A new survey from Vacatia reports that timeshare owners are happy with many things about their timeshares, but have one big concern - potential difficulties in selling their timeshares. Surprise, surprise! If it was as easy to sell a timeshare as it is to buy one, this industry would be a lot different than it is today.If only buying and selling timeshares worked like other things...
Vacatia (who sponsored the survey) runs an online timeshare marketplace, a website that facilitates buying and selling timeshares. While I applaud the idea (and have a few notes on their site below), I'm afraid that having a new online marketplace will not address the fundamental issues with the timeshare resale market.
Here are the real problems, as I see them.
Business model means a big price drop when selling
Selling new timeshares is quite a business. Companies give away significant freebies to keep a steady stream of prospects coming in the door, and run them all through a high pressure sales funnel. It's an unusual business model, and I don't know of any other industry that operates quite the same way.
Where does this become an issue for resales? Because of the built-in difference in sales power between the timeshare company's streamlined sales system, and your sales system when you want to sell.
Look at it this way. Say you have a couple who are intelligent and knowledgeable, and able to evaluate what value they will get from owning a timeshare. If their own analysis would lead them to think a certain timeshare is worth $50K, then the timeshare company would not need this extensive, expensive system. They could sell it like other real estate - list it, advertise, show the property, and let people make up their own minds. The current system is needed because so many people, given all the facts and time to make up their own minds, would not buy a timeshare at the retail price.Your sales system isn't quite as sophisticated as theirs
When you try to sell that timeshare you bought retail, you don't have a big league sales system to convince people to bay big league prices. You don't have a high pressure environment, where you can keep your prospects captive for a couple of hours as you beguile them with possibilities. Your timeshare will have to sell on its own merits, with whatever info you can put in a sales ad. Lower selling power translates to a lower price.
Right now, the deck is stacked for you to take a significant loss when you sell, because you don't have the same machine behind you.It sometimes seems the deck is stacked against you
Resale limitations make selling more difficult
Whenever a timeshare still has active sales going on, that means the developer sales are in competition with current owners who are reselling those same timeshares. How can they charge $50K for a timeshare, while a current owner is offering the same thing for $5K? Enter the world of resale limitations.
This is where timeshare companies say that resales only get a limited product. An analogy would be that this is like buying a car that is fully equipped and fully capable, but knowing that when you go to sell it, whoever buys it will not get the same package you have. How serious this is depends on the company involved.
- Minor details. With some companies, the limitations are fairly minor. It's like knowing when you sell the car, the rear window defogger will be gone.
- Major limitations. For other companies, the limitations can be significant - more like capping the speed, so the next owner won't be able to drive on the highway anymore.
You can see why this makes it harder to sell your timeshare.
- First of all, it means the value (and price you can get) goes down when you decide to sell.
- Secondly, for the timeshares with major resale limitations, how many people want to buy a product so limited? Your pool of potential buyers is diminished.
The fact is that timeshare companies don't really want you to sell your timeshare. As long as you own it, they have somebody paying maintenance fees, and life is good. When you try to sell, that's when it becomes a problem for them.
Some timeshares are nearly impossible to give away
Some timeshares get into an area of negative value, so that it is almost impossible to sell them, or even give them away. These are the timeshares that you see on a timeshare sales site, with 35 of them for sale, starting at $1. How does this happen?Unfortunately, selling some timeshares is nearly impossible
- Rising fees. When maintenance fees grow and grow until they reach a level that is too high for what you get, then the value is not there anymore. If I can rent something comparable for less than the maintenance fees, why would I want to pay more and lock in that negative value?
- Seasons. In some cases, seasonality can lead to negative value. In many places, owners in every season pay the same maintenance fees. However, the value is much greater in the high season, when everybody wants to be there, and accommodation prices are high. In the off season, few people want to be there, and you can pay much less to just rent something than you would for those maintenance fees.
- Underpriced rentals. Another issue is when the timeshare company themselves rent out units for less than the maintenance fees. Once again, why would you buy, when you can get the same thing for less, without any on-going obligation?
These problems leave the unfortunate owners of these timeshares in a difficult spot. How can they get rid of something nobody wants to buy?
What's the solution?
I don't know how to fix all of the problems, but I do have a few ideas that can help people.What's the solution?
- First of all, I am a big believer in buying timeshares on the resale market. This eliminates the typical steep price drop due to the discrepancy in sales power between you and the developer.
- Secondly, by buying resale, you work around the resale limitations. Sure, your timeshare has some limitations, but you can sell the same exact thing that you bought, retaining the value that you paid for. You will know exactly how the timeshare works, resale limitations and all, and can represent this correctly to potential buyers.
- Lastly, make sure to do all of your research and due diligence before buying a timeshare, to avoid ending up with one of the lemons. Of course, there is no guarantee, and no crystal ball showing the future, but making sure you start out with a winner makes it far less likely that you will end up with a problem later on.
Note: I know, I know. Somebody has to buy those timeshares the first time! But it may not be people who read this blog, or my timeshare book... 🙂
Vacatia is an online timeshare marketplace, intended to make the process easier and more pleasant for both timeshare buyers and sellers. Among the results of their survey of timeshare owners, the standout item was this:
70% of respondents expressed concern about potential difficulties in reselling their timeshares.
I took a quick look at the Vacatia.com website. I have not actually used the site to either buy or sell, but here are a few thoughts and observations from just looking around the site briefly. (I am not associated with that company in any way.)
- No up front fees. This is definitely important for sellers. You do pay a fee, but only once the sale is made.
- Nice, simple, attractive format. They present all of the timeshares in a consistent way, and the overall effect is quite appealing.
- Data is inconsistent. The format was consistent but the data was not, based on a few random spot checks I did. For instance, the same exact 2-BR timeshares at a resort that I know personally, had maintenance fees listed from $431 per year, to $500 per month.
- There are already other timeshare marketplaces available, such as Redweek or eBay. Of course, when you look through those, you can find inconsistent or incorrect information, as well. Buyer beware.
- They offer a service "Vacatia Guaranteed", where they will verify all of the details of the timeshare to confirm that the information is correct. I really like that idea, but since there is an additional cost to the seller, I'm not sure how many people will take advantage of it.
I wish Vacatia all the best, and I do want to see the resale market improve. However, until some of the fundamental issues are resolved, I don't think an online marketplace is really going to fix people's concerns.
Have you sold a timeshare? If so, what was your experience? Are you thinking of selling one, and are you concerned about it? I'd love to hear what you think, so please leave a note in the comments below.