Wednesday, September 06, 2006

 

Timeshare Ownership Comes With Problems

Lawmakers have chased away most of the con men who roamed the timeshare industry in its early days three decades ago. But in their place, Corporate America has swallowed the market and filled it with fine print.

Much of the industry is now a well-oiled machine that often nicks consumers at every level of purchasing, owning and getting rid of a time share. Unsuspecting buyers face:

--High-pressure sales tactics

--Expensive financing

--Convoluted reservation systems

--Volatile and steep annual fees and questionable management

--A dismal resale market in which owners virtually must give away their units in order to get rid of them.

Pitches and promises

Helen Allston does not have the luxury of luxury. The 56-year-old Summerville resident has been on disability from her job at the Postal Service since her car was rear-ended in 1997. She is the main support for her 32-year-old son, who is learning disabled and works as a custodian. She has learned not to count on promises, which were exactly what she heard when her boyfriend wrangled her into a timeshare sales pitch on Edisto Beach in 1998.

"I had no intention of buying them and I told him so," Allston said. "I watch my money. ... I wouldn't spend this much on something like this."

The salesman, however, sensed that the boyfriend was won over and attacked Allston's skepticism. He said he was disgusted that the pair would even think of turning him down after he offered up confidential information, Allston recalled.

"He was actually making me feel like dirt for not wanting it," she said.

The guilt tactic worked and the couple paid $3,600 before leaving the office that day - most of which went directly into the pocket of that salesman and his on-site managers, according to other time share salesmen interviewed for this article.

Timeshare promoters have to abide by strict state rules these days. They are not allowed to pitch units as an investment or discuss their possible resale value. They are not allowed to tell potential buyers that the properties can be rented for income.

But sales offices are pressure-cookers and most timeshare owners interviewed for this article said the salespeople they dealt with either broke the rules or came close to illegal territory.

Meredith Exum, a Fairfield saleswoman at the SeaWatch Plantation resort in Myrtle Beach, skillfully stayed within the rules when responding to a Post and Courier reporter who inquired as a member of the public a few weeks ago: "We're not licensed Realtors, so I can't tell you anything about selling or renting them," she said. "Now, do I have owners that do both of those things? Yes. I'm not going to lie to you."

Another Myrtle Beach timeshare salesman, who asked to remain unnamed to avoid retribution from his employer, said good salespeople can earn between $90,000 and $120,000 a year along the Grand Strand. Top sales promoters on Hilton Head Island regularly gross more than $200,000, he said.

Between 2000 and 2004, 14 percent of time share revenue went to paying sales commissions, according to a March report analyzing the industry by PricewaterhouseCoopers, a New York-based auditor.

"Honestly, a salesman is probably going to tell you anything that works, because it's commission," the Myrtle Beach salesman explained. "And they'll finance anybody. They don't give a crap if they have credit or not."

Since the start of 2005, at least six lawsuits have been filed against Hilton Head-based Trew Holdings LLC, alleging that the company's salesmen lied while pitching time shares at its Coral Sands resort, one of four time share properties the company owns on the island.

Archie Elliott, a former salesman, detailed the deception in November for a lawsuit filed by 66 owners, testifying in a sworn affidavit that the staff knowingly promised to rent the units for would-be buyers, buy them back if they ever wanted to sell and grant an extra week's stay, even though none of those provisions were offered in the contract.

Trew Holdings' defense attorney did not return phone calls for this article.

The S.C. Real Estate Commission, which regulates more time share resorts than any state but Florida, has received about 60 complaints about Trew Holdings' properties in the past five years. Most of the gripes involved sales tactics similar to those outlined in lawsuits.

John R. Pitts, Jr., the commission's administrator, acknowledged that misleading sales pitches are a problem industrywide, although the state fields few complaints about some of the biggest players in the market.

"What (buyers) are told verbally and what's in the contract often are two different things," Pitts said. "I would love it if this article would warn the consumer to read the contract before buying, don't just take someone's word on it."

Illegal sales pitches, he added, are particularly hard to prosecute, because they usually pit the buyer's word against the seller's. The contract, which many consumers don't look at closely, often has a disclaimer that says buyers should not "rely upon representations other than those" on the paper in front of them.

Giving, then taking

The points system

and talk to a different agent.

"It was a little bit of a hassle, but you learn how to do it," Terre said. "You learn how to play the system, and that's what it is, playing the system."

But after almost three decades as a time share owner, Terre recently reached his breaking point. He was sitting in the indoor pool of a Myrtle Beach resort when pieces of the ceiling fell in the water around him. A few months later, after checking into a brand new Myrtle Beach resort, the keys didn't work and the appliances were so noisy that he couldn't talk on the phone.

"I'm just thoroughly disgusted with all of it," Terre said. "I'm not going to buy any more points and I wouldn't recommend them to anyone."

Terre also said most of the people he talks to at time share resorts feel the same way and want out.

When asked about customers having trouble booking, time share developers and the industry trade group invariably blame the problems on misinformed customers, not complicated booking systems or oversold resorts.

Thornhill, with Bluegreen, said learning how to use a time share is a big education process. "We do our best to work with customers," she said. "But a lot of times they don't understand the legal obligations that they sign and read."

Skyrocketing fees

Reservation or no reservation, time share owners get billed regularly, coughing up fees to pay for maintenance and occasional refurbishments. These charges generally run between $150 and $1,000 a year and can add up to the original sales price of a unit over 10 or 15 years.

A lot of buyers fall behind on these payments. In 2004, the average week of time share ownership cost $479 in annual maintenance fees, according to an industry trade group. The March study by PricewaterhouseCoopers said some 7.4 percent of time share owners were delinquent in paying those fees.

In addition to sales revenue and high-interest loans, many developers collect a steady stream of recurring fees by managing the resorts that they built, a practice that has sparked criticism. Their employees often dominate the ownership committees that set the annual charges and hire contractors. Some publicly traded time share companies highlight these arrangements in filings with the Securities and Exchange Commission.

Byron Wiegand, a former time share developer who owns California-based Timeshare Resale Alliance, said this is a "total conflict of interest" that is gouging consumers.

"You've got the weasel in charge of the henhouse," he said. "And they're just fee-ing them to death ... stuffing the money in their pockets as fast as they can."

Individual buyers own such a miniscule portion of a resort that they often don't bother exercising their voting rights. Once developers are in charge, Wiegand said, problems often start. Fees go up, maintenance is neglected and one-time "assessment" charges are levied.

Cutting losses

Time shares, like most cars, immediately plummet on the resale market. That's one of the reasons banks won't finance them directly.

Fairfield, for example, was charging $155 for 1,000 points earlier this year. Reserving a week at the company's two-bedroom Myrtle Beach units in the middle of summer requires at least 21,000 points. Yet those same points were fetching less than $20 per 1,000 in recent eBay auctions - roughly 13 percent of the retail value. A Summer Bay Resort time share in Las Vegas recently sold for $26, according to a list of completed eBay auctions.

Wiegand's Timeshare Resale Alliance won't play with points.

"We just tell people, 'I'm sorry that you bought them,' " he said.

Some developers discourage people from buying on the resale market by telling them they won't have as much booking clout or privileges if they buy a second-hand unit. And the industry is still plagued by shady resale firms, boiler rooms full of hucksters who promise great results - even profits - in exchange for a few hundred dollars. Most states outlawed these operations from charging an up-front listing fee, but some operators skirt the rules by calling the payments "appraisal" or "assessment" fees.

Pat Pendleton, who resells time shares out of her Surfside Beach realty office, said most resale companies will "tell people anything" to get the up-front fee. "The majority of them are just advertising companies," she said. "They aren't even licensed to broker a sale. ... And they don't even have to sell them, because they're making so much money up front."

One of the biggest time share fans interviewed for this article was Jack Brewer, a restaurateur from Charleston, W.Va., who bought on the resale market. Over the years, Brewer purchased four time shares from Pendleton Realty, each for about what he would have paid to stay at a hotel for a week.

"It all works for me," Brewer said. "Resale time shares, as far as I'm concerned, is the way to go."

Adding it up

Helen Allston, however, could have rented a lot of nice hotel rooms for the thousands of dollars she and her boyfriend paid to a time share developer. And the thrill of being the owner of a vacation getaway wore off quickly for her, the day she received the gifts that helped clinch the deal.

"The steaks (they sent) were so tough that nobody could eat them; the grill was one of these dime-store Wal-Mart ones," she said.

Allston and her boyfriend have paid off the unit - $353 a month for seven years, including $11,031 to cover the developer's 14.4 percent interest rate. Even though she has never stayed at the Edisto Beach property, Allston still pays $1,440 a year in maintenance fees. She also has forked over another $700 to a Florida resale company that has yielded no results. Now, she's not even trying to recover her money. She's just hoping to get out of her contract and to stop the payments. If Allston stops sending checks, the developer will eventually take back the unit, but not before planting some red flags in her credit report.

"There's no way we could have used this thing enough to make our $15,000 or $20,000, or whatever we've got invested, worthwhile," she said.

Comments:
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This story pisses me off. My parents had an experience quite like what's portrayed here. Thought they'd buy a property where the family could congregate once a year. So they did, but didn't realize that a flex week, which flexible, isn't for sure. Hence, congregating proved harder than imagined.

They held onto it for quite awhile and then tried to sell it, an exceedingly difficult experience that brought out the reality of the original sale. Seems they were pressured pretty hard and told a number of things that skirted the truth on the front-end and completely sold out by reseller after reseller on the back-end.

It was a bad experience for the whole family. I learned a lot about timeshares though, vicariously. They eventually sold it through a company called timeshare relief. I attended a presentation with them and all our eyes were opened even further.
 
We bought a time share at Rancho Banderas only because they offered a "cash back" of $10,000 that would cover our $13,000 time share purchase. It was a few months later that we we informed that the "cash back" offer was void and null due to the fact that Rancho Banderas did not pay their fee to the cash back compnay. Are there any legal rights, refunds,etc. that I would be able to seek? We are very upset and we know of at least one other couple that had the same experience during the year of 2005. Thank you for any information you can share regarding this issue. Even though we are upset, we still plan on visiting RB this June with our family. I have nick named RB "Rancho Banditos" Thanks, Mr. Pelon
 
These articles are fantastic; the information you show us is interesting for everybody and is really good written. It’s just great!! Do you want to know something more? Read it...:Great investment opportunity in Costa Rica: jaco beach resort, best western hotel jaco beach, map jaco beach costa rica. Visit us for more info at: http://www.jaco-bay.com/
 
We bought a timeshare with Coral Resorts on Hilton Head Island. Everything they told us was a LIE! We ended up paying $8,000 to one week every 3 years. Do not deal with CORAL RESORTS! They are nothing but CON ARTISTS!
 
I totally agree with Mr. Nichols and Jenn. Denise, I beg you to please beware of these slick sales people. We went for a presentation yesterday and we bought. Everything we were told ended up being lies; not one or two things but I repeat everything. It was not one person but it has been a total of 4 employees now all telling lies. We cancelled our contract today by certified letter, we returned the cute little briefcase they gave us (otherwise they would deduct $100 from our deposit. When I called and told them I was returning that to their office, the man said to just keep it. He did not want me coming into that office anywhere near his prospective customers, or should I say, prey. When we went in, they gave us a receipt for returning the materials, my husbands cancelled check, our incentive check of $150 for attending the presentation (Iwhich we had given back to them as partial payment for closing costs. Get this, when we went to the Post Office on Palmetto Drive, the postal worker asked if he could help us and we said we needed to send a certified letter and he sad "For who, Coral Resorts, Marriott or Spinnaker?" That is really sad. I asked him how many people came in that post office cancelling by certified letter and he said at least 5 or 6 every day. Don't take our experience and decide for yourself though, just Google "Coral Resorts" or Island Links" and EVERY result that turns up will be a negative one...try it, I dare you! The really bizarre thing about this is that Hilton Head, Beaufort County, the State of SC, BBB, Real Estate Commission, nor any other entity is doing a darn thing to stop this company nor do they have any plan in effect to make them abide by the timeshare laws, much less moral standards. Where is Erin Brockovich when you need her? Why has this island been spared by God? This is not only evil practices by a company but every official is condoning their behavior, looking the other way...conveniently. Lots of wrong going on here and if anyone has any morals and standards left, you will step up to the plate and fight this. It is wrong and I am the first to attempt to do something about this. Remember 9/11, what's the difference, we are being raped, murdered, taken advantage of today too.

Take care all of you out there,

Terri
Elberton, GA
(Coral Resorts employees know who I am)
 
This comment has been removed by the author.
 
I totally agree with Mr. Nichols and Jenn. Denise, I beg you to please beware of these slick sales people. We went for a presentation yesterday and we bought. Everything we were told ended up being lies; not one or two things but I repeat everything. It was not one person but it has been a total of 4 employees now all telling lies. We cancelled our contract today by certified letter, we returned the cute little briefcase they gave us (otherwise they would deduct $100 from our deposit). When I called and told them I was returning that to their office, the man said to just keep it. He did not want me coming into that office anywhere near his prospective customers, or should I say, prey. When we went in, they gave us a receipt for returning the materials, my husbands cancelled check, our incentive check of $150 for attending the presentation (which we had given back to them as partial payment for closing costs). Get this, when we went to the Post Office on Palmetto Drive, the postal worker asked if he could help us and we said we needed to send a certified letter and he said "for who, Coral Resorts, Marriott or Spinnaker?" That is really sad. I asked him how many people came in that post office cancelling by certified letter and he said at least 5 or 6 every day. Don't take our experience and decide for yourself though, just Google "Coral Resorts" or Island Links" and EVERY result that turns up will be a negative one...try it, I dare you! The really bizarre thing about this is that Hilton Head, Beaufort County, the State of SC, BBB, SC Real Estate Commission, nor any other entity is doing a darn thing to stop this company nor do they have any plan in effect to make them abide by the timeshare laws, much less any moral standards. Where is Erin Brockovich when you need her? Why has this island been spared by God? This is not only evil practices by a company but every official is condoning their behavior, looking the other way...conveniently. Lots of wrong going on here and if anyone has any morals and standards left, you will step up to the plate and fight this. It is wrong and I am the first to attempt to do something about this. Remember 9/11, what's the difference, we are being raped, murdered, taken advantage of today too.

Take care all of you out there,

Terri
Elberton, GA
(Coral Resorts employees know who I am)
 
Great read on Vegas Real Estate, thanks for the post will save and share.
 
Please review TUGBBS for further accounts of deals gone bad at Coral Resorts:

http://tugbbs.com/forums/

We CAN obtain justice! Hopefully... we can recoup our losses too!!
 
Getting rid of a timeshare can be a nightmare. My friend is having the hardest time getting out of hers and she keeps running into timeshare cure ripoffs. I would never get a one. Good luck to those who do have one!
 
Timeshares can be the best and worst thing that ever happened to anyone. We enjoyed ours for 5 years, and then when we wanted to get out, we used a timeshare relief agent. We lost a couple of dollars in the process, but ultimately had a positive experience all the way around.
 
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