to maximize profits, especially to overcome some of the turnover they experience. In order to do so, they have to continuously find ways to fill fractional owner vacancies. The less they have, the more they count on current owners to cover expenses. While re-marketing current users isn’t as costly, they realize the real revenue comes from acquisition. The more timeshare owners acquired, the more consistent their revenue will be. This also gives them flexibility to continue developing and expanding properties.

At first glance, you might think it’d be easier to simply sell each unit individually. But, that leaves too much money on the table for resorts. Instead of selling a single condominium unit, timesharing gives resorts an opportunity to make money on 52 interests sold for each unit (52 weeks in a year). It’s pretty hard to tell timeshare developers to stop when they’re able to make 20-40% margins on each sale. It’s simple math. Sell the unit for $1 million or sell 52 weeks for $25,000 and make $1.3 million.

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The revenue potential isn’t even close and that’s not factoring in maintenance fees. Besides the fact resorts can charge whatever they want per unit if revenue is low. Most timeshares even limit availability by continuing to sell retail packages. The continual chase of revenue is why resorts don’t mind investing mass amounts of money into strategic endeavors to persuade.

To give you an idea on how much timeshare companies spend on new acquisition, roughly 30-50% of all revenues goes towards sales and marketing efforts. As you can see, the urgency to keep condos filled with fractional owners is real. The problem is, timeshare companies ignore the fact they’re biting the hand that feeds them. While they may promise timeshare owners a plethora of things during the sale, not much comes into fruition. This is where laws are needed to ensure buyers get what they paid for. Let’s take a look at an example so you can see how timeshare sales laws work.

Manhattan Club Caught Taking Advantage of the Elderly.

An investigation of the Manhattan Club began after the Office of the Attorney General received repeated complaints from many timeshare owners that were unable to make reservations at the resort. Despite paying tens of thousands of dollars for their timeshares, the rooms were rented to the general public rather than the timeshare owners, which was in direct violation of the timeshare contract.

But, illegal practices began even before purchases were made. Investigators found that timeshare sales teams repeatedly deceived potential buyers regarding reservation procedures, the ability to sell back shares, and other specifics of the contract. High pressure sales tactics even went so far as to state that their timeshare ownership was “better than money in the bank.” Seniors were (and still are) sold on an experience that’s not realistic.

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The sales pitch inevitably promised public use of rooms, an easy reservation process and scarce constraints regarding reservations for owners. All of these claims were found to be false by the Office of the Attorney General  and proven in court. In this case, timeshare sales laws protected a good amount of fractional owners that could have been taken advantage of for a long time.

How Timeshares Create a Demand for No Availability

Common timeshare sales tactics tend to surround the overselling or misrepresentation of travel products. In other words sales teams state that owners will have access to all of the inventory while distracting them with an array of intriguing possibilities in order to get the tour to sign the dotted line. What they don’t explain is that they’re selling the lowest level of access and buyers will have to dish out more cash or jump through more hoops to make this a reality.

Salesman know that once the prospect is under contract, there isn’t much they can do to get out of the agreement. The sales system is set up to continuously persuade users to upgrade no matter their frustration. Timeshare infrastructure is built to overcome conflict and upsell. They purposefully create no availability but demand payment. This is why the regulation of the sales pitch is so important.

We hear these types of situations from our clients all the time. One woman was told she could go to Jamaica which was her sole purpose for purchasing the timeshare so they could visit their family once a year. When she went home and immediately called to reserve, they told her there were no properties left in Jamaica. They told her to check back in a few weeks, ironically once the rescission period was over. After multiple complaints, they promised to give her a “fully loaded” golf or beach view casita elsewhere. Since she couldn’t cancel the timeshare agreement anymore, she accepted their offer to upgrade and funded the down payment on a new contract. She ended up being a guest at a dingy unit in a sister resort with a parking lot view.

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Timeshare Sales Laws Do Regulate Unethical Tactics

These types of situations happen more often than people realize. The thing is, buyers aren’t aware of the laws that protect their rights. While salesmen may tell you your contract is final, unethical terminology used can work to your advantage. If you feel like you’re being set up for another bad experience, then you need to document what’s being said. Without any proof (especially when it’s in person), the probability of things working out in your favor aren’t likely.

Sales Pitches on Investments and Potential Income.

Understanding timeshare sales laws will help you identify and expose false promises that eliminate your obligation to pay for the property. Timeshare companies and sales teams can be penalized if the product is being sold as an investment or prospects are being told they can make money renting out or re-selling the property.

The Florida Vacation Plan and Timesharing Act specifically touches on some of this jargon. “The purchase of a timeshare interest should be based upon its value as a vacation experience or for spending leisure time, and not considered for purposes of acquiring an appreciating investment or with an expectation that the timeshare interest can be resold.” The California Vacation Ownership and Timeshare Act of 2004 also clearly restricts this verbiage.

In other words, it’s a purchase, not an investment – and claiming you can make money on it is against the law. Sadly enough, this causes many timeshare owners to believe they can actually sell the property. This results in them wasting even more money on resale services that rarely pan out. Instead of learning how to get out of a timeshare, they dig a deeper whole due to deception.

Additional Unethical Timeshare Sales Claims.

Leading timeshare owners to believe the property holds more value than it really does is only one tactic that sales teams use. Leaving out pertinent information can also result in consequences. If you’ve signed a contract and the timeshare hasn’t disclosed the right of rescission, right to increase maintenance fees or liability of ownership that results in assessment fees – then you have the right to void your contract.

Another enticing offer for potential timeshare owners is the Survivorship Clause that’s sold as a “Legacy Pitch.” This basically means the timeshare company tells you that you can pass on the property to family when you pass on. In reality, you’re basically dumping the perpetual expense on an unexpected heir. Aside from being extremely inconvenient and a terrible memento, it doesn’t even guarantee the recipient will be able to use it. One of our clients actually speaks about this in one of our testimonials. “Because of the changing industry, they were basically stuck with the cost and nothing to show for it.”

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As you can see, there are a number of ways timeshare companies bend the truth and con aspiring travelers. The worst part is that it can take years for those wronged to find restitution. Because of the power timeshare conglomerates have, they can easily bully consumers with expensive legal teams. Unfortunately, most cases don’t even make it to court. But that wasn’t the case for Diamond Resorts in 2016. Arizona Attorney General Mark Brnovich announced a $800,000 settlement with the timeshare giant.

Many timeshare owners found relief when the state found the company was violating timeshare laws regarding annual fee increases, resale claims, rental opportunities and counterfeit discounts on other travel needs. While this was a big deal for the timeshare industry, we still have a long way to go to right the ship. If you’re thinking about buying a timeshare, we encourage you to consider these points before signing the contract. Although we may not be able to do anything about the unethical practices of the industry, we can take a stand to educate consumers on the possibilities of ownership.

If you feel as though you’re stuck in a timeshare contract and want to be relieved of your obligation to pay, we’d be happy to review your options with you. Timeshare cancellation services aren’t always necessary and we take pride in ensuring our clients exhaust all options before investing more money into the purchase.

Beware of Timeshare Resale Scams.

Beware of Timeshare Resale Scams.

The timeshare industry has historically been plagued by developers who use high-pressure and deceptive sales tactics to close a timeshare sale. Using false and misleading statements of what buyers could expect from their timeshare ownership, the industry has a tarnished reputation which over the years grown ever worse.

In 2008, with the collapse of the economy and crash of the stock market, many homeowners found themselves no longer able to afford their homes much less the timeshare that they had purchased in a moment of weakness.

Because a timeshare is essentially a “lifetime” obligation to pay maintenance, taxes and fees it is a liability not an asset, that many people could no longer either afford or want.

Faced with the prospect of ever increasing maintenance fees, and desperate to get rid of the so – called “ vacation of a lifetime” many timeshare owners turned to the timeshare resale market in an effort to be relieved of their lifelong obligation to pay ever increasing dues and fees.

Into this vacuum of desperate owners wanting to sell, jumped the timeshare resale scammers.

Armed with false promises of ready buyers, fast sales, big profits and money-back guarantees fly – by – night scammers proliferated with promises of a quick sale and lots of money for what was now an unwanted timeshare.

The truth is timeshares are not an appreciating asset and there is no ready market for a used timeshare. A simple search on ebay can verify the truth of this statement. By simply entering the search term “timeshare” hundreds of supposedly valuable timeshares will appear for as little as $1.00 with the seller agreeing to pay all the closing costs.

With the timeshare resale scam running rampant, the Federal Trade Commission and state consumer protection agencies began to shut down dishonest timeshare resellers for bilking timeshare owners out of millions of dollars.

The state of Florida quickly passed a state law designed to crack down on this kind of fraud. That law forbids timeshare resellers from making unfounded promises and collecting large upfront fees.

The Federal Trade Commission was even more proactive, spearheading a national effort against the timeshare resale scam bringing over 200 actions nationwide against the scammers in 28 states.

So if you are a timeshare owner who is no longer interested in the ever increasing fees, lack of availability and high pressure sales pitches to “upgrade” avoid the timeshare resales scam at all costs.

If you own a timeshare, question any offers to help you resell it. Moreover, if you are thinking of selling a timeshare look first at what is out there. Listen carefully for the promise of lots of money quickly and a request for an upfront fee. Those are two signs of a timeshare resale scam.

The California Bureau of Real Estate warns: “The fraudsters use the names of companies (some of which have professional-looking but usually phony websites, fancy-sounding titles and addresses, and purport to be escrow, timeshare resale, finance, and/or title service businesses) and individuals in California.”

Remember this, once purchased a timeshare is very, very hard and almost impossible to sell.

So if you are looking to be relieved of your timeshare and its lifelong financial obligations, find a company who can provide you a guarantee to cancel your timeshare contract.

At the offices of Vacation Ownership Consultants, we have helped hundreds of timeshare owners who no longer wish to be burdened with their timeshare.

For more information on how you can safely eliminate an unwanted, unsellable timeshare with an exit strategy, please contact us today. Our consultants are standing by to assist you. Call 1-800-614-5288

Are you better off without owning a timeshare? Fans love them but others will sell you their interest for less than a penny.

Are you better off without owning a timeshare? Fans love them but others will sell you their interest for less than a penny.

John and JoAnn Belczak vacation in Hawaii every year.

That’s in addition to trips the Yorba Linda couple have taken to Tahoe, Boston and the Carolinas. They’ve strolled the scenic beaches of Aruba and St. Kitts and been on a cruise to Alaska. Every three years, they spend a week in a 2,000-square-foot penthouse in Nuevo Vallarta on Mexico’s west coast.

Timeshares make all that travel possible for the peripatetic Belczaks and their three now-grown children. After buying their first timeshare in Kauai 10 years ago, they upped their points a few years later, then bought a second timeshare in Mexico.

“Never regretted it,” said JoAnn Belczak, 59. “It’s not cheap. We know that. But so long as you know how to work the system and you use it, it’s great.”

William Dorman has a different take on the Las Vegas timeshare he got talked into buying at a sales presentation 15 years ago. Yes, he has exchanged his parcel for trips to places like Palm Springs and Arizona, but nothing exotic. Those were always booked. He had to pay out of pocket for accommodations in New York because the timeshare there also was booked.

Now he wants to get rid of it.

“Nothing’s available, and you have to book two years ahead of time,” said Dorman, 56, of Dana Point. “People are giving them away … or they’re listed for $5 or $100 because people want to get out of them.”

Some people are happy with their timeshares, saying they give them a chance to see the world in homey, spacious accommodations that cost less than an equivalent hotel. Others deeply regret them, saying maintenance fees keep rising, they can never book the times they want and they’re stuck paying for something they can’t use.

Regardless of whether timeshares are good or bad, the industry is booming.

Sales revenue by timeshare developers and operators rose 32 percent – to $8.6 billion a year – in the five years ending in 2015, according to the most recent estimate by the American Resort Development Association, or ARDA. Association figures show there were 411,880 transactions in 2015, with prices averaging $22,240, up 21 percent in five years.

But secondary market sales by private owners have been flat and represent a tiny fraction of the timeshare market, said Bob Schmidt, data officer for Sharket.com, a timeshare resale data firm. The resale market averages 25,000 to 26,000 transactions per year, with an average price of $5,000, a fourth the value of a typical retail unit.

“There certainly are a lot of people who are interested in selling their timeshares,” Schmidt said.

Sexier vacations

The timeshare concept, which dates to the 1960s, allows multiple owners to share one property or to gain access to resorts around the world by cashing in points they’ve accumulated or through an exchange system.

People who love their timeshares say they are motivated to take regular vacations, and they get better accommodations for less money, with kitchens and, in most cases, two or more bedrooms.

An ARDA survey found timeshare owners are more likely to take annual vacations.

And because timeshares have more rooms, and thus more privacy, owners have more sex, the industry trade group claims (yes, they actually asked vacationers about this). More than two-thirds of timeshare owners say they have more sex on vacation, while less than a third of nonowners have more sex.

ARDA President and CEO Howard Nusbaum said that over a 10-year span, the typical timeshare saves a family almost $14,000 compared with renting two hotel rooms for a week each year.

“You save money, plus you get all the comforts of home,” Nusbaum said. “It’s a better way to vacation.”

But it’s not for everyone, he concedes. People who are happy sharing a hotel room with the kids or who don’t mind sleeping on Grandma’s sofa don’t buy timeshares. But for those who want to stay in a nice hotel and take a vacation each year, he said, “it works out.”

Booking issues

Discipline and advance planning are a must in the timeshare world, owners say.

Jeff Weir, owner of three timeshares and chief correspondent for Redweek.com, a leading timeshare resale site, said bookings can get competitive. For example, he has to call a year in advance to reserve a week at the Marriott Newport Coast Villas, where he’s an owner.

“Wait two days later, those weeks are gone,” he said. “There are some practice issues for owning a timeshare that people have to deal with.”

Most of the unhappy owners are people who own a timeshare in a “legacy resort,” or an older, single-site property not affiliated with a large club, ARDA’s Nusbaum said.

“Those are the owners who have more pent-up demand to sell,” he said.

A glut of resales

Almost half of the 614 timeshares selling on eBay the weekend of Jan. 14-15 had starting bids of $1 or less, with 37 of them going for a penny.

“There’s a glut,” says a representative of Vacation Ownership Consultants, a company specializing in timeshare contract cancellation.

Hard-sell tactics are a key reason owners end up buying a timeshare they can’t use over the long run.

Buyers are lured into sales presentations by free dinners, theater tickets or discounts on hotel bills. The presentations last hours, lubricated by free food and drinks. Then, the buyers are presented a stack of papers to sign.

“They are zombies when they sign the contract. We have judges, we have clerks, we have doctors. They all come to us. We’re getting people out of these contracts that are burdensome and oppressive because at the time they signed them they really weren’t in their right mind.”

Recently a series of lawsuits were filed accusing Las Vegas-based Diamond Resorts International sales people of falsely telling buyers their timeshares appreciate in value and are easily sold and the property could be used by their heirs when they die. A retired Oceanside couple with no income paid $150,000 for timeshare contracts with Diamond, a recent Orange County lawsuit said.

“You’re told it’s an investment. … It’s not, it’s a liability … because of the maintenance fees you have to pay every year if you go on vacation every year or not.”

The lawsuit “is without merit,” a company statement issued last week said.

In December, Diamond agreed to pay Arizona $800,000 and take back timeshares after the state alleged it had received hundreds of complaints of false statements and misrepresentations made during sales presentations, the state Attorney General’s Office said.

A Diamond statement said the firm will launch nationwide reforms this month, dubbed Diamond Clarity, “to enhance the overall customer experience” during sales presentations.

Rising fees

Virginia Pelton of Laguna Hills sold timeshares in the early 1990s and ended up buying four of them in Las Vegas, Palm Springs, Dana Point and Cabo San Lucas.

“I used them several times a year,” said Pelton, 88, a former model. “A lot of people say, ‘If I want to go somewhere, I’ll get a hotel.’ But they don’t travel that much. If you have a timeshare, you use it. I did.”

But then maintenance fees started going up. Her total bill is $6,000 a year, and she’s taking steps to shed her timeshares.

“I was really into it until (the maintenance fees) went out of sight,” she said. “I can’t afford it anymore.”

Anaheim bakery owner Asem Abusir, 55, tried going to court to get rid of the Las Vegas timeshare he bought for $12,000 in 2008. He said he hasn’t been able to get a reservation since he refused to upgrade to a $35,000 plan. His annual maintenance fees are $1,400.

“They said, ‘Eventually you have to upgrade, so think about it,’” Abusir said. “It’s like I have no option.”

Eventually, he was able to shed his obligation by paying a $2,500 fee.

“I didn’t want to pay for something forever that I wasn’t using,” he said. “They said, ‘Even if you die, your kids will have to pay.’”

For more information on how you can safely eliminate an unwanted, unsellable timeshare, please contact us today. Our consultants are standing by to assist you. Call 1-800-614-5288

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