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Timeshare Market Heating up with Sales, Reselling Scams

By Broderick Perkins | April 20, 2012

Timeshares' tiny $5 billion slice of the real estate pie is poised to grow even bigger with its increasing sales and timeshare rats are scurrying out of the woodwork to take a bite.

Pasquale Pappalardo and his wife, Lisa Tumminia-Pappalardo, among others, agreed to settlements with the Federal Trade Commission (FTC) that permanently ban them from telemarketing and engaging in timeshare resale services.

Timeshare markets heating up

The ban also comes with a $5.4 million judgment against the two and the south Florida-based Timeshare Mega Media and Marketing Group, Inc. after the operation netted $2.7 million in 20 months by defrauding thousands of consumers to the tune of about $2,000 each.

The operation charged consumers an up-front fee, allegedly a refundable amount toward the sale of a timeshare. Instead, clients received a contract to market and advertise their timeshare, which they mistakenly signed thinking it was a sales contract.

The company never had timeshare buyers lined up, never assisted anyone selling a timeshare and refused to refund money, before the FTC stepped in.

Bracing for more of the same, the FTC has updated a consumer alert, "Selling a Timeshare Through a Reseller: Contract Caveats."

Initial timeshare sales are typically regulated through the real estate regulator in the state where the timeshare property is located.

A timeshare purchase is a purchase of an interval of time at a furnished resort, for an average of about $19,300, according to the American Resort Development Association (ARDA). Intervals are usually one week, but can be longer with "fractional" timeshares. Buyers also pay an annual maintenance and management fee (averaging $731) and may have access to an exchange service that allows them to trade times and places.

When it comes time to dump a timeshare, however, resales generally are not regulated.

This March, in Florida, home of one in four of all U.S. timeshares, Sunshine State legislators passed into law the "Timeshare Resale Accountability Act" to head off more fraud in the resale sector.

Also, last year, the ARDA launched the online "Timeshare Resale Resource Center" ahead of expected growth in sales this year.

The $4.63 billion in timeshare sales in 2010 was up 1.1 percent from 2009, according to ARDA, a far cry from the high of more than $10 billion in sales in 2007, but more growth is expected, according to ARDA.

The FTC said consumers looking to cash in on the growing market and resell their timeshare should question resellers – real estate brokers and agents who specialize in reselling timeshares.

Don't assume you'll recoup your purchase price for your timeshare, especially if you've owned it for less than five years and the location is less than well-known. To determine value, use a timeshare appraisal service licensed in the state where the service is located. Check the license with the state real estate regulator.

Beware of claims your timeshare market is "hot" with buyer demand, claims buyers are available and ready to buy and promises to sell your timeshare within a specific time.

The market is growing, but like the rest of the real estate market, it's growing slowly and the target of scam artists.

The FTC also advises:

• Get everything in writing - the reseller's marketing plan, plans to use a progress report, fees, refund policies, etc.

• Don't agree to anything on the phone, online or otherwise until you've had a chance to check out the reseller. Contact the Better Business Bureau, your state Attorney General and local consumer protection agencies. Determine if any complaints are on file.

• Ask if the reseller's agents are licensed to sell real estate where your timeshare is located. Verify their license with the state real estate regulator. Work only with licensed real estate brokers and agents. Seek references from family members, relatives, friends, co-workers or others you trust.

• Consider doing business with a reseller who takes his or her cut after your timeshare is sold. If you must pay a fee in advance, ask about refunds. Get refund policies and promises in writing.

• Before you sign on the dotted line of a reseller's contract, get the details of all terms and conditions. It should include the services the reseller will perform; the fees, commissions, and other costs you must pay and when; whether you can rent or sell the timeshare on your own at the same time the reseller is trying to sell your unit; the length or term of the contract to sell your timeshare; and who is responsible for documenting and closing the sale.

Never sign a contract with blank spaces or a contract that doesn't include the terms and conditions you desire. Shop around for other resellers.

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