The Dangers of Buying a Timeshare on the Secondary Market

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Timeshare Resale Market

Consumers purchase many things based on the simple notion that they’ll be able to gain value from that thing long after the purchase, whether it’s through use or, in many cases, through resale.

Homes, condos, and other properties, for instance, are purchased not just with the short term intent of habitation, but with the ultimate goal of resale – typically at a profit – in the long term. The same goes for cars and other types of vehicles; when a consumer wants or needs to “trade up,” there are a variety of channels he or she can go through to gain some reasonable resale value from their old vehicle, maybe to help facilitate the purchase of a new one. Even clothes have substantial resale value, as sites like eBay and secondhand boutiques and retailers buy up previously-worn clothing in order to resell it to new consumers.

This cycle of use and reuse is so embedded in our economic DNA that we tend to take it for granted. Not only do we expect our homes, jewelry, cars, and furniture to hold – or even increase – in value, as aftermarket consumers, we expect those products to still be up to extremely high standards. We don’t buy a car on the resale market and expect the steering wheel to be missing, or expect a clothing reseller to snip off the sleeve of a previously-worn blouse.

In the timeshare resale market, however, this is exactly what’s happening.

As our own Michael Finn brought to readers’ attention in his recent writing, “The Nearly Nonexistent Timeshare Resale Market: Is the Industry Eating Its Young?,” some prominent timeshare developers “intentionally strip away incidental contractual benefits” when a timeshare is resold.

This isn’t hearsay or speculation; indeed, at least one prominent developer stated as much in its 2015 SEC filings (emphasis added):

“Owners generally can offer their vacation ownership interests for resale on the secondary market, which can create pricing pressure on the sale of developer inventory.  However, owners who purchase vacation ownership interests on the secondary market typically do not receive all the benefits that owners who purchase products directly from us receive… While a purchaser on the secondary market will receive all of the entitlements that are tied to the underlying vacation ownership interest, the purchaser is not entitled to receive certain incidental benefits. For example, owners who purchase our products on the secondary market have restricted access to our internal exchange program and are not entitled to trade their usage rights for Marriott Rewards Points. Therefore, those owners are only entitled to use the inventory that underlies the vacation ownership interests they purchased.”

Exchanges and points are key components of the current timeshare business model.

Removing an owner’s access to these rights will significantly impact his or her ability to use their timeshare in the manner that best suits their needs. After purchasing their interest on the timeshare resale market, this owner will be on the hook for assessments, annual maintenance fees, and taxes – per the developer’s own words – but unable to get the full benefits of an owner who bought the same interest directly from the resort.

Suddenly, that example of the car without a wheel doesn’t sound so far-fetched, does it?

This is all part of a long – and public – campaign by major developers to hobble the timeshare resale market for the sake of their own bottom lines. We can point curious readers to countless examples of resorts condemning an active timeshare resale market, or taking active steps to counter one, including a fierce right of first refusal on all resale transactions. This suppression leads to a confusing and intimidating aftermarket for buyer and sellers alike, one with no guarantee of success but fraught with the very real risk of scam artists and fraud.

After navigating all of these conditions, a consumer’s ability to access the full benefits of their resort can simply be negated, or the sale quashed.

Does that seem fair, friendly, or welcoming to consumers, let alone conducive to the economic health of the industry? While it increasingly seems more and more like a pipe dream, we maintain that a healthy resale market should be part and parcel of the full economic cycle of the timeshare industry, for the benefit of developers and consumers alike. Until that time comes, however, the onus, unfortunately, remains on the consumer: Do your research, know your rights as a consumer, and remember – “buyer beware.”

More Timeshare Resale Articles of Interest

I Was Told a Timeshare Would Be Difficult to Resell.

 


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