Posted: 10 Mar 2011 02:30 AM PST
Many people buy timeshares believing they are a good investment. In fact, they are the worst possible real estate investment.
Irvine Home Address ... 74 LINHAVEN Irvine, CA 92602
Timeshare or fractional ownership has been around since the 60s, but is was during the 90s this industry really took off. Wikipedia defines Timeshare as follows:
Timeshares give people the opportunity to use property like a hotel occupant while retaining rights of ownership -- a right many believe always brings rapid appreciation. Timeshares do not go up in value.
Many are looking to sell their time shares amid the still-ailing economy and as the first generation of owners are nearing retirement. Some find their properties are worth pennies on the dollar.
By Jennifer Bjorhus -- March 7, 2011
When I was out of high school and out of the house, my parents bought a timeshare like many Americans did. They didn't go very often, and they got tired of paying the fees, so they sold it for a loss. They were glad to be rid of it.
My parents enjoyed their stays at the resort where they got their timeshare, but the cost versus the benefit wasn't in their favor over the long term. This is the experience of most timeshare owners.
I wonder how many of those people kept up the payments on the timeshare while they defaulted on other loans. Why not? If they aren't making a house payment, they will have the money to go enjoy their timeshare. The timeshare operators won't let the "owners" stay if they're in default. It's hard to squat in a timeshare.
Desperation will always breed exploitation. For someone selling one of these through a shady service, what did they expect would happen? After paying an up-front fee that was probably half the value of the asset -- assuming it has any real value -- did the timeshare seller really believe this seller was going to obtain a price far enough above the open market to warrant the fee? Any service you have to pay for up front is probably a scam. Remember the loan mod shops the California Bar had to crack down on?
Personally, i am shocked it is that low. Perhaps timeshare owners more than appreciation loanowners are willing to hang on because the timeshare was always primarily a consumptive use. Any resale value was a bonus. Plus, those borrowers weren't using Option ARMs; although, I doubt timeshare loans were underwritten to tight standards either.
LOL! This guy is hilarious.
For the last nearly two years, Shevy has worked with clients who came through the IHB. In my conversations and in his, we have shown people the cost of the purchase their making and made no illusions about the bleak potential for appreciation and likelihood of continued price decline.
Most clients chose to purchase anyway. But rather than justifying an emotional decision with delusions of appreciation and HELOC riches, these buyers know they are paying a price, a consumptive price to the degree they were paying over rental parity. And that's okay as long as they know that going in.
People are smart and generally rational when they want to be. Buying can still be the right decision, it just isn't buying your own personal ATM machine. It's a shelter that provides a forced savings through amortization and a hedge against inflation.
This guy's retirement wealth is tied up in a timeshare? I hope he has other investments.
I have a news flash for the Holbrooks: they should take the pennies on the dollar and be happy they didn't have to pay someone to take those losers off their hands.
Timeshares make fortunes for successful developers, and they create financial nightmares for most buyers.
I'll let you in on some timeshare industry secrets. But first some background.
As part of the project, I was given a behind-the-scenes tour of their sales operation. These guys set the standard for high-pressure sales techniques that worked. I found their tactics appalling but fascinating in a train-wreck sort of way.
Having previously worked for years with homebuilders, I have seen sales with urgency, but these timeshare sales guys won't take no for an answer. And that's a big part of their model for success. Over the course of dealing with thousands of leads in their controlled sales environment, they have encountered every objection imaginable, and they have developed detailed scripts they memorize and regurgitate on command.
Success in timeshare sales is much like that of interrogators. Police interrogators try to induce people to confess. One successful method is to confine the defendant in a room for hours on end and question them over and over again until they break under the pressure. Timeshare sales is the same.
In timeshare sales, one technique is to show people around the resort in large groups with salespeople assigned to each family, couple or individual to politely badger them. These people are herded into an auditorium with small round tables where the salespeople move in for the close.
Some in the group want to buy and eagerly sign up. When these first few buy, they ring a bell and loudly celebrate. This tells the herd purchasing is okay because others have bought. Very few people have the courage to screw up on their own, but as the housing bubble showed, they will go over the cliff together as long as they are reinforced for their foolishness by the people they see. Once a few people buy, momentum builds, and herd dynamics prompts many to buy when they ordinarily wouldn't.
The people who run these operations are master salesmen who know every trick to quickly close the deal. It's an extremely profitable business for the good operators. For those who don't know how to operate one of these unique sales presentations, attempting to go timeshare would be a disaster.
The timeshare business is profitable because they can sell a $200,000 condo 50 times at an average price of $20,000 a week. If you ever go on one of these presentations, do the math for yourself. It's astounding how much they make, but it's also astounding how much they have to pay out to make it.
So when a timeshare owner pays $20,000 for their week in a condo, they are really buying a 1/50 interest in a $200,000 property. Their $20,000 purchase is really only worth $4,000 at best. So back to the main point of the article of the day, timeshares are the worst real estate investment because they are extremely overpriced when you buy them, and the ongoing fees will make them a liability that after a time outweighs the consumptive value.
I'll just stay at a hotel.
This property was first featured on May 25, 2010 when it was for sale as a short for $710,000. Apparently the negotiations with the borrower broke down because the bank foreclosed on 12/13/2010 and now after what looks like a first-rate renovation by the bank, they are offering it for sale.
The following is updated from the previous post, The California Economy is Dependent Upon Ponzi Borrowers:
Today's featured Ponzi borrower
This couple spent almost half a million dollars in a four-year span. That is a one-family stimulus plan. If they were an isolated case, it may be a titillating story, but I have profiled hundreds of these here in Irvine. It is a widespread practice.
Irvine Home Address ... 74 LINHAVEN Irvine, CA 92602
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