Timeshare Scams
The sale of real estate by dividing it into 'timeshare' units has become an
extremely profitable way for developers to sell real estate - particularly condos
in vacation hot spots.
Essentially, buying a timeshare means that you and other people are all buying
one property -- and sharing the time you spend in it (hence the name).
Some timeshare properties guarantee you a week a year, others allow for up to
3 weeks annually.
All of them have you pay a portion of the property value itself, and all of
them have you pay a 'common area' cost for upkeep on the building and grounds,
etc.
Most timeshare units are sold at a 'presentation.' There is almost always some
attractive incentive for you to attend the presentation.
Common incentives include discount or free hotel rooms, weekend getaway packages,
or prizes. Some of these are legitimate -- the company makes it clear that you
need to attend a presentation and they know they can afford to give away incentives
because they profitably sell timeshare units.
(We'll talk about a timeshare as an investment in a moment.)
There are also many timeshare scams, and the incentives are where the trouble
usually begins...
Timeshares that are scams will offer everything from a new car or boat... to
a two-week luxury holiday. It's one thing if they offer you a discount or free
hotel room for a couple of nights. It's a totally different thing if they offer
a free car or boat or luxury two-week holiday to everyone who just listens to
a presentation!
Either way, you'll usually find that the presentation involves very high-pressure
sales tactics. Know that going in.
However, the real timeshare scams don't deliver what they promise. For example,
one timeshare scam in England involved people being told they had either won
a sports boat with an outboard motor, a car or £1000. To claim what they'd
won, all they had to do was attend a presentation.
When they arrived at the presentation, everyone had won the sports boat. All
they had to do was pay £49.99 for delivery.
The 'prize' they received was a toy dinghy with a small motor, not a real boat.
The £49.99 easily paid for the 'prize' and the delivery!
Other scams include having to pay an 'administration fee' for a holiday, or
having the company 'go out of business' after they take your deposit.
Another ploy is that attendees are told they can sell the timeshare they already
own -- at a very attractive price. However, the sale does not occur... so they
are now stuck with two timeshares!
Travel club scams may work the same way: people are invited to a presentation,
and offered an amazing prize just for attending. Travel clubs often promise
discounted airfares, special travel packages, and remarkable rates on accommodations.
Here are 7 things you can do to avoid timeshare scams:
1. Don't ever, ever buy (or sell) 'on the spot.' Sleep on it,
and take the time to evaluate whether the deal is a good one.
2. If you are offered a prize as an incentive, read the 'fine print' on the
prize, and DON'T PAY for anything.
3. Read the contract and have it reviewed by an attorney. If the sales person
promised you something that's not in the contract, don't sign the contract!
4. If the presentation is too high pressure, leave. You have every right to
leave when you want. Simply stand up and politely say 'thank you very much but
we're leaving now.' Then go -- don't let them argue with you.
5. Ask for references -- and call them. Ask for folks who have been happy and
unhappy with the previous service.
6. Don't ever call a 1-900 number to book a trip -- it's very likely a scam.
7. Consider a timeshare the same way you'd consider any other real estate investment.
Do research and educate yourself on the market and the value.
Let's now talk for a moment about timeshares as real estate investments. A common
question Nolo Press gets asked is "I've been told that I shouldn't buy
a timeshare because it will be hard to sell later. Is this true?"
Here's their answer:
"Very likely, yes. Timeshare owners face a few difficulties when they try
to sell. The first hurdle is the lack of a strong resale market. Although statistics
vary, all studies show that there are many more timeshare owners wanting to
sell than there are buyers.
"Another problem is the likelihood that you will lose money on the sale
of a timeshare. The original price of a timeshare may have included premiums
of up to 40% to cover sales costs. Also, timeshare properties age and can become
less desirable. So, your resale price may be anywhere from 20% to 60% of the
original purchase price -- plus you will have to pay a commission to the broker
(often as high as 20% of the resale price) who sells the property for you."
Some people prefer to look at the costs of a timeshare in terms of the money
they spend on their vacations rather than as an investment. Just be sure it
makes sense and that you want to go to the same place every year -- or that
there are good options for trading which will work for you year after year.
You can read more about timeshare scams and travel scams at:
==> http://scambusters.org/a/news9.html
For an interesting Mexico timeshare fraud alert (that also includes good advice
on timeshare scams everywhere), visit:
==> http://www.thetimesharebeat.com/mex-fraud.htm
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