Quite often, many vacation property and timeshare purchasers are blind to the extent of which they have been manipulated into a sale.  Sales reps spend hours in training learning insincere methods to find common interests with their prospects. Often reps are taught to engage in deceitful conversations pertaining to similar life experiences, or other “bonding” strategies that are generally used to build trust in a very untrustworthy situation.

Sales reps are known to imply multiple devious tactics to prevent a new client from canceling their purchase within their cancellation period.  These tactics frequently include making several insincere phone calls, providing free activities and gifts, or taking the client and their family for a meal.

The same “pitch” is frequently used on prospect after prospect, day after day, to come across as authentic and original, in an effort to make the prospect feel special.

This is an attempt to disguise what is really happening. Sales reps hope the groundwork laid through the false trust building process was enough to gain the sale. The sales rep gets a commission check, and the buyer is stuck holding a bag of debt.

This goes hand in hand with timeshare developers being all too eager to remarket to previous buyers.  The unsuspecting prospect is typically told to revisit the resort for an update meeting but in reality, is being lured back into additional debt through another sales process.

In this disguised sales presentation, previous buyers are typically told the terms of their previously purchased timeshare have extreme disadvantages and are made to feel inferior if they don’t go along with the company’s new changes.  No matter what ‘level’ a purchaser has reached, sales reps are trained to lure buyers into another purchase at all times.  All the while still demanding the business is done on the day of the presentation.

All changes pile more debt on to the previous contract and are an obvious ploy to consistently increase profits for the developer.  Enhancements to the program are rarely better than the first purchase, however, strategies such as these are well designed by timeshare developers to continue to rake in profits.

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This has become a common topic our clients prefer to discuss with our consultants nowadays. Some have a hard time getting real answers when it comes to the topic of their personal credit.

Business and real estate owners like many other consumers have developed a very distorted view of what is actually important when it comes to their financial well being. This is usually due to the many lucrative “credit-monitoring products” advertised on television.

Like most business and second home or fractional real estate owners, numerous clients of ours have been hemorrhaging their money for years by pouring money into a failing business or real estate ownership for fear that if they do not it will affect their severely overhyped credit score. Advertising campaigns of credit score information products have grown into a billion-dollar industry in recent years. These companies have made a fortune off of convincing customers that by paying into their services a higher credit score is insured. However, consumers are unaware of who the target customer really is for these kind of corporations. The most ideal consumer these companies can reach is a 30k-100k-income client that is for the most part, not fully financially educated.

Let’s look at it a bit more in depth:

Most consumers in this income range are not aware that in the late 1980’s, credit scores had not even been invented yet. To get a loan you had to show your current income, debt, and any other collateral you had at the time to show the lender you were worthy of borrowing the money.  Guess what? The same methods are still in practice today

Average lenders will not just glance at a simple score and say this customer is approved.

In fact when unscrupulous lenders did exactly that before our last market crash, many consumers bit off much more than they could chew when it came to their home. Lenders and realtors frequently were able to massage a consumer’s ego by complimenting them on their credit score.  This kind of persuasion led buyers to believe a high credit score was their true buying power, regardless of what they actually had in the bank and their debt to income ratio which was the homebuyers’ real ability to pay. We all know the affect this artificial “buying power’ had on our economy.  The affect of lending purely by credit scores helped to cause one of our biggest real estate market crashes in history. Too often people confuse a credit score with their net worth, which causes many consumers to remain in debt.

Consumers will greatly sacrifice their personal net worth (which is what IS most important for any families financial well-being) to keep up the “score” they bought on TV. Top financial advisors don’t agree with this thinking. Here’s an example of why many of them are not in favor maintaining an artificially high credit score at the expense of their families net worth.

When a Lender is qualifying a couple with a $7,000 monthly income for a signature loan and they currently are carrying $6200 in other monthly payments, how important is that credit score now? It’s meaningless at this point. The lender knows that with such little disposable income left the customer has a much higher chance of defaulting. The lender will be asking “what if this person looses their job tomorrow or suffers a medical condition and is immediately in need of funds, can the current debts be liquidated to cover what was loaned to them?”

When it comes to most failing business or fractional real estate ownerships the answer is absolutely not. So, knowing this does it make sense to incur a $15,000 debt for the same product that can be purchased for $1 on auction sites?

These are types of scenarios we work with clients on to examine and help find solutions to. Consumers cannot improve net worth when their focus is distorted by having the wrong information. Remember, credit scores are for consumers who are in debt and wish to stay in debt. Otherwise, why would anyone need them?

Its not always easy to understand the financial impact of an underwater mortgage. As much as the borrower hopes that the situation will fix itself, its not always the case. Sometimes taking a hard look at what (if any) is beneficial about keeping a property that lost significant value is a necessary step for a better financial future.

Navigating the waters of short sales, foreclosure, or deed-in-lieu of foreclosure can be a complicated process. As with many mortgage products, the institution making the suggestions generally do so for their benefit. This bias makes it hard for the client to know if what they are being directed toward is in their best interest or the institutions. For those who are making payments time is even more of an essence. Clients in a long-term mortgage don’t often realize that only a tiny portion of the monthly payment actually goes to paying off the principle. Paying long-term on an underwater mortgage, with monthly payments that hardly scratch the surface of the principle, can really derail clients from other financial goals. Owners Financial Services can help discuss mortgage avenues such as loan modification, principle reduction, short sale, and other methods that can greatly help mortgagees who are struggling with negative equity on a residential property.

Dissolving and mediating foreign purchases owned by a partnership can require more attention and time than individually owned domestic purchases, however they are in no way beyond dissolving at a reasonable cost.  Dissolving the partnership through mediation can save owners thousands of dollars in legal fees verses paying expensive international legal fees to achieve the same result.  Contact our mediation department for a precise assessment of your current situation.

The secondary market is immensely saturated with desperate owners who are deeded even the best locations who cant get rid of them at any price. Kids hardly ever want mom and dad’s second home’s and fractional properties, and other would-be buyers are also turned off by the mandatory fees of ownership. That and (for many) the costly and unclear methods of exchange make for a nearly impossible sell.

Adding to this, non-fractional real estate owners can just quickly book a luxury condo vacation through the many reputable rental websites out there.  Open market rentals are almost always less costly and easier to reserve. Users of these websites enjoy hassle free, cheaper, and quicker bookings, plus they are never pinned down by mandatory fees and unclear exchange options. Again, it’s these reasons that make fractional ownership nearly impossible to sell.

About as close to 0% that you can get. For the past 30 years owners have been receiving mail and phone calls from marketing companies that claim selling their ownership would be quick and lucrative.

The fact is these marketing companies are entirely supported by upfront fees that generally range from $300 – $1500. They know perfectly well that these will never sell but they disguise their upfront fees by telling clients it’s for “closing costs,” or “transaction fees.”

Think about it, if these companies had successful sales records they wouldn’t be asking for upfront monies, they would just take their commission at the closing like all real-estate brokers.

Other than monthly payments, homeowners association fees might single-handedly be the number one concern for second home or fractional real estate owners. It is also why fractional ownership plans are nearly impossible to sell. Here’s what’s going on behind the scenes, and why fees will continue to go up.

Things like taxes, insurance, electric, water, and wages for employees will generally increase and cause maintenance fee hikes.  In addition, units undoubtedly experience accelerated wear and tear. Its almost certain that each unit in a fractional ownership association will see hundreds of guests per year. All that excessive use translates to higher fees for cleaning and replacing worn items inside the unit, and in the common areas as well.

Owners incur these costs whether they use the property or not. This is very scary to would-be fractional owners and a huge reason for the endless people out there failing to find someone to take over their ownership plan(s).

What many vacation ownership clients don’t know is the ease in which booking condos is possible; without the many fees that go along with ownership.  One method mentioned in the “options to sell” tab above is to opt into a “pay-as-you-use” program. These programs have the same inventory as the most well-known timeshare exchange companies but empower the user to book and pay on their own terms. Basically the user doesn’t have to pay maintenance fees but can use the exact same units as those who do.

As resorts age “big ticket” repair items like roofing, concrete repair, HVAC systems, and plumbing will need major repairs. The cost of these big ticket items generally go beyond the standard maintenance budget.  Therefore, the costs are paid by the current owners under the guise “assessment.”

Assessments can range from hundreds of dollars to thousands. Failure to pay special assessments on time leads to steep finance charges, the inability to use the property or exchange program, and (if not paid) foreclosure. The other caveat of assessments is they are non-negotiable; basically you don’t have the luxury to shop around for a cheaper price like you could for other similar services. Whatever the association says you have to pay is what you pay, no matter how high it is.

Most likely if a client is asking themselves this question, they probably do. Toxic assets are fairly easy to spot. The largest metric of a toxic asset is if the cost of keeping it largely outweighs its benefit. Things like if interest is being paid but no equity is being built, if the open market doesn’t recognize any value in it, and if the owner of the asset is powerless to stop its rising future costs. Any one of these things might mean financial headwinds for the future if the ownership continues to go on. Owners Financial is very attune to what is and is not a toxic asset and can quickly assess any clients portfolio to see if one (or more) exist.