Timeshare cancellation companies pose a threat to the timeshare industry that is different in kind from the seemingly similar relief companies (or post card companies) that came before them. The proliferation of these companies risks triggering a mass panic among timeshare owners; one that could change our industry permanently. Addressing the supply of companies offering cancellation services should certainly be a priority, but only addressing the supply will mean another long and costly game of whack-a-mole for resort professionals. The issue that genuinely needs to be addressed is demand for these services on the part of owners. Reducing demand for cancellation services to the point where it is no longer profitable to be in the timeshare cancellation business solves both sides of the equation.
Relief companies convinced owners to doubt the value of their properties, using fear of rising costs and the lack of a developed resale market to devalue the product, while inadvertently reaffirming the legitimacy of the timeshare contract itself (since it was so “permanent” the only way out was to pay them to take it). Additionally, since a prerequisite to attending a relief presentation was that the timeshare be owned “free and clear,” no owners with mortgages would ever hear the relief sales pitch.
Cancellation companies target owners with outstanding mortgages and, rather than questioning the value of the timeshare, their sales pitch attacks the legitimacy of the timeshare product. With this approach, timeshares are not simply difficult to sell; they are fraudulent financial instruments sold via deception, and the remedy is hiring a lawyer to get out now. (Though many cancellation companies are only loosely affiliated with an attorney, these disclosures are often ignored by consumers and are only given after the hook is set.) Science suggests we remember as little as 10 percent of a presentation after only a week. The typical timeshare owner who contacts a cancellation company remembers very little about what prompted them to buy in the first place; they just know they want out.
Depending on which cancellation company iteration we’re talking about, next steps may vary: Typically there will be a brief consultation with a lawyer or pseudo-lawyer where leading questions will help the owner “remember” deceptive sales tactics used on the tour. Often, owners are advised to allow their timeshare mortgage to go into default. The owner may be given form letters (extortion demands) to send to the resort developer and often to the lender who holds their mortgage. In some instances owners are urged to simply sign a Quit Claim Deed back to the developer and pay to have it recorded in the relevant jurisdiction. In all instances the owner gets put on a list of willing plaintiffs/perjurers to be used in a Class Action Lawsuit if/when the list for a specific developer becomes long enough to be worth it.
The important thing to note here is, that whether or not the owner who hears the cancellation sales pitch goes for it, and whether or not the services provided by the cancellation companies work, is almost irrelevant. The suggestion of illegitimacy is such a powerful one; in the best case scenario it plants the seeds of doubt and distrust of the industry. Over time, confirmation bias does the rest of the work. An exchange request that doesn’t work out, a maintenance fee increase, even just the monthly payment auto-drafted from the family checking account – these all serve to confirm just how illegitimate timeshares are. (Good luck selling this family an upgrade!)
There are limits to how far the cancellation companies’ cancerous message can spread before the industry reaches a crisis. Recently a major developer stated that “increased effort by third parties to encourage customers to default on their timeshare loans” could affect the performance of its loan portfolios. The Pareto Principle (80/20 Rule/Law of Vital Few) implies that 4 percent of the “vital few” are responsible for an outsized 64 percent of the outcome of the “many.” I would build on this logic and suggest that once more than 4 percent of all timeshare owners have been influenced by the ideas of the cancellation companies, it will be too late for the industry to regain control of the narrative. In order to take corrective action, there needs to be some clarity on how we got here. Rather than thinking of timeshare owners as an amorphous group, let’s imagine the specific owner who would have occasion to contact a cancellation company:
John is 40 years old and married. He and his wife, Jane, bought their biennial even-year timeshare while they were visiting Orlando back in 2015. The sale price was $14,000 including closing costs. John put $1,400 on his Visa card, and the balance of $12,600 was financed over 10 years with payments of $210 monthly. John and Jane went back to the timeshare resort in 2016 and they had a great experience in their luxurious condo. Even though John complained about the “pressure” of the inhouse sales presentation, he would have loved to upgrade and have even more points – if he could afford to take more vacations. This year money has been tight, and making the $210 payment on his timeshare feels like more of a burden since he won’t have points again until next year.
John wonders if maybe selling the timeshare and getting rid of the payment would be the best choice, at least for now. Maybe John calls his resort and asks them how he can sell his timeshare. His resort eventually tells him some version of the following: He should contact a commission broker and list his timeshare with them, and he should definitely not “pay upfront” because that would be a scam.
John contacts a few brokers who literally laugh at the idea of selling his timeshare before finding one who will agree to list it at $3,000 with a commission of $1,500 at time of sale. John protests that he still owes $11,326 on his timeshare and there is no way he can send a check for almost $10,000 at time of closing, but the broker has nothing else to tell him. John is now starting to suspect that he might be a victim, and he’s starting to feel quite angry at himself and at his timeshare resort. Then he hears an ad on the radio for a company that can “cancel” his timeshare contract entirely…
Are you starting to see the problem here? John’s resort, perhaps unwittingly, gave him the exact advice that would send him into the arms of a predatory cancellation company. And even if John hadn’t called his timeshare resort at all, he could have read that same “advice” on any number of industry websites (with a few exceptions, such as ARDA.org and my company’s site, BayTreeSolutions.com, each of which endeavor to give the ‘straight story.’)
The only way to reduce demand for cancellation services is to provide newer owners, especially those with mortgages, with hope their timeshares can be resold at a fair price (ideally enough to cover their outstanding mortgage balance). Providing this service in an ethical way is possible, but not without substantial costs. Selling timeshares has always required expensive marketing, and selling them on the resale market is no different. Reaching potential buyers on the internet is neither easy nor cheap. No one is going to provide these services as a charity; the owner will have to pay an upfront fee. The industry needs to start being honest about this.
There is another cost to providing timeshare owners a means to sell their properties at a fair price, and it’s the proverbial ‘elephant-in-the-room’ that no one wants to talk about. Providing owners the means to effectively market and sell their timeshares will inevitably cannibalize some percentage of developer sales. What percentage that might be, eventually, is the great unknown, but there is good reason to believe it would be less than developers fear. (It might be worth pointing out here that a robust resale market for homes hasn’t prevented new homes from continuing to be sold.)
The message of cancellation companies is so toxic it puts developers, their employees, those of us who work in the larger timeshare industry, and especially the countless happy timeshare owners at risk. If developers continue to act as they have in the past, undermining the resale market by attacking the companies working to build it, they will continue to lose ground to cancellation companies – or whatever nightmare comes after them. The alternative is allowing good and hard-working resale companies, like Bay Tree Solutions, to do what we do best: provide cover for developers while growing the secondary market to whatever degree possible, and providing much-needed hope to owners when it matters most.