Why Is There No Resale Market?

[JLB Please excuse me, I'm a Dick. Not a moron just a Dick Find all posts View Profile Close JLB]

We talk about it like it is an axiom, that timesales are worthless in the resale market.

Why do you think that is?

[jlwquilter Senior Member Find all posts View Profile Close jlwquilter]

I think one factor is that there's currently such a discrepancy between what the resort based seller wants (thousands and thousands) and what the resale eBay seller wants ($1 or so) that people can't wrap their heads around it. There MUST be something wrong with the $1 timeshares. The disparity is too great.

I am thinking of the monkey story that was just posted. If ALL the re-sale timeshares went away for a little while and then all came back priced lower, but closer to what the sales weasels are asking, then a stable resale market could happen. But of course someone will always be desperate to sell for whatever reason and the race to the bottom starts again unless sellers ignore the random anomoly. Kinda like price fixing.

The general bad reputation of the product also hurts. People that really could benefit from timeshare ownership don't even want to listen. And the bad rep also seems to 'justify' the $1 price tag... see? I told you they are scams, worthless, etc. if they only sell for $1!

Lastly (not really lastly), getting good to great value out of a timeshare means work. And most people are lazy, especially when it comes to how they spend their leisure time. If doesn't fall into their laps with a bow on top, they are not interested. Well, that's my observation anyway.

[ace2000 Senior Member Find all posts View Profile Close ace2000]

I'll say it again, it's the MFs. For example, I have a resort that offers me one week of usage for a set amount of MFs and potentially SAs.

The market has determined how much that is worth. As long as MFs keep going up at a rate higher than inflation, it's only going to get worse. And I'm locked into whatever my management has determined to be a fair price for their costs.

Next, think about what that week would be worth if I could rent it for higher than the MFs. Which was possible several years ago. Shoot, I'd settle for breaking even.

Someone remind me why I bought these things?

[eal Senior Member Find all posts View Profile Close eal]

You may be buying a timeshare on ebay for $1 but you are committing to paying often $1000+ FOREVER when you buy resale. That kind of disposable income may be a thing of the past...

[BocaBum99 Super Moderator Find all posts View Profile Close BocaBum99]

It is very simple economics.

Price is determined by the point at which the supply and demand curves for resale timeshares intersect.

There is a significant increase in supply due to:
1) a dramatically greater number of existing owners due to sales made between 2004 and 2008, a percentage of which always want to sell in any economic environment.
2) a greater number of owners who must sell due to one of many financial issues facing their families like the lack of a job.
3) a greater number of owners who are defaulting because they should have never qualified for a timeshare loan in the first place.
4) a large number of timeshare resorts that should self terminate, but, for one reason or another, cannot.
5) the proliferation of vendors who take a fee for liquidating timeshares. They are advertising everywhere.

There is a significant decrease in demand due to:
1) significantly reduced discretionary budgets of consumers
2) current owners who loaded up on cheap timeshares over the past 3 years cannot take advantage of additional timeshares at any cost.
3) the slow increase in educated buyers who are the market for timeshare resales.
4) rising maintenance fees making the rental market and own vs rent market less attractive.

The only way to create a situation where a market clearing price is higher than $0 is for both supply to decrease dramatically AND for demand to increase dramatically. That can happen if maintenance fees are significantly below the rate at which a resort will rent. That will create and sustain an investor market of people who will purchase timeshare units for profit.

Also, supply must be taken out by developers who will do so if and when credit markets ever return to a reasonable level. When that happens, they will start taking back free resale inventory to sell at retail.

Supply can also be taken out if resorts are allowed to terminate their timeshare plans. Selling off the land for an alternate use would net owners a lot of cash and put a price floor on timeshares.

Given the above, the requirement to solve the liquidity issue for the timeshare resale market is as follows:

Make a law in every state that requires a timeshare HOA to take deedbacks for all timeshare units for a transfer fee and 1 or 2 years maintenance fees. This will force the resort to do one of the following:
a) keep the maintenance fees low enough so that units can rent at a profit so owners will take over those units for a price higher than zero.
b) be so burdened with uncollectable fees that it must raise the annual fees to a threshold where owners vote to terminate the timeshare plan.

When the above happens, investors will buy up timeshares for potential capital gain when the timeshare resort is sold off and proceeds are distributed to all owners. Or, those same investors buy up property because there is a positive return on invested capital higher than the risk adjusted return for a timeshare rental.

All of the above will result in price floors that are higher than zero for resorts that remain.

[ace2000 Senior Member Find all posts View Profile Close ace2000]

Boca, great reply! I really enjoyed reading that.

[JLB Please excuse me, I'm a Dick. Not a moron just a Dick Find all posts View Profile Close JLB]

I'll say it again, it's the MFs. For example, I have a resort that offers me one week of usage for a set amount of MFs and potentially SAs.

The market has determined how much that is worth. As long as MFs keep going up at a rate higher than inflation, it's only going to get worse. And I'm locked into whatever my management has determined to be a fair price for their costs.

Next, think about what that week would be worth if I could rent it for higher than the MFs. Which was possible several years ago. Shoot, I'd settle for breaking even.

Someone remind me why I bought these things?

I'm shocked at how many are beginning to sound like me.

Or, we are all beginning to sound like each other.

[ebram Senior Member Find all posts View Profile Close ebram]

It is nit so much there is no market, but they is no market for dog off season weeks and markets where there is much overbuilding. No bargains on summer oceanfront and ski in ski out winter weeks if you can even find them.

[winnipiseogee Junior Member Find all posts View Profile Close winnipiseogee]

Great post Boca -

Although I've debated various resale ideas for quite some time your is the first that actually seems like it would work.

FYI there is a resort on Acadia in Maine where the HOA manages the resale process for owners (its an owner managed property) and they actually seem able to maintain some resale value. Of course I'm not sure if its because owners managing the property keep MF low or because there is a transparent resale market where everyone can see exactly what goes on without worrying about getting scammed!!

[ace2000 Senior Member Find all posts View Profile Close ace2000]

I'm shocked at how many are beginning to sound like me.

Or, we are all beginning to sound like each other.

Actually I've been posting my example on the worth of timeshares for several years.

As far as when I went negative on my timeshare weeks, it probably happened very soon after I couldn't rent a high red summer week for more than $300. That probably did it. And that occurred two summers ago.

[JLB Please excuse me, I'm a Dick. Not a moron just a Dick Find all posts View Profile Close JLB]

Actually I've been posting my example on the worth of timeshares for several years.

As far as when I went negative on my timeshare weeks, it probably happened very soon after I couldn't rent a high red summer week for more than $300. That probably did it. And that occurred two summers ago.

You are my twin. Exactly the same deal. First it went to only getting $300. This year all I'm getting from cl ads are propositions, so to speak.

[stevenvwood Junior Member Find all posts View Profile Close stevenvwood]

resale

I have bought lots on the resale market for 10% to 20% of what they sell from the timeshare companies. People that buy direct don't actually understand that difference. There are usually perks for buying from the timeshare company and I have actually bought very small upgrades from the timeshare company to pull in all the benefits (I can actually use those benefits for all of my ownership, not just the small upgrade).

[JLB Please excuse me, I'm a Dick. Not a moron just a Dick Find all posts View Profile Close JLB]

I have bought lots on the resale

So have most of the folks here.

All of our six weeks, for instance. Never got less than anyone else.

There I go repeating myself.



The problem is, any more, that even at free, most timeshares are worse than worthless because of the ongoing obligation.

There I go repeating myself again.

[Spence Super Moderator Find all posts View Profile Close Spence]

It is very simple economics.

Price is determined by the point at which the supply and demand curves for resale timeshares intersect.

There is a significant increase in supply due to:
1) a dramatically greater number of existing owners due to sales made between 2004 and 2008, a percentage of which always want to sell in any economic environment.
2) a greater number of owners who must sell due to one of many financial issues facing their families like the lack of a job.
3) a greater number of owners who are defaulting because they should have never qualified for a timeshare loan in the first place.
4) a large number of timeshare resorts that should self terminate, but, for one reason or another, cannot.
5) the proliferation of vendors who take a fee for liquidating timeshares. They are advertising everywhere.

There is a significant decrease in demand due to:
1) significantly reduced discretionary budgets of consumers
2) current owners who loaded up on cheap timeshares over the past 3 years cannot take advantage of additional timeshares at any cost.
3) the slow increase in educated buyers who are the market for timeshare resales.
4) rising maintenance fees making the rental market and own vs rent market less attractive.

The only way to create a situation where a market clearing price is higher than $0 is for both supply to decrease dramatically AND for demand to increase dramatically. That can happen if maintenance fees are significantly below the rate at which a resort will rent. That will create and sustain an investor market of people who will purchase timeshare units for profit.

Also, supply must be taken out by developers who will do so if and when credit markets ever return to a reasonable level. When that happens, they will start taking back free resale inventory to sell at retail.

Supply can also be taken out if resorts are allowed to terminate their timeshare plans. Selling off the land for an alternate use would net owners a lot of cash and put a price floor on timeshares.

Given the above, the requirement to solve the liquidity issue for the timeshare resale market is as follows:

Make a law in every state that requires a timeshare HOA to take deedbacks for all timeshare units for a transfer fee and 1 or 2 years maintenance fees. This will force the resort to do one of the following:
a) keep the maintenance fees low enough so that units can rent at a profit so owners will take over those units for a price higher than zero.
b) be so burdened with uncollectable fees that it must raise the annual fees to a threshold where owners vote to terminate the timeshare plan.

When the above happens, investors will buy up timeshares for potential capital gain when the timeshare resort is sold off and proceeds are distributed to all owners. Or, those same investors buy up property because there is a positive return on invested capital higher than the risk adjusted return for a timeshare rental.

All of the above will result in price floors that are higher than zero for resorts that remain.

"bizarre"

[spirit Junior Member Find all posts View Profile Close spirit]

Interesting post

The timeshare owner has changed over the last 30 years. Originally timeshare owners bought into a very nice vacation package. The resorts were new, they were fairly young with good incomes. They needed the space for their families and were willing to pay a premium for the right to stay in a very nice place at a price they could afford. Timesharing met their lifestyle needs.
Fast forward 30 years. They are retired, the kids are grown, the resort is older, they want to spend time at their new retirement place in Arizona etc.. They do not need a "break" from a high paced lifestyle. The owners at the resort have changed. They are not their peers anymore but...renters, young families, partiers, The resort is older, needs more maintenence, fees go up.
In many cases the wives DO NOT want to spend their time cooking and cleaning. The vacations they want now are cruises, all inclusives, tours of Europe ex. Rick Steeves. They just want out. Timesharing does not meet the needs of these owners.
Over the past few years, the original owners sold their packages at rock bottom prices ( I bought 2 of them for my family) Others bought these packages as investments. Now with the recession, weeks go begging for renters because of the economic downturn. When your job is uncertain you do not take many holidays. Also many young couples do not want to spend their time at a resort. Too much like their grandpa's holiday. Kiss of death. I know my own children do not want my timeshares but I am hoping that when the grandchildren come along and air fares go up for a family of 4, 5 or god help me 7 or 8, they will see the benefits of timesharing. But I am not holding my breath. Right now they live close to the timeshares I own but if they ever move and have to fly there all bets are off.
Personally, I love timesharing. I would love to buy 2 more prime weeks at my home resort but my husband says no. He does not want future obligations and for now I can rent those weeks easily with no obligations. So I am not buying. My kids are not buying and investors are not buying because the rental market has dried up. I know that one more resort in Canada is in financial difficulty. Aviawest is in creditor protection proceedings. I was going to buy a week there but backed away when I heard about the financial problems they were having. I want this headache? At least the pain from a root canal is over and done with in a few hours. Pain from timeshare ownership is almost guaranteed sometime in the future. So far my resort is financially stable, knock on wood. I have only been an owner for 4 years but the 4 years I have spent on this forum learning about timesharing has been a world class education. Thanks to everyone here on TUG.