[ 2013 ] Do you need a Timeshare license to "Flip" or assign contracts? I think not...

[Jesse6283]

This is a grey area and people seem to have different opinions on the issue. My question is, do you need a license to use an assignment contract for timeshare resales or rentals. Before you answer this question, please consider real estate law in USA/Canada with the below example:

In contract you decide to make your name "Joe Smith and/or assigns"

a) If you go into contract on a condo that is being built and you decide before the closing date that you want to assign the contract to another buyer, you are allowed to do this and make the 'spread' without a license

b) If you went into contract on a house and before the closing you decide to give it to another buyer and you make the difference


So my question is , why does every Timeshare Resale website "flaunt" their license terminology? Most of the resale websites in my opinion dont actually need to be licensed UNLESS they are collecting a commission - and who is going to collect a commission on a $1000 sale? It is not as if they are selling a $300,000 house .....

I would like some clarification on the legal issues and what is legal and what is not please! Thank you

 

[easyrider]

In most of the USA you will need to be a real estate broker to buy, sell, rent or trade or advertise timeshares. Timeshares are mortgaged back securities and a person can get busted for securities fraud for acting as a broker with out the proper license.

That being said, a person can legally broker their own property with some limitations in some states.

 

[Jesse6283]

.

Well here is the dilemma. For example, I am licensed but real estate laws differ for every state in most countries. It seems ridiculous to me because technically one could make an argument that Resale website are illegal unless you hold a license for every single state and for every state of every country, we are talking hundreds of licenses ...... So , there must be a legal way to have a legitimate RESALE website without having to worry about this, and the only way I can think of is to organize contracts properly, that being -- Flips and advertising (non-commission) fees ..... What do you think about this EasyRider?

 

[Joe33426]

Well here is the dilemma. For example, I am licensed but real estate laws differ for every state in most countries. It seems ridiculous to me because technically one could make an argument that Resale website are illegal unless you hold a license for every single state and for every state of every country, we are talking hundreds of licenses ...... So , there must be a legal way to have a legitimate RESALE website without having to worry about this, and the only way I can think of is to organize contracts properly, that being -- Flips and advertising (non-commission) fees ..... What do you think about this EasyRider?

In Florida, to sell real estate commercially you need a Florida license. So, how do resale websites avoid the licensing requirement?

I think they don't use contracts, they use "in-house" closing companies, and on the deeds when it says "prepared by" they put the old owner's name.

Is all this legal? Who knows? Perhaps if we have an attorney on board, he/she could comment. But I think that in many states, the preparation of a deed is actually considered the practice of law. In Florida, consummating a real estate transaction without a contract is in violation of the Florida Statutes, but it happens many times someday.

 

[BocaBum99]

This is a grey area and people seem to have different opinions on the issue. My question is, do you need a license to use an assignment contract for timeshare resales or rentals. Before you answer this question, please consider real estate law in USA/Canada with the below example:

In contract you decide to make your name "Joe Smith and/or assigns"

a) If you go into contract on a condo that is being built and you decide before the closing date that you want to assign the contract to another buyer, you are allowed to do this and make the 'spread' without a license

b) If you went into contract on a house and before the closing you decide to give it to another buyer and you make the difference


So my question is , why does every Timeshare Resale website "flaunt" their license terminology? Most of the resale websites in my opinion dont actually need to be licensed UNLESS they are collecting a commission - and who is going to collect a commission on a $1000 sale? It is not as if they are selling a $300,000 house .....

I would like some clarification on the legal issues and what is legal and what is not please! Thank you

I am a licensed real estate broker in the state of Florida and I am also a real estate investor.

The laws as they relate to assignable contracts are nearly the same for residential real estate as they are for timeshares. In States like Florida, there are special laws and business practices that apply only to timeshares which must be understood to use all of the real estate investment tricks.

Can you assign a contract without a license? Yes. However, most people do the assignment incorrectly and many timeshare resorts look very unfavorably when an original contact has one name and the transfer paperwork has a different name on it. Also, many people who use assignables try to hide the original contract from the buyer. That is illegal. If you are assigning a contract, the buyer needs to see the original contract you are assigning since the contract terms and liabilities are being transferred to them. Also, ROFR processing messes things up as well.

You do need a real estate license for earning a commission on real estate. If you sell a timeshare on behalf of a third party and get compensation of any kind for it, that is a commission. In Florida, unlicensed real estate brokering is a third degree felony. When you assign a contract, you are not brokering. You actually are selling a contract which is not selling real estate because you never took title to the property in the first place. It's legal when you do it correctly.

This is further complicated by the Timeshare Resale Accountability act. What some people do to avoid borkerage laws is to take title of the property and then resell it. Since in all states you can always sell your own property without a broker, this is fine. When you do immediate flips of property, that is called a double transfer. However, many timeshares do not have deeds and the transfer intervals can take longer than in residential real estate (e.g. point systems like Bluegreen and WorldMark). Or, they have ROFR processing and Final transfer requirements that can take months after the deed is recorded to effect title transfer. Moreover, the timeshare accountability act limits this practice because if you do more than a certain number of transaction per year, you are considered a developer and therefore need a real estate license.

What is ridiculous is the number of laws that have been put in place to regulate the timeshare resale business. They are done with good intentions because there are a lot of scammers out there who caused the legislation to occur. However, the unintended consequence of such laws are making it nearly impossible to sell and transfer a timeshare inexpensively. Licensed real estate agents need to make at least $500-1000 in commission to create a viable business brokering timeshares. Transfers are heading to the $500 or more level when including estoppel fees, resort transfer fees, escrow requirements and other regulatory overhead. So, the legitimate companies like licensed and bonded title companies and real estate brokers are forced to focus only on those timeshares that can support a minimum sales price in volume. There aren't many of those. If anything, the new regulations are making the resale market even more untenable than ever. As a result, expect more scams because resorts are still reluctant to take deedbacks, but owner still want of their timeshares.

 

[BocaBum99]

I forgot to mention. When you assign a contract, there is only one transfer. You get a contract into your name, you sell the contract and the transfer is done between the seller and the final buyer. One transfer.

In a double transfer, the first contract is between the seller and the intermediary. A transfer occurs. Then, another transfer occurs between the intermediary and the final buyer. This transfer also needs a contract.

The double transfer can be very expensive especially when the resort has a high transfer fee or a very long transfer interval. So, what some people do is cancel contracts and write new ones. That can much things up because it is illegal to have 2 contracts on the same property simultaneously. There are ways around this issue with contingency clauses. However, without precision, it can really get messed up.

Plus, if you start a transfer, its hard to cancel the transfer and start over with a new contract without incurring lots of cost.

 

[BocaBum99]

In Florida, to sell real estate commercially you need a Florida license. So, how do resale websites avoid the licensing requirement?

I think they don't use contracts, they use "in-house" closing companies, and on the deeds when it says "prepared by" they put the old owner's name.

Is all this legal? Who knows? Perhaps if we have an attorney on board, he/she could comment. But I think that in many states, the preparation of a deed is actually considered the practice of law. In Florida, consummating a real estate transaction without a contract is in violation of the Florida Statutes, but it happens many times someday.

My above remarks should clarify most of your questions. It is NOT in house closing companies, nor it is "prepared by" deeds. You need to distinquish between the different parties in a transaction. That is what the new Florida legislation spends a lot of effort doing.

The Florida timeshare laws are forcing businesses to become licensed. Licensed real estate brokers to sell. Licensed and bonded title companies to do transfers. Advertising companies that must disclose their success rates.

When you see resale sites, it is easy to see if a Broker is involved. Any advertisements must indicate the name of the brokerage firm on it.

If it doesn't have a brokerage firm, they are either selling their own properties or they are advertising properties on behalf of other owners. Advertising is not earning a commission because the fee is due whether or not the property sells.

Technically, if you are selling a contract via an assignable agreement, you can't advertise the property for sale because you don't own it. If you don't own it and you advertise it, you are illegally trying to sell a property you don't own without a license. It would be like advertising the Brooklyn Bridge for sale.

It doesn't help that properties cross state lines. That is when it gets gray. And, since the enforcement arms of most states are small and the transactions are pretty small. Most states just leave it alone.

 

[Jesse6283]

Dear BocaBum99,

Thank you so much for your reply it is much appreciated. It has clarified a lot of things for me. However, even with that being said, I think we would both agree that there are a lot of Grey areas... I am about to launch a website and I want to make sure I have all my ducks in a row, you seem like the guy to talk to I am going to send you a PM

 

[skye]

I forgot to mention. When you assign a contract, there is only one transfer. You get a contract into your name, you sell the contract and the transfer is done between the seller and the final buyer. One transfer.

In a double transfer, the first contract is between the seller and the intermediary. A transfer occurs. Then, another transfer occurs between the intermediary and the final buyer. This transfer also needs a contract.

The double transfer can be very expensive especially when the resort has a high transfer fee or a very long transfer interval. So, what some people do is cancel contracts and write new ones. That can much things up because it is illegal to have 2 contracts on the same property simultaneously. There are ways around this issue with contingency clauses. However, without precision, it can really get messed up.

Plus, if you start a transfer, its hard to cancel the transfer and start over with a new contract without incurring lots of cost.

What exactly would prevent the buyer from reaching out to the seller directly once I show them the original contract to get a better deal?

 

[rickandcindy23]

This is an old thread.

Honor and integrity.