Interesting... I actually have only bought direct (tug or redweek ads) so haven't dealt with eBay sellers. However, I have paid for title insurance and have seen title policies. I'm curious to learn more about the point you raise.
A title policy covers "any defect in or lien or encumbrance on the title" and "unmarketability of the title". Then you have a bunch of exclusions in "Schedule B" (typically in complex legalese) which say what is not covered...
If an owner signs a poa and takes the proceeds from the sale, how can they then invalidate the sale? Even if they do, why would title insurance not cover this? Is there a specific clause in Schedule B that relates to cases like this? My understanding is that anything not in Schedule B is covered...
Well, there are a number of scenarios, but I will explain the most prevalent.
A PCC usually does not actually take title to a timeshare.
They have the owner sign a limited POA. The owner thinks they are signing over the timeshare, but they are not.
The PCC then auctions the timeshare on ebay.
The PCC uses the POA to close the transaction.
The owner gets no money. In fact, they likely paid the PCC for what they thought was getting the timeshare out of their name.
The owner was lied to on several fronts. Including the misrepresentation of the legal ramifications of keeping the timeshare.
These amount to obtaining the owners POA "under duress", which invalidates the POA.
Should the owner later claim that the POA was obtained under duress (which every one of them can) the POA which was used to close the transaction is invalid.
The PCC has the money. The deed reverts back to the previous owner. The ebay buyer is holding the bag.
Title insurance will not cover the buyer in such a circumstance.
Now, this is exactly how most timeshares wind up on ebay at dramatically reduced prices.
Others are represented illegally, but are more difficult to reverse because the owner was actually involved in the final sale and deed transfer. This does not make the "reseller" activity legal, but does protect the buyer if title insurance is obtained.
What usually happens is an ebay reseller will "auction" a unit they do not have a legal right to represent. One bidding has ended, they present an "offer " to the owner. Those that do not bring a high enough price to actually induce an owner to sell, are tried again.
One can argue that the ebay bidding nonetheless reflects what the spot market for the timeshare really is. But, that is a false premise IMO, for several reasons.
PCC's have no equity in the timeshare, so any price is good enough.
Other illegal and unlicensed activity has none of the expense associated with conducting a legit business. Nor, does it proceed from the prospective of an owners equity interest. So, closed auctions such as the one you referred to are assumed to be the "market", which influences what bidders are willing to pay.
It becomes a self-fulfilling exercise.
The buyer may not care, but it is nonetheless, overall, illegal activity which has the effect of damaging the equity value of the market at large.
Car sellers can't get away with it, nor would they try.
Those that sell pens for $1 are dealing in a cheap commodity, so they have no incentive to sell what they do not own.
Only timeshares are at once a commodity, and high priced enough to encourage this type of activity.
