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Does Lack of Financing Depress Resale Values?

Discussion in 'Buying, Selling, Renting' started by CalGalTraveler, Jul 4, 2018.

  1. CalGalTraveler

    CalGalTraveler TUG Member

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    Does it matter to the seller what kind of loan it is?

    For the HOA as a personal loan it seems they can't just abandon the timeshare.

    For developer defaults, dont they also leave it to the HOA to pay the lien for MF? Are they obligated to take it back?
     
    Last edited: Jul 7, 2018
  2. PigsDad

    PigsDad TUG Member

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    You wrote "Lots of old boats and RVs cannot get financing." I was just responding to that -- I thought it was obvious...

    Kurt
     
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  3. alwysonvac

    alwysonvac TUG Lifetime Member

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    Sorry if you didn’t like my post.
    Simply stating the general mind set doesn’t mean end of discussion. Obviously if I felt that way I won’t have made several other comments in this thread.

    Many topics are not new. They have been rehashed over and over again on TUG so folks are simply going to have opinions.

    For example, the standard advice on TUG is to rescind, research and buy resale. However there are some who have financed and continue to finance their timeshares. And there are some who bought from the developer and continue to buy from the developer. And those topics come up from time to time on TUG as well.
     
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  4. ronparise

    ronparise TUG Member

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    Two things
    There is more to the definition of value than "its what a buyer is willing to pay"


    the classic formula that it is the amount a ‘purchaser willing but not obliged to buy, would pay to one willing but not obliged to sell

    and another definition of value

    The price at which a property, if offered for sale in the open market, with a reasonable time for the seller to find a purchaser, would transfer for cash or its equivalent, under prevailing market conditions between parties who have knowledge of the uses to which the property may be put, both seeking to maximize their gains and neither being in a position to take advantage of the exigencies of the other

    and yet another

    value is the price where the neither the buyer nor the seller gained an objective financial advantage at the expense of the other in the transaction.

    and another

    The most probable price, as of a specified date, in cash, or in terms equivalent to cash, or in other precisely revealed terms, for which the specified property rights should sell after reasonable exposure in a competitive market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably, and for self-interest, and assuming that neither is under undue duress.


    Sure,, value is what a buyer would pay, but there are important qualifiers that have to be considered..
    Ive highlighted important qualifiers in the above definitions


    ********************************************************************************************************
     
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  5. bizaro86

    bizaro86 TUG Member

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    The "for cash" in the above definition is met in a financed real estate or timeshare sale. The seller receives cash. Whether the buyer gets it from their chequing account, a loan, or the sale of a black market kidney isn't especially relevant.
     
  6. CalGalTraveler

    CalGalTraveler TUG Member

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    @Anne&Jim Thank you for your kind comments. Healthy debate is good and takes a conversation forward.

    I have learned a lot from the posters on this thread and will try some of these ideas when I sell because it does not cost anything to try. I can differentiate my TS from others without reducing the price. :thumbup: If others don't want to try it, then that benefits my listing more because it further differentiates my TS. Plus I can still offer a cash price. So what's to lose?

    I believe that there are very few bad ideas. Just bad timing or context. The financial crisis of '08 was a decade ago. Perhaps the conventional wisdom of paying cash and lack of access to financing was borne out of this context when even primary homes could not get financing? Today is different. More financing is available, people have jobs, money in the stock market etc.

    Revisiting sacred cows is always beneficial. As they say in business, "Disrupt or be disrupted."
     
    Last edited: Jul 9, 2018
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  7. Saintsfanfl

    Saintsfanfl TUG Member

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    I've never seen a lack of financing to buy a timeshare, except during the worst part of the downturn, but even then it wasn't that hard to get a loan to buy one. They are high interest high risk loans and given out like candy. You can have the best credit in the world and you will still pay a hefty interest rate.

    Cheap timeshares on the resale market are actually partly due to available financing. Timeshare presentation sales result in a trade-in of current owned but unwanted timeshares for new ones, all financed as a package deal. The old timeshare where the profit has already been banked is dumped as fast as possible to the highest bidder, many times for prices less than $100. The process is repeated over and over.

    Without financing timeshare sales would have been slow all along, or possible non-existent altogether. Resale prices would increase because there wouldn't be so many available units from defaults and trade-ins by unqualified buyers.
     
    Last edited: Jul 11, 2018
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  8. CalGalTraveler

    CalGalTraveler TUG Member

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    Your points are very interesting as it suggests that the reason timeshare resales are so depressed is because of DEVELOPER self-financing which they hand out like candy to people who cannot afford and default. Although this is different than the point that was being made about resale financing, it is a very good point and drives the structure of the industry.

    If Developers did not have self-financing, then people who could not afford would not be able to buy and would not bail out later at fire-sale prices. The industry would not have grown to the size it is today with oversupply in places like Orlando and Vegas. Developers would have a very difficult time selling if people had to cough up the $75k to $100k+ prices they are charging today in cash or bank financing. This supports @ronparise point that developer prices are inflated and that the value of resales are below true value because many are sold as distressed properties when unqualified developer-financed buyers bail.
     
  9. Saintsfanfl

    Saintsfanfl TUG Member

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    Ron is 100% correct. On the self financing keep in mind that they will bundle those loans and sell them to a bank. This was brought up in that documentary about Westgate. Selling the debt was their whole system and during the downturn the banks would no longer buy the loans and Westgate could not afford to continue to self finance.
     
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  10. taterhed

    taterhed TUG Member

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    Yup....
    When the economy is up and financing rules are slack.......new car sales skyrocket. Why? easy credit. The result is a surge of used cars with higher rates and more problems.

    It will be interesting to see the effect of the slowing rising FED rate (maybe not so slowly) and the gradual disappearance of the <2% rates on many forms of consumer loans.
    The times....they are a changing....
     
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  11. Saintsfanfl

    Saintsfanfl TUG Member

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    Changing indeed. Hopefully the federal funds rate doesn't ever go back over 20% like it did in 1980. :eek:
     
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  12. CalGalTraveler

    CalGalTraveler TUG Member

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    Bundling sub-par mortgages was a key factor which led to the '08 crisis. Unlike an individual loan that is scrutinized by a banking committee, such bundles hid many bad loans. Sounds similar.

    In the current scenario, this over-abundance by developers means that it is a buyers' market for resales. What do you think will happen if/when developers cannot sell the loans?
     
    Last edited: Jul 12, 2018
  13. Saintsfanfl

    Saintsfanfl TUG Member

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    Ones that target lower income borrowers and resell, it inhibits their ability to continue selling timeshares. Or they change their cash flow model and keep the loans themselves rather than selling them. I don't know if they all sell the loans, but when the banks won't buy, it usually means the risk is too high, which indicates the ones kept in-house are difficult to manage as well.

    I don't know if anyone truly keeps them in-house. I believe Marriott finances using an independent company. True in-house financing would enable attractive interest rates and even the fake 0% that car dealers offer. Instead every timeshare financing I have heard of is a very high interest rate, even from a max credit rating borrower.
     
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  14. x3 skier

    x3 skier Tug Review Crew: Rookie TUG Member

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    My 0% financing wasn’t “fake” to me. After I negotiated the total price of the car, I divided the cost by 60 and that was the fixed monthly payment. Actually it’s a slightly negative interest rate to me since later payments will be lower in value because of inflation.

    Cheers
     
  15. Saintsfanfl

    Saintsfanfl TUG Member

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    0% interest rates are not real, and not even a legal loan. They are designed to fool the buyer/borrower. The price of the car is increased to compensate for the disguised 0%. On their books they can't even record the 0%, they have to use at least the minimum interest rate for the loan to be legitimate.

    You can easily test this when you negotiate by stating you will get your own financing, or pay cash. If you negotiate the lowest price possible with these purchase methods, and then switch and say you want the 0% in-house financing, they will not be able to do it at that price (provided you really got the best price).

    Part of the purchase price is always the interest on a 0% loan. The penalty is you can no longer escape the interest by paying early.
     
  16. x3 skier

    x3 skier Tug Review Crew: Rookie TUG Member

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    Which is exactly what I did.

    Negotiated a cash price and then paid it with a monthly loan payment that was that price divided by 60. The “best price” is what they were willing to accept in a cash deal and that I was willing to pay.

    How the manufacture’s captive finance company makes money is not my problem:D. The difference between what the dealer paid for the car and what I paid, based on my research, was about $500 for the car I got. No problem with that. Whatever additional incentives the manufacturer gave to the dealer to move the iron is unknown to me.

    Bottom line, the cash price and the 0% finance price were the same.

    Cheers
     
  17. CalGalTraveler

    CalGalTraveler TUG Member

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    Some of our longtime friends are starting to lease cars. They are finding that if they can stay under the mileage caps, it is less expensive to lease than to own for certain cars. We have always owned our cars and then ran them into the ground. We will compare to leasing next time we need a new car.

    The other option is buying BMWs after they come off a 3 year lease. Apparently 70% of BMWs are leased so there is a lot of certified inventory out there and they can be bought for about 1/2 the cost of new. My 2006 BMW has pretty much the same design as the new models so people cannot really tell the difference anyway. Kind of like buying a resale timeshare. :whooopie:
     
  18. CalGalTraveler

    CalGalTraveler TUG Member

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    HGVC told me that they self-finance and hold the loans so they can take back the assets easily should the buyer default.
     
  19. Saintsfanfl

    Saintsfanfl TUG Member

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    That is definitely a better strategy than what Westgate was doing and it has served them well.
     
  20. bizaro86

    bizaro86 TUG Member

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    I'm pretty sure they actually put the loans into a special purpose vehicle and borrow a bunch of money against them, then manage the special purpose vehicle for the owners of the new notes.
     
  21. Saintsfanfl

    Saintsfanfl TUG Member

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    But at least it gives them the right to act on defaults, protect the asset, and resell it. While that action might be self serving, it also protects the HOA and the other owners, and keeps a floor on the resale. Most Timeshare companies act with reckless abandon, which not only kills resale values, but leaves the other owners high and dry, footing the unpaid maintenance fee bills.
     
  22. CiCi

    CiCi Guest

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    It seems that TS developers are following this logic in their sale process. While there is self-financing available from developers for timeshare purchases, resale buyers must either cough up the entire resale amount at the time of purchase, or self-finance from a Heloc.”

    Don’t fully understand the issue...We financed our TS resale through a personal loan at our credit union. Easy Peasy along with a very low interest rate.
     
  23. dioxide45

    dioxide45 TUG Review Crew: Veteran TUG Member

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    0% financing is really just another form of a buydown loan. The dealership pays a portion of the upfront price to the lender to buy down the rate. Kind of like points on a mortgage.

    We recently went to buy furniture and they had different financing options. The regular and cheapest method was 12 months on their store credit card. Same as paying cash or using another form of payment. You could also get 24 or 36 month financing, but you didn't get as big of a discount on the upfront purchase price. So if you went for the longer terms, they took some of that upfront price and sent it off to the lender to buydown the rate for the longer term. You still paid the "interest", just all of it was paid upfront.
     
  24. Arusso

    Arusso TUG Member

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    As has been noted in the past, the inherent problem of TS as an assert , despite the fact that the product is fundamentally based on real estate, is that the developers do not yet have or are reluctant to establish a robust interest in resales. Until such time as the developers are willing to repurchase either deeded or RTU contracts, they are the only ones that can risk financing.
     
  25. icydog

    icydog TUG Review Crew: Expert TUG Member

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    The thread that you mention in your post was written in 2007. In 2007 I was making a little bit of cash buying, selling and trading timeshares. Then 2008 came along, the mortgage crisis happened, and the bottom fell out of timeshares. A good week in an off-brand timeshare, pre-2008, had value. The same timeshare, post-2008, was worthless.

    It hit big developers too, Disney, Marriott, Hilton and Hyatt. Disney and Marriott virtually discontinued ROFR. It was a freeforall in the timeshare marketplace. And I was out of business (albeit a very small business)

    What I did find nostalgic, and kinda sad, were the posts by some of our most prolific contributors who have since past on! I now realize how important they were to TUG’s success.
     
    Last edited: Jul 14, 2018
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