Avoiding Scams in Timeshare Resales
In the challenging marketplace of timeshare resales, owners often find themselves facing numerous obstacles, including the risk of scams.
A recent article by Gary M. Singer, a Florida attorney board-certified in real estate law, sheds light on these difficulties, particularly focusing on a scenario that seems all too common.
The Lure of an Easy Timeshare Resale
The article discusses a situation where timeshare owners, after struggling to sell their property, receive an unsolicited, time-sensitive offer from an unknown company. This company claims to have found a buyer willing to pay a fair price. However, there’s a catch: the owners are asked to pay a $2,000 refundable fee via a payment app before receiving the closing paperwork.
Red Flags and Warning Signs
Singer emphasizes key warning signs that timeshare owners should be aware of when reselling, to avoid falling victim to scams. Recognizing these indicators is crucial for safely maneuvering through the often complicated and unclear realm of timeshare real estate dealings.
Unusual Payment Requests
A major red flag in property sales, as Singer notes, is the requirement for sellers to pay a commission upfront. In a typical, legitimate real estate transaction, the process is markedly different. The commission, which is a percentage of the sale price, is usually paid by the seller, but it is not an upfront cost.
Instead, this fee is deducted from the total sale proceeds at the time of closing. This ensures that the commission is only paid upon the successful completion of the sale, aligning the interests of the real estate agent or resale company with those of the seller. An upfront demand for commission payment is atypical and should be approached with caution, as it deviates from standard industry practices.
The Nuances of Upfront Fees
Singer also brings attention to the distinction between legitimate upfront fees and questionable demands. It’s not uncommon for some reputable companies to charge an upfront fee, particularly in the realm of listing services. These fees generally cover the costs associated with marketing the property, such as advertising, professional photography, and listing the property on various platforms. However, these fees are for services rendered and are not contingent on the sale of the property.
In contrast, a request for an upfront fee that is framed as a commission dependent on the successful sale of the property is unusual and potentially deceptive. This arrangement suggests that the fee is more akin to a guarantee of sale rather than payment for specific services, which again is not a standard practice in real estate transactions.
Understanding the Dynamics of Real Estate Commissions
In standard real estate transactions, the commission is a critical component, typically ranging from 5% to 6% of the sale price, though this can vary. The commission is split between the buyer’s and seller’s agents and is only finalized upon the successful closing of the sale. This structure incentivizes agents to work diligently to facilitate a sale that is satisfactory to both buyer and seller. When a seller is asked to pay this commission upfront, it disrupts the traditional incentive structure and introduces a risk to the seller: paying for a service (the successful sale) that has not yet been, and may never be, rendered.
Evaluating the Legitimacy of Upfront Charges
While upfront charges for listing services are not inherently fraudulent, it is important for sellers to thoroughly vet the timeshare resale company requesting such fees. Researching the company’s track record, seeking reviews and testimonials from past clients, and understanding exactly what services are being offered for the fee are key steps in this evaluation. Transparency in the fee structure and a clear breakdown of services provided are signs of a legitimate company. In contrast, vague descriptions of services, lack of a clear contract, or pressure to pay quickly should raise concerns.
The Hallmarks of Timeshare Resale Fraud
Singer emphasizes the importance of scrutinizing the details of such offers. Common indicators of fraud include:
- Requests for upfront payment with the promise of a larger return.
- Payment methods that are hard to reverse or track, such as cryptocurrencies, wire transfers, or payment apps.
- Unsolicited offers that pressure quick action.
The Federal Trade Commission’s Advice
The FTC advises caution with unexpected offers that demand specific payment methods and urge rapid decisions. Scammers may even use deceitful tactics like sending a check and asking for a portion of the money back, only for their check to bounce later.
Protecting Yourself Against Scams
To safeguard against scams, Singer recommends:
- Taking time to think over the offer.
- Consult with trusted individuals.
- Avoiding quick decisions under pressure.
- Be skeptical of offers that seem too good to be true.
Final Thoughts on Timeshare Resale Scams
This article, originally published in the Salem News and authored by Gary M. Singer, serves as a crucial reminder for timeshare owners to remain actively informed in a marketplace rife with potential scams. By understanding the warning signs and seeking professional advice, owners can navigate these challenges more effectively.
Read the full article here for more insights from Gary M. Singer.
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Please note this blog is for information purposes only and is not intended as legal advice. Always seek competent counsel for specific assistance in dealing with timeshare resales.
Led by Timeshare attorneys J. Andrew Meyer and Michael D. Finn with over 75 years of combined legal experience. The Finn Law Group is a consumer protection firm that specializes in Timeshare Law. For a free consultation, please contact our office at 727-214-0700 or email us at [email protected] or follow us on Twitter.
