NOVEMBER 4, 2016

This article appeared in the Baltimore Business Journal onNovember 4, 2016 on pages 1 & 16-18. It has been reprinted by the Baltimore Business Journal

BALTIMORE BUSINESS JOURNAL

COVER STORY

GETTING LURED INTO BUYING A TIMESHARE

IS EASY. GETTING OUT OF ONE ISN’T. HERE’S

WHY THE EXIT INDUSTRY IS GROWING. 16

PHOTO ILLUSTRATION BY STEPHANIE REDDING/ISTOCK

NOVEMBER 4, 2016

This article appeared in the Baltimore Business Journal onNovember 4, 2016 on pages 1 & 16-18. It has been reprinted by the Baltimore Business Journal

BALTIMORE BUSINESS JOURNAL

The

path

HAVE A TIMESHARE YOU DON’T WANT?

AN INDUSTRY IS GROWING AROUND GETTING YOU OUT.

to an

exit

cott and Yvette Rose were

spending thousands on a

timeshare they weren’t using.

e Roses, who live in Bel

Air, hadn’t used the time-

share since a trip to the Grand Canyon

a decade ago. But the bills kept coming.

e Roses and others like them, lured

in by ﬂashy sales presentations, now

ﬁnd themselves stuck with a vacation

option that is inﬂexible and no longer

aﬀordable because of rising mainte-

nance fees.

“We would run for the hills now,”

Yvette Rose said about her $8,549 ini-

tial timeshare contract. “It wasn’t a bad

experience, but we were sucked into a

contract without a way out.”

Ending a timeshare isn’t easy

because many companies are unwill-

ing to let owners out. e demand for

these contracts on the resale market is

weak. Some timeshares are going for $1

on Ebay.

With baby boomers looking to cash

out in droves, a burgeoning indus-

try aimed at getting timeshare owners

an “exit” is growing. Attorneys, online

middle men and businesses, like the

Timeshare Exit Team, a company that

is heavily advertising its services in

Greater Baltimore, are cashing in on

the trend. While the timeshare indus-

try staunchly defends the relevance of

the concept itself — it says the contracts

are still popular and a good vacation

deal — there’s no disputing that, like tat-

too removal, getting people out of their

timeshare contracts is a solid business

opportunity.

The problem

Getting out of your timeshare will cost

you. That’s why a cadre of companies

and attorneys focus on the business.

Desperate timeshare owners also face

potential scammers who get ahold of

timeshare lists and try to profit off them.

NOVEMBER 4, 2016

This article appeared in the Baltimore Business Journal onNovember 4, 2016 on pages 1 & 16-18. It has been reprinted by the Baltimore Business Journal

BALTIMORE BUSINESS JOURNAL

Scammers promising a cancellation

or resale often tell owners to stop paying

their maintenance fees. After providing

payment, owners never hear from the

scammers again. Instead, they are left

still owning their timeshares as well as

now having damaged credit.

Stephen Holmes, CEO of Wyndham

Worldwide Corp., told analysts in sev-

eral earnings calls over the past year

the company has seen the number of

defaulted payments increase. Wyndham

has pursued legal options, Holmes said,

but the “best defense is a strong base of

happy, satisfied, timeshare owners.”

Scams are one of the main reasons

Natalie Koss, managing partner of

Potomac Legal Group in Washington,

D.C., says she works with clients and

timeshare companies to negotiate an

end to a contract.

Koss said many of her clients are peo-

ple who suddenly realized their points

package, which was supposed to help

get reservations at beach or casino prop-

erties, couldn’t be used at many loca-

tions. When those owners complained

to the timeshare company about an

inability to book reservations, compa-

ny salesmen used it as another selling

opportunity.

Changes in lifestyle, lack of availabil-

ity and maintenance fees are among the

top reasons people choose to get out of

timeshares, Koss said.

Maintenance fees alone have

increased by 65.8 percent over the last

10 years, from an average of $555 per

year in 2006 to $920 in 2015, accord-

ing to the American Resort Develop-

ment Association, a timeshare indus-

try group.

The process

Timeshare Exit Team bills itself as an

alternative to lawyers

The Lynnwood, Wash.-based compa

ny, has an office in Towson and opened

a Columbia office in October.

Brandon Reed founded Timeshare

Exit Team in 2012, after facing his own

struggles with getting out of timeshare

contracts.

Since then, Timeshare Exit Team

has experienced rapid growth, the CEO

said. In the past 18 months, the com-

pany has grown from 30 employees in

12 locations to more than 170 employ-

ees at nearly 40 offices nationwide. Reed

declined to say how many customers the

company has exited.

Timeshare Exit Team promises to

take on cases by acting as an agent for

the customer, Reed said. The compa-

ny negotiates deals with the timeshare

companies. Through a partnership with

a law firm, the company also has attor-

neys who can litigate cases if timeshare

companies will not agree to a deal.

Reed declined to disclose which law

firm the company partners with, saying

it is a “trade secret.”

“You never have to communicate with

the timeshare company again,” Reed

said. “We manage the entire ecosystem.”

So how does it work? First, a custom-

er attends a consultation. At that time,

Timeshare Exit Team provides a quote

based on the customer’s situation and

how long it estimates the exit process

will take.

Clients are assigned an account coor-

dinator who becomes a point of contact

during the entire exit process. Reed said

the coordinators “never” advise custom-

ers to stop paying their maintenance

fees to the timeshare companies.

When Timeshare Exit Team has a

possible deal, the account coordinator

updates the client. Sometimes the deal

may include payment of maintenance

fees if the client is not current with their

payments. If the client declines the deal,

Timeshare Exit Team tries to negotiate

another deal.

Howard Nusbaum, CEO of the Amer-

ican Resort Development Association,

does not think timeshare owners need

to hire middle men. If someone is cur-

rent with their maintenance fee pay-

ments and has paid off their mortgage,

he said, the resort should make an offer.

“I would be shocked if they would

be unable to get a good deal,” Nusbaum

said. “If it’s not paid for, there is prob-

KAITLIN NEWMAN

Scott and Yvette Rose, residents of Bel Air, say they were initially “sucked” into buying a timeshare.

NOVEMBER 4, 2016

This article appeared in the Baltimore Business Journal onNovember 4, 2016 on pages 1 & 16-18. It has been reprinted by the Baltimore Business Journal

BALTIMORE BUSINESS JOURNAL

ably going to be a problem.”

Koss and Reed both said

timeshare owners experience

difficulties because resorts are

often unwilling to commu-

nicate until lawyers become

involved.

“If people were success-

ful in getting out of their con-

tracts, we wouldn’t be hav-

ing the success we have had,”

Reed said.

For the Roses, the decision

to use Timeshare Exit Team

came out of fears about getting

scammed by resellers.

For example, Arizona Attor-

ney General Mark Brnovich

filed a consumer fraud law-

suit last year against a time-

share resale company accused

of making hundreds of unso-

licited telemarketing calls to

consumers who owned time-

share properties. The lawsuit

claimed consumers in several

states may have paid Arizona-

based Condosmart LLC thou-

sands of dollars for services

that were not provided.

There also have been sever-

al lawsuits filed against resorts

for using deceptive sales prac-

tices during presentations.

For example, Orlando,

Fla.-based Westgate Resorts

lost a legal battle in Tennes-

see last year when a judge

issued a $500,000 judgment

against the company for act-

ing “intentionally and fraud-

ulently.” Earlier this year, the

Consumer Financial Protec-

tion Bureau opened a federal

probe investigating Westgate’s

sales practices.

A guarantee

The Roses said they received

solicitations from companies

offering to resell their time-

share. They decided to go with

Timeshare Exit Team because

its radio ad offered a full refund

if the exit didn’t work.

Timeshare Exit Team

declined to say how much it

charges its customers. The

Roses paid $3,600 to Time-

share Exit Team. Consumer

Reports said in February the

average charge for such ser-

vices is $3,900.

The Roses bought their

timeshare in 2002 after attend-

ing a sales presentation with

the promise of a free trip at the

end. They did not originally

intend to purchase a contract,

but after the salesman offered

them a “great deal,” they could

not turn it down. They hoped

the purchase would push

them to travel to places they

had never gone before.

Early on, the Roses did use

their timeshare. But then they

had children and their lives

changed. They also found their

timeshare was limited. They

could only use their points at

certain times and at a limited

number of locations.

“We started taking larger

vacations with extended fam-

ily, and the places we went to

didn’t have timeshares,” Rose

said. “We also started finding it

harder to get availability.”

The Roses stopped using

their timeshare but continued

to pay the monthly mainte-

nance fee, which steadily grew

year after year. In 2016, the fee

had gone up to $50 per month.

They couldn’t resell their

points-based timeshare

because of a lack of interest.

“$3,600 is nothing to sneeze

at, but we have heard of people

paying a lot more,” Yvette Rose

“If people were successful in

getting out of their contracts,

we wouldn’t be having the

success we have had.”

BRANDON REED,

Founder of Timeshare Exit Team

HOLDING STEADY

Number of timeshare units in the U.S.

50,000

100,000

150,000

200,000

‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15

176,232:

units in 2006

200,720:

units in 2015

225,000

175,000

125,000

75,000

25,000

Timeshare sales have been recovering since the recession.

Maintenance fees on timeshares are rising.

$10

$12B

$6.3 billion:

sales in 2009

$10.6 billion:

sales in 2007

$8.6 billion:

sales in 2015

$920:

fees in 2015

$555:

fees in 2006

$400

$600

$800

$1,000

SOURCE: AMERICAN RESORT DEVELOPMENT ASSOCIATION

When people buy timeshares, they

are only paying for the right to use a

space for an allotted period of time.

There are other costs people need

to consider before they purchase a

timeshares.

THE HIDDEN EXPENSE

OF TIMESHARES

AIR FARE

FOOD

CAR RENTAL

MAINTENANCE FEES

ISTOCK ILLUSTRATIONS

NOVEMBER 4, 2016

This article appeared in the Baltimore Business Journal onNovember 4, 2016 on pages 1 & 16-18. It has been reprinted by the Baltimore Business Journal

BALTIMORE BUSINESS JOURNAL

said. “It was worth it because now we

are out of the contract and don’t have

to worry about the maintenance fees

anymore.”

‘It’s like owning a car’

Like the Roses, many timeshare own-

ers find they are unable to resell their

contract.

The problem comes down to sup-

ply and demand, said Amy Gregory, an

assistant professor at the University of

Central Florida.

“There is lots of supply but not much

demand. There is a lot of inventory out

there,” Gregory said.

Demand on the secondary market

depends on quality of the unit, Ameri-

can Resort Development Association’s

Nusbaum said. A unit at a Disney resort

for a prime vacation time will probably

get resold, but a unit at an older resort

in Ocean City may not be as popular.

“It’s like owning a car. If you wanted

to sell an Audi right now, it would be no

problem,” Nusbaum said. “But let’s say

you want to sell a 1983 Chevette. Not a

lot of people want to buy that.”

Timeshares are often misunderstood

by people, Nusbaum said, because peo-

ple think they are investments. Time-

shares do not appreciate, he said, and

the value comes from use.

Over time, families can save money

by using timeshares. They average fam-

ily spends about $3,000 for a vacation

including travel and two hotel rooms

for a week.

A timeshare costs about $28,000 over

10 years, he said, and provides the com-

fort of home.

If people do not use their timeshares,

he said, then of course they will become

frustrated with paying maintenance

fees.

“For some people, vacationing is

important,” Nusbaum said. “Owning a

timeshare is about commitment.”

HOW A TIMESHARE WORKS AND HOW TO GET OUT OF ONE

RENT OUT TIMESHARE

Use location/points to rent

out timeshare space

Options when not using a timeshare

SWAP TIMESHARE

Trade timeshare spaces

with other owners

GET OUT OF CONTRACT

Various ways to go about this

SOURCES: AMERICAN RESORT DEVELOPMENT ASSOCIATION; POTOMAC LEGAL GROUP; TIMESHARE EXIT TEAM

MAKE INITIAL PURCHASE

Pay cost of timeshare, sign

contract (may have to pay

transfer and recording fees)

STATIC TIMESHARE

Traditional contract

(Same place, same time)

RESCIND

Maryland allows 10 days to

cancel sales contract

HIRE EXIT

COMPANY

Acts as an agent

for client and

gets power of

attorney

HIRE ATTORNEY

Will negotiate with company,

litigate, or make estate plan

NEGOTIATE WITH

TIMESHARE COMPANY

Pay fee, must have

mortgage paid o and be

current with maintenance

fees

RESALE

Lack of demand, owners

won’t get money back

POINT-BASED

Use points to pick location

and date

“It’s like owning a car. If you wanted to sell

an Audi right now, it would be no problem.

But let’s say you want to sell a 1983

Chevette. Not a lot of people want to buy

that.”

HOWARD NUSBAUM,

CEO of the American Resort Development Association