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Looking at the Strings of a Timeshare Repurchase Program

Looking at the Strings of a Timeshare Repurchase Program

We wrote recently about the various ways in which your resort developer can impact your timeshare “resale,” including a right of first refusal and, of course, the severe restrictions that have historically been placed on the growth of any sort of timeshare aftermarket.

Because of these constraints on resale value – the sort of thing we take for granted for consumer goods ranging from property to vehicles to furniture – timeshare owners are often left scrambling for a viable way out of their obligation and its attendant yearly fees. Some consumers try to turn a profit by renting out their weeks, only to find that it can be tedious and difficult to do so. Countless more turn to the shadow market that has crept out of the internet, only to be duped a scam that leaves them with nothing more than even greater debt and an increased sense of desperation.

So when the resort offers up the promise of a no-strings-attached “repurchase program” – one that offers you money in exchange for your unwanted timeshare points – it can be powerfully appealing. The only problem? More often than not, there are, indeed, strings attached.

For an in-depth look at one repurchase program offered by a major resort company, we encourage you to read this recent post brought to our attention by Lisa Ann Schreier (@LisaLooksAt on Twitter), the timeshare industry expert and crusader behind Timeshare Insights. The machinations are complex and fascinating, and well worth a thorough examination.

Broadly speaking, the resort’s repurchase program offers members the opportunity to have their points bought back on a first come, first serve basis. And while this is certainly an appealing offer on paper, it comes with numerous caveats.

 

For instance, the developer’s budget for this repurchase program is restricted “to 1% of the Developer’s last year’s sales.” As the piece that Lisa highlights points out, if the resort sold $52,000,000 in membership points last year (a generous estimation), their budget for the repurchase program would be around $520,000. If the program paid an average of $10,000 a buyback, they may be able to accommodate 50 or so a year. This still sounds worthwhile – until one considers that the waitlist, by some insider accounts, may be up to 3000-plus people and counting! At that rate, it may take more than 50 years to have your membership addressed!

And it bears remembering that all of these numbers are one author’s estimates based on accounts and industry trends – the actual numbers, kept under tight wraps by the developer, could be substantially different, affecting your outcome even more.

Then there is the matter that not all consumers are even eligible for this program: According to the post cited by Lisa, you must have bought your points directly from the developer (another check on the secondary market!), and owned them for a minimum of five years. Five years paying for an unwanted membership and its attendant fees? When it comes to your credit and financial stability, half a decade could easily feel like a lifetime!

And, finally, a major caveat worth examining is the repurchase price – which, as the article points out, almost always works to the benefit of the resort. For owners who have had their points for fewer than eight years, the program offers “a purchase price equal to the lesser of sixty (60%) percent of the original purchase price or forty (40%) of the lowest current sales price charged by any developer on a sale of the same number of resort points;” for those who have owned for eight years or more, they are eligible to “be paid a purchase price equal to the lesser of one hundred (100%) percent of the original purchase price or forty (40%) percent of the lowest current sales price charged by any developer.”

However, as the writer makes clear, “it almost always works out to the 40% of the lowest current sales price being the lesser value.” For example, if the current sales price were $200, and you paid $125 a pop for your 120 points nine years ago, you would get the lesser of $125 or $80 a point – aka, $80. You would get back less than $10,000, despite originally paying around $15,000. And while this is comparable to what you might expect for a used car or a secondhand piece of clothing (most items do depreciate, after all), it’s hardly an offer worth salivating over, particularly when you keep in mind all of the taxes, assessments, and maintenance fees you’ll be responsible for while you wait for your turn to come up.

Unfortunately, as this example makes clear, the old adage still rings true – an offer that seems too good to be real probably is.

Led by Attorney Michael D. Finn with 50 years of experience, the Finn Law Group is a consumer protection firm specializing in timeshare law. Our lawyers understand vacation ownership as well as the many pitfalls of the secondary market of timeshare resales. If you feel you have been victimized by a timeshare company, contact our offices for a free consultation. Know your rights as a consumer and don’t hesitate to drop us a line with any questions or concerns. 


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