Forth Bridge Corporation - Timeshare Information

Selling

So, you bought a timeshare from a resort developer at one of those sales presentations, and now you want to sell it? You contacted your resort, and they either don’t want to handle it for you or they want a 50% commission. You talked it up among your friends and people at work, but nobody was interested. Other people have told you what a big mistake you made buying it in the first place and that you can’t possibly sell it to anyone, anywhere.

Well, the good news is you CAN sell it. In fact, the timeshare resale market is hotter than blue blazes and is getting hotter all the time as timeshares get more favorable exposure in financial publications, newspapers and magazines. Yes, you can sell it; however, you need to understand the facts of life as they apply to timeshares.

If you bought your timeshare from the resort, you will lose at least 50% of your initial purchase price when you resell it. Sorry, but that’s a fact. When you bought from the resort, you probably took a tour, received some gifts and free breakfast, met the salesperson, the tour guide, the admin staff, watched a video, took a brochure…and you helped pay for all that overhead, not only for your purchase, but also for all the people who took the goodies and got up and walked out without buying.

At least 50% of the price you paid went to pay all that selling expense, and the other 50% is the value of the timeshare. When you as an individual go to sell your timeshare in the resale market, you don’t have all that overhead, and a knowledgeable buyer won’t pay you for it. So resale prices start at 50% of the resort’s price, then go down from there as individual owners compete with each other on the basis of price. And sooner or later, the price-cutting levels off and a stable, viable market level is established. You know that old adage about a new car depreciating 25% as soon as you drive it off the lot? Well, in timeshares it’s 50%.

What if you still owe money for your initial purchase? Well, it’s the same as if you have an existing mortgage on your house when you want to sell it. You have to somehow pay off the initial loan. The problem is, you probably won’t receive enough money from the sale to pay off the loan. So you will be required to pay it off from other sources of funds – your savings, your investments, or maybe a home equity line of credit. You must pay off the loan that is tied to the timeshare in order to have clear title to sell it to someone else.

What about other costs to sell the timeshare. Yes, there’s more. You may not have a direct closing cost as the seller, because the buyer will pay for those services. (Of course, you could agree to split the closing costs if you want to.) If you advertise and sell it yourself, you may have an advertising cost, maybe a lawyer fee if you use your attorney. If you sell it through a resale broker, you will pay the broker’s commission, which in the resale market could be a significant percentage of the sales price. Similar to when you sell a house, the real estate broker is entitled to a commission for his services. In home sales, it might be 6-7% of the selling price. For a $100,000 house, that’s $6-7,000. In timeshares, however, most resales sell for less than $10,000, some as low as $1,000. So the broker can’t live with 7% commission. Some brokers charge 25%-35%-50%. Others charge a flat fee. Either way, you should expect the broker to pay for all the costs to advertise, promote, answer inquiries, do the paperwork, collect the deposit, and follow through the process for you. That’s why, if he has to do all that, he has to have a decent income from the proceeds. And, of course, that money is deducted from the proceeds of the sale before you get paid.

The process for selling through a broker is straightforward and analogous to selling a house. In all 50 U.S. states, you are required to have a valid real estate license to sell timeshares. And the process comes under the same laws, regulations and industry standards as home sales. The main difference is that it’s all done through E-mail, fax and snail mail. None of the parties ever meet each other; you don’t all meet in a conference room and sign papers at closing.

I strongly recommend that you use a real estate broker who specializes in timeshares, not a guy who sells houses or commercial real estate, because timeshares are a special case with some specific requirements, and most residential or commercial brokers do not understand them.

You can locate brokers on the Internet. Enter your keywords, and you’ll get a list of web sites. But beware! Not all of them are licensed brokers. You’ll find advertising sites that will charge you a fee to place your “For Sale” ad, like placing an ad in the newspaper. These folks are not licensed to actually sell the timeshare and conduct the transfer. They will take your ad, then it’s up to you to work out your deal with a potential buyer, collect the money, make the transfer, provide the necessary paperwork, etc. Other sites will be for magazines or timeshare user groups where you can place an ad, but again they can’t help you make the sale.

You’ll also find brokers who handle timeshare resales. And there are two types out there. There is an ongoing controversy in the industry between brokers who charge you fees upfront to take your listing and those who believe in earning their commission by selling your timeshare.

The upfront guys say it’s fair to charge a listing fee, an advertising fee, or an “appraisal” fee before they ever take your listing and try to sell it. They claim they have the right to be paid for services they agree to perform, whether your timeshare sells or not. But that’s not very satisfying for you, is it? After all, once they collect a $500 - $600 upfront fee, do they really care if your timeshare sells or not?

Most people don’t mind paying a broker commission if the broker gets their timeshare sold. After all, you’re paying for his expertise, to protect you and your money from an unscrupulous buyer, to make sure the paperwork is done properly, to make sure nothing comes back to bite you later. And you’re also paying him because he knows how to find interested buyers and you don’t. But you only want to pay him for successfully selling your timeshare, because that’s your goal in the first place.

When you’re selecting a broker, ask some questions:

A.	Are you a licensed real estate brokerage, and are all your sales people also licensed?
B.	In what state are you licensed?
C.	What’s your broker number so I can check you out with the state Real Estate Commission?
D.	What’s your company name and business address so I can check you out with the Better Business Bureau?
E.	Do you charge upfront fees?
F.	What’s your commission?
G.	Is timeshare resales your only business, or do you do other things as well?
H.	What percentage of your business is timeshare resales?
I.	Are your listings exclusive? (You want non-exclusive!)
J.	Do you give a Satisfaction Guarantee of any kind?

If a broker won’t give you his broker number or company information, if he wants you to pay ANY money upfront for ANYTHING, hang up the phone and move on.

Once you find a suitable broker with whom you’re comfortable, one who doesn’t charge upfront fees and only gets paid when he sells your timeshare, you will be asked to fill out a listing agreement. This document is where you tell the broker and potential buyers what you have to sell and how much you want to ask for it. The listing agreement will spell out your agreement with the broker, the length of the listing agreement, its exclusivity or not, and the broker’s commission. It will ask you lots of detail about your property, and this is what is called “disclosure”. As the seller, you must disclose to the buyer all the pertinent information about your timeshare, and the buyer will rely upon this information as he decides about buying your timeshare. So make sure the information you provide if accurate. If it is not, you could cause a potential sale to be cancelled, and you could even open yourself up to potential legal action.

The listing agreement should NOT ask for information about your reason for selling, your initial purchase details, your bottom-line price, or any other information not related to the timeshare as it exists today. You are not required to give this information and the broker is not permitted to ask for it. So don’t even volunteer this information in casual conversation with the broker; he really doesn’t want to know it. If he doesn’t know it, he can’t inadvertently divulge it to a potential buyer, and he can’t be sued for malpractice for betraying your confidence. Mum’s the word!

Once you complete the listing agreement and the broker accepts it, you can expect him to advertise and promote your timeshare in whatever way he goes to market. Some brokers use the Internet, some have store fronts, some use paper ads or flyers, some use radio or television ads. You can expect the broker to respond in a timely manner to all inquiries, provide detailed information to the inquirer, and try to sell your timeshare. Some brokers will enhance your timeshare offer by adding incentives to the buyer such as bonus weeks or satisfaction guarantees. During this time, you won’t hear a thing from the broker. You hired him to conduct this phase of the sale, and he’s off doing what you hired him to do.

Once a potential buyer emerges, the broker will obtain a signed purchase offer contract and collect an earnest-money deposit from the buyer. The deposit is held in the broker’s escrow account, strictly regulated by state law, and will be applied to the purchase at closing. The broker will contact you and present the offer to you. If you accept, he will transmit the contract to you for your signature, and you return it immediately. One caution here: You don’t have to accept any offer, but if the offer is from a ready, willing and able buyer at your asking price, you will owe the broker his commission. You have contracted with the broker to bring you a bona fide buyer, and he has done that, so he is owed his commission.

Timeshare resale contracts all have a cooling-off period to protect the buyer, usually 7 to 10 days. During this time, the buyer may cancel for any reason without penalty, and this right may not be waived. So nothing will happen during this period except everybody sits and waits. On Day 11, you are in a binding real estate contract and all parties are obligated to follow through on it. If you default, you could be sued by the buyer to enforce the contract, and also by the broker to collect his commission. Think of it: If you live in New York, the broker is in Florida, and the buyer is in Minnesota, you could find yourself defending two lawsuits in two different states, neither of which is where you live. Not a good thing, right?

Once the waiting period is over, the broker will engage a title agency to conduct the closing. The title agent will perform a title search to make sure all your maintenance fees are paid up and to discover if you owe money to the developer or his bank. In about a month, you will receive your closing statement in the mail, and you sign it before a notary and send it back to the broker. Then all will go quiet for a long time. During this time, the buyer will be processing his closing documents and sending in his money, the resort will be notified to transfer ownership, the buyer’s deed will be registered, a closing will occur, and checks will be disbursed to the proper parties. You will be notified by the broker when this process is completed and you will receive your money at that time.

So, now you know all about selling your timeshare. All you need is to locate a reputable broker. Thanks!