Timeshares are one of those ideas that look great on paper. Rather than sinking tens or hundreds of thousands of dollars into a vacation home, a group of people collectively own a property and use it on a schedule. The idea is so attractive that timeshare sales were around $8.6 billion in 2015 .
Despite that growth, the industry as a whole is shot through deceptive practices and outright timeshare fraud. The FTC took action against a timeshare reseller in December 2016 for allegedly scamming consumers out of $15 million dollars.
In February 2017, consumers were warned about a Georgia-based reseller that may have scammed customers out of $200,000 to as much as $1 million.
In the face of so much timeshare fraud, you may be wondering how to protect yourself from a scam. Let's take a closer look to see what you can do.
Timeshare Fraud - What to Watch Out For
Timeshares come in several flavors, so each kind has its own unique types of scams, but there are some general warning signs.
It's an Investment
Any timeshare sales pitch that says or even implies that you're making a financial investment is a flat out deception. Timeshares gain zero value over time. The IRS treats timeshare properties as being functionally worthless .
High-Pressure Sales Tactics
High-pressure tactics aren't an automatic sign of a scam, but those tactics are common to scammers. Scammers want to get as much money from as many people as they can and do it as fast as possible. The high-pressure approach helps them do that.
A salesperson that says it's easy to sell a timeshare is lying to you. Timeshares are very difficult to offload because the contracts are designed to make it hard and expensive to do so.
Credit Card to Attend
Some timeshare companies will ask for your credit card information simply to attend one of their meetings. The only reason a business asks for credit card information is if they intend to charge you for something. In one case, a timeshare company charged thousands of dollars to a woman's credit card on the assumption she would buy into their program.
These are just warning signs and subject to some interpretation. One person's high-pressure tactic is another person's impassioned advocacy. It's possible for you to see any or all of these warning signs and still be dealing with a legitimate company.
Even so, your best defense against getting sucked into timeshare fraud is to steer clear of companies that make use of these tactics.
Specific Timeshare Scams
The timeshare business has been around long enough that specific kinds of scams have been identified. Most of them revolve around people who already own a timeshare and want to rid of them.
The reseller scam is probably the most common timeshare fraud. In its most basic form, the scammer contacts you and promises that they have buyers lined up. They can move it today, but you need to cover things like filing fees and closing costs that often soar into the thousands of dollars .
Once you pay the fee, typically through a shady payment method like cash or a wire transfer, the scammer disappears with your money. The timeshare doesn't sell and you're out several grand.
The reseller-reclaimer type of scam is novel in that it's a scam built on top of the reseller scam. The scammer approaches someone who was a victim of the reseller scam and offers to help recover the money for a fee. You pay them and they disappear with your money.
The pre-seller scam is a variant of a more general type of real estate investment fraud. This scam offers to let you "get in on the ground floor" and buy your timeshare before the building is even built. The problem is that the building never gets built and the money vanishes.
The donation scam takes advantage of people's desire to be rid of their timeshare and their impulse to do a little good. An organization sets up a supposed charity to which people can donate their unwanted timeshare. In this case, the organization does take possession of the timeshare, but at a price.
People who donate are charged excessive processing fees by a company owned by the same people who run the supposed charity.
Avoiding Timeshare Fraud
The people most likely to fall victim to timeshare fraud are those who find their timeshare a serious burden. Timeshare maintenance costs, for example, tend to go up every year and a change in your financial circumstance can make those fees problematic. Here are some things you can do avoid the scams.
Almost every timeshare scam works by offering you the thing you want. It's a sad truth that life rarely provides you the thing you want without demanding a lot of effort in return. If you get an offer that looks a little too great, assume it is.
Never take anyone's word for it that their offer, their service or their company is legitimate. Look into the company and the person to make sure they exist. Your state's consumer protection office is a good place to start the search.
Get It in Writing
Before signing on with any company, get everything in writing. This helps to establish a paper trail that can demonstrate you were promised things that never materialized.
If there is a contract involved, have a lawyer review the document before you sign it. A lawyer is much more likely to spot something questionable in the contract.
Many timeshare businesses are legitimate companies selling a product to people who want it. There are also less legitimate companies that will use high-pressure tactics and outright deception to get people to buy timeshares they don't want or can't really afford. Avoid these companies whenever possible.
The true dark underbelly of the timeshare industry is the scammers who prey on those who want to escape their timeshare contracts. Avoiding them takes some skepticism, research and getting everything in writing.
If you're stuck in timeshare contract you don't want anymore, Primo Management Group specializes in helping consumers use legal means to exit the contract. Contact us today for more information or a free consultation.