# Buyer Default Versus Rescission



## jaygdee (Aug 31, 2013)

I'm a new timeshare owner and TUG member who can add himself to the list of those who wish they had known about this board before buying from a developer.

My situation is this. I purchased a timeshare at the Grand Pacific Palisades Resort in Carlsbad, CA that includes 5000 HGVClub points from the developer while at a presentation August 5. It was only after the 7-day rescission period that I stumbled across information regarding the resale market and its obvious advantages. I understand during the rescission period that I can cancel without penalty, but now I'm exploring potential options to see if it's possible to cancel the purchase before the first payment is due (I had intended to pay in cash anyway, but haven't yet). If the penalties wouldn't be severe, I could still come out way ahead in the long run.

The terms of my Purchase and Sale Agreement state that if I fail to complete the purchase, the "seller shall retain as liquidated damages the deposit actually paid or three percent of the purchase price, whichever is less." That would "constitute the exclusive remedy of seller on account of the buyer..." In my case, the lesser of deposit or 3% of purchase price would be a little less than $600. This seems a small price to pay to potentially save many thousands via a resale purchase. My attorney looked at the contract and agrees that should be the extent of my exposure, although it may take quite a while to actually get the difference from my original deposit back.

Has anyone ever done this or heard of anyone doing this? I would love to think I've still got some options available outside the rescission period.

As an aside, I've already learned a tremendous amount by reading the posts on this site and look forward to learning and contributing more as time goes by.


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## persia (Aug 31, 2013)

You are wise to ask an attorney.  Don't expect them to fight fair, expect bill collectors and (at least temporarily) dinged credit.


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## Passepartout (Aug 31, 2013)

My best guess is that you are a new timeshare owner. The law requiring a cooling off period was fought by developers for obvious reasons. They obey it because they have to, not out of some courtesy to buyers to go out and find out about resale sometime later.

The length of time a buyer has to rescind a purchase is governed by the state where the purchase is made. Some are as short as 3 days, but I don't know any that are 'until the first payment is due'.

Welcome to TUG. Stick around and learn how to use your purchase. Don't feel too bad. Many, if not most TUGgers bought their first TS from the developer, and then went on to buy others resale to 'dollar cost average' to a lower number. Some even bought more developer weeks.

I suppose you are always welcome to send a rescission letter at this late date, but don't expect a lot of success. (imo)

Jim

PS, let me add that since I really didn't answer your either/or question, If you are not able to rescind, and choose to default, expect a ding to your credit before it's resolved. Only you can decide how seriously to take that.


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## SMHarman (Aug 31, 2013)

Hilton, Marriott and Starwood as brands that want to keep their reputation intact will usually let this happen. As you note, you loss 3% but that is better than paying 100% and losing 50%  

Do this and then buy the same or what you really want resale. 

Sent from my LT26i using Tapatalk 2


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## jaygdee (Sep 1, 2013)

Thanks for the feedback. Being new to the whole timeshare thing, I guess I was in some ways equating "default" with "cancellation" and thinking defaulting would be like walking away from earnest money before a home close. But given that I've already closed escrow I could see where it would have credit consequences, besides just the modest financial consequences. I'm not sure I want to risk that.

I can definitely see purchasing some additional points via resale down the road to average down the overall cost of points, but then I'm sure I would be taking on additional maintenance fees. Would there be any way around that?


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## Passepartout (Sep 1, 2013)

jaygdee said:


> I can definitely see purchasing some additional points via resale down the road to average down the overall cost of points, but then I'm sure I would be taking on additional maintenance fees. *Would there be any way around that?*



Nope. More points= more MF.  Acquiring resale points is simply buying another contract along with it's MF obligations. You might still see if for the roughly $600 you can back out of the original purchase. Contact the front office, not the sales department. This is news to me, but if it's what your contract says, that's a reasonable cost to rescind so you can buy resale.


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## SMHarman (Sep 1, 2013)

jaygdee said:


> Thanks for the feedback. Being new to the whole timeshare thing, I guess I was in some ways equating "default" with "cancellation" and thinking defaulting would be like walking away from earnest money before a home close. But given that I've already closed escrow I could see where it would have credit consequences, besides just the modest financial consequences. I'm not sure I want to risk that.
> 
> I can definitely see purchasing some additional points via resale down the road to average down the overall cost of points, but then I'm sure I would be taking on additional maintenance fees. Would there be any way around that?



I believe this default is the earnest money contract default. 

You should make that clear to them and clear that you are willing to expedite the transfer from your name back to theirs. 

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## eugeneleemd (Sep 1, 2013)

plus if you buy resale buy a platinum package 7000 pts since the mf are the same.


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## Passepartout (Sep 1, 2013)

eugeneleemd said:


> plus if you buy resale buy a platinum package 7000 pts since the mf are the same.



Agreed. This is the 'sweet spot' of max points/MF ratio.


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## 55plus (Sep 1, 2013)

Think about having your attorney write a letter to them stating you are going to execute the option that is spelled out in the contract, that if you fail to complete the purchase, the "seller shall retain as liquidated damages the deposit actually paid or three percent of the purchase price, whichever is less." Then ask how long will it take for you to receive the monies owed you.


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## SMHarman (Sep 1, 2013)

morrisjim said:


> Think about having your attorney write a letter to them stating you are going to execute the option that is spelled out in the contract, that if you fail to complete the purchase, the "seller shall retain as liquidated damages the deposit actually paid or three percent of the purchase price, whichever is less." Then ask how long will it take for you to receive the monies owed you.



Or just write a letter like that yourself. No need to pay a lawyer for that. 

I reread the op. Already has an attorney. Yeah, get him to write a letter.  $600 + attorney letter vs $20k. Good deal. 

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## bastroum (Sep 1, 2013)

If you already closed escrow the deal is complete. You will default and it will hurt your credit if you don't make the payments. You now own the timeshare. Almost everyone on this site has bought from a developer. Enjoy the unit and buy resale next time.


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## e.bram (Sep 1, 2013)

Since your contract is a contract of adhesion, any ambiguity in the interpretation the advantage will be with you , not the drafter of the contract.


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## timeos2 (Sep 1, 2013)

jaygdee said:


> The terms of my Purchase and Sale Agreement state that if I fail to complete the purchase, the "seller shall retain as liquidated damages the deposit actually paid or three percent of the purchase price, whichever is less." That would "constitute the exclusive remedy of seller on account of the buyer..." In my case, the lesser of deposit or 3% of purchase price would be a little less than $600. This seems a small price to pay to potentially save many thousands via a resale purchase. My attorney looked at the contract and agrees that should be the extent of my exposure, although it may take quite a while to actually get the difference from my original deposit back.
> .



If that remedy / option is in writing in your contract it may well be a way to get out relatively cheaply. Since it sounds like you alreaady have an attorney have them act on this ASAP and hopefully be able to look into the far better value available in resale(s). And be sure to let us know how it goes whatever the path taken turns out to be.


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## bastroum (Sep 1, 2013)

timeos2 said:


> If that remedy / option is in writing in your contract it may well be a way to get out relatively cheaply. Since it sounds like you alreaady have an attorney have them act on this ASAP and hopefully be able to look into the far better value available in resale(s). And be sure to let us know how it goes whatever the path taken turns out to be.



If the contract was completed on a visit to a HGVC sales office it was probably completed before they left the office. Let's say they made a deposit and failed to sign all the documents. If they didn't return to complete the docs the remedy would have been losing the deposit. Since they didn't rescind in the 7 day time period they now own the unit.


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## timeos2 (Sep 1, 2013)

bastroum said:


> If the contract was completed on a visit to a HGVC sales office it was probably completed before they left the office. Let's say they made a deposit and failed to sign all the documents. If they didn't return to complete the docs the remedy would have been losing the deposit. Since they didn't rescind in the 7 day time period they now own the unit.



May be but if the OP has already invested in talking to a lawyer why not check out any possible "out"? Far cheaper than paying WAY too much for a retail timeshare.  If the buyer is willing to take a hit to get out before the first payment is even due it still could be far cheaper than paying the term out and/or getting credit hits for defaulting. If they agree to a settlement / buyout then there wouldn't be any credit report hit only the cash agreed to to end the deal.  Well worth checking into.


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## bogey21 (Sep 1, 2013)

jaygdee said:


> The terms of my Purchase and Sale Agreement state that if I fail to* complete the purchase*......



My guess is that the key words are "complete the purchase".  My guess is that you are past that point but playing dumb and writing a letter offering to pay the "liquidated damages" is worth a try.

George


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## csxjohn (Sep 1, 2013)

bogey21 said:


> My guess is that the key words are "complete the purchase".  My guess is that you are past that point but playing dumb and writing a letter offering to pay the "liquidated damages" is worth a try.
> 
> George



My take on this is similar to yours, what constitutes completing the purchase?  

I'm not an attorney but I would think that once you paid the deposit and signed all the papers the deal is completed.

I mean how far can one carry this?  Can you make a few more payments and then say, hey, I don't want to keep paying so the deal is not complete?  I hope that is the case for your sake.

Good luck and please keep us informed.


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## jaygdee (Sep 2, 2013)

Thanks for all the additional input. In the original evaluation by my attorney, he was basing his interpretation of the liquidated damages provisions in the purchase agreement on the fact I hadn't been informed yet I had closed escrow. In his estimation, there would be no way escrow could close without my involvement, either, because it appeared the documents had not been completed properly. As it happens, I got an e-mail shortly thereafter saying escrow had closed anyway.

I'm going to meet with him again (hopefully tomorrow or as quickly as possible) to see if the escrow closing changes his interpretation of things. Maybe he'll say that's it or maybe, if he still believes escrow closing should not have been able to occur without my involvement, it's possible there might be legal grounds for cancellation (or at least a settlement).

I'll provide an update as soon as I can. Thanks again for all the helpful feedback from everyone.


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