eBay sellers requiring use of designated closers

[Carolinian]

I note that many eBay sellers in their conditions of sale purport to require use of a certain closing company, which is often overpriced for its services.

Years ago when I used to do residential real estate closings, the realtors commonly told their clients that it was a rule that whoever paid for certain aspects of the closing (seller - deed preparation; buyer - title search, loan document prep, etc.) had a right to choose the attorney who did the work.
That principle was so commonly accepted, I never had occaision to seek its source.

Timeshare is real estate, so shouldn't the same principle apply? Has anyone tried to use a different closer and then raised the matter with a state Real Estate Commission when the eBay seller objected?

Many of these eBay sellers may back off if a buyer suggested taking the matter up with a Real Estate Commission. Some Real Estate Commissions, like North Carolina, take the position that they have regulatory authority over any seller of timeshare at a resort in their state, no matter where the seller is located. Many of these eBay sellers may not have brokers licenses anywhere, and certainly not in multiple states. It seems like this may be a way to play hardball with them.

 

[johnmfaeth]

Several of the sellers who are selling timeshares that people paid to dump or other "liguidations" don't care if they sell it for $1, they still make a couple of hundred off the closing service kickback.

That's why they are "married" to the closing services. Sometimes, the seller is actually a partner/owner of the closing service as is the case with the Holiday Group (great folks despite the "too close" situation).

 

[Carolinian]

I fully understand why they do it. I just question whether they can get away with it if one raises the issue with the appropriate state Real Estate Commissiion.

 

[philemer]

Many of these eBay sellers may back off if a buyer suggested taking the matter up with a Real Estate Commission. Some Real Estate Commissions, like North Carolina, take the position that they have regulatory authority over any seller of timeshare at a resort in their state, no matter where the seller is located. Many of these eBay sellers may not have brokers licenses anywhere, and certainly not in multiple states. It seems like this may be a way to play hardball with them.

The seller would just cancel the sale because you refused to go along with his terms. Who's going to complain to their state RE Comm. on such a trivial matter? Why don't you bid on, and win, one of those auctions, Steve, and then follow through with your idea? Let us know how it goes.

My philosophy is, if the total price is right I don't care who does the closing.

Phil

 

[rickandcindy23]

Because it is illegal with regular real estate sales, at least in Colorado, for a Realtor/Broker, which I am, to be in bed with a closing/title company. There can be no kickbacks or you can lose your license and be fined. It is a very serious offense. You can take kickbacks from mortgage brokers, but when it comes to the title of a real estate property, that is serious stuff and improprieties are to the detriment of the buyer/seller.

 

[johnmfaeth]

Ah, but none of these sellers are realtor/frokers and not subject to ANY of the state "agancy" laws and regulations. How? They only sell things that they own as principal.

As an individual, corporation, or LLC selling real estate that they own as principal, they can demand any closer as a condition of sale quite legally. And if selling as a principal they are allowed to take kickbacks from any vendor as long as the vendor otherwise follows state laws which apply to them.

No fiduciary breach exists if you buy and sell as a principal, unless you are also a licensed broker and bought something under market price, or without full disclosure, from a client while in a fiduciary position with them.

I took my New York State Real Estate Salesperson and Real Estate Brokerage exams in 1982/83.

However, once you have a closing company with an escrow account, you do fall under many state laws including the statute of frauds and "agancy" laws which govern how you treat the client's money. For example, here in NJ it is a felony to touch the escrow account money until a transaction is closed, only then the (related) seller be paid off. You are not allowed to have an interest bearing account as your escrow account. Those escrow agency rules are followed perfectly from the transactions I've had on Ebay with all the big sellers and their "sister" closing companies.

 

[Jya-Ning]

Ah, but none of these sellers are realtor/frokers and not subject to ANY of the state "agancy" laes and regulations. How? They only sell things that they own as principal.

As an individual, corporation, or LLC selling real estate that they own as principal, they can demand any closer as a condition of sale quite legally.

That answer's Carolinian's question. They may act as power of attroney since although they "relief" the owner, they did not really went through the proper transfer, they just behavor as flipper.

Jya-Ning

 

[Giselherr]

As an individual, corporation, or LLC selling real estate that they own as principal...........

Do they "own" if they are just acting under a POA? I would think that they don't therefore "own" it under a POA, but since I'm not a lawyer, my "common sense" understanding of the word "own" may not be "legally" correct.

At any rate, then comes the question again "if some of these weeks are so bad that people have to pay these companies to "take" them, what happens if the taking company also can't manage to sell the week? How do they dispose of "unsaleable" weeks?

 

[Bill4728]

At any rate, then comes the question again "if some of these weeks are so bad that people have to pay these companies to "take" them, what happens if the taking company also can't manage to sell the week? How do they dispose of "unsaleable" weeks?

This is part of the scam. They tell everyone who comes thru the door that "their TS will be very difficult to sell" even for a $1 and therefore the TS owner should pay these slime-balls the $4000 to take it off their hands.

This one size fits all is my biggest problem with these companies. If they truely looked at each TS and made some determination of the TS true value and then made an offer based on the TS value, I don't think I'd have a problem with these companies. BUT they don't do that. "Every TS is worthless and everyone must pay them $4000" to help the owner get rid of the TS.

As I said before, I just bought one of these TS for $1500 and feel that I could sell it tomorrow for >$2500 if properly advertized. So, IMHO, the fact that they were paid $4000 to take this TS off the owners hands is a scam!!

 

[johnmfaeth]

My belief is that at the price of $1 and no closing costs you can move anything on EBay.

Bill is 100% correct IMHO, the fact that they had somepay pay THOUSANDS to take it, often under false pretenses like having "corporate buyers" may be legal but still a scam. I consider it highly immoral and wonder how they justify their actions to themselves.

I will repeat my favorite borrowed timeshare quote:

"In Heaven, there are a bunch of Popes, a handful of lawyers and NO timeshare salesmen."

"Salesmen" can be broadly interpreted here to mean 90% of the industry.

 

[Carolinian]

North Carolina real estate law relative to timeshares exempts only an owner who actually uses his unit from the regulatory requirements of the law. An individual who buys for resale purposes must comply. They also consider anyone who is selling North Carolina timeshares to be subject to their regulations, no matter where they are located. About ten years ago, an HOA wholesaled about 100 weeks to a Colorado-based entity called Triple Crown Finance, which then resold them. When the North Carolina Real Estate Commission discovered this, they insisted that Triple Crown comply with their regs. Rather than try to jump through those hoops, they just deeded back the then-unsold weeks to the HOA.

Ah, but none of these sellers are realtor/frokers and not subject to ANY of the state "agancy" laws and regulations. How? They only sell things that they own as principal.

As an individual, corporation, or LLC selling real estate that they own as principal, they can demand any closer as a condition of sale quite legally. And if selling as a principal they are allowed to take kickbacks from any vendor as long as the vendor otherwise follows state laws which apply to them.

No fiduciary breach exists if you buy and sell as a principal, unless you are also a licensed broker and bought something under market price, or without full disclosure, from a client while in a fiduciary position with them.

I took my New York State Real Estate Salesperson and Real Estate Brokerage exams in 1982/83.

However, once you have a closing company with an escrow account, you do fall under many state laws including the statute of frauds and "agancy" laws which govern how you treat the client's money. For example, here in NJ it is a felony to touch the escrow account money until a transaction is closed, only then the (related) seller be paid off. You are not allowed to have an interest bearing account as your escrow account. Those escrow agency rules are followed perfectly from the transactions I've had on Ebay with all the big sellers and their "sister" closing companies.

 

[johnmfaeth]

If you look into the details of the Crown "affair" (pun intended), you will find that the State and Federal charges against them were levied because of their abusive telemarketing activities and a systemic practice of false marketing statements.

These are crimes unto themselves regardless of industry and this case does not grant the State the right to regulate individuals selling as principals and picking there own (and related) closing service.

 

[Carolinian]

If this is even the same company you are talking about, any such charges would certainly have been after the NC Real Estate Commission leaned on them to stop sales of North Carolina timeshares because they were not licensed in North Carolina.

You might want to look at how North Carolina defines a timeshare ''developer'' in North Carolina General Statute 93A-41 (2):
''Developer'' means any person or entity which creates a time share or a time share project or program, purchases a time share for purpose of resale, or is engaged in the business of selling its own time shares. . .but a person who purchases a time share for his or her occupancy, use, and enjoyment shall not be a developer.

Pretty broad isn't it?????? You might be surprised at what you might find in the laws of your own state.

One other thing you may be missing is that the Real Estate Commision not only regulates real estate brokers and salesmen, but it has seperate statutory authority to also regulate timeshare sales. While the two may overlap, they are seperate and distinct grants of authority.

If you look into the details of the Crown "affair" (pun intended), you will find that the State and Federal charges against them were levied because of their abusive telemarketing activities and a systemic practice of false marketing statements.

These are crimes unto themselves regardless of industry and this case does not grant the State the right to regulate individuals selling as principals and picking there own (and related) closing service.

 

[johnmfaeth]

Hi Carolinian,

While most will consider this thread boring legalese, thank you for pointing out this fascinating definition in NC law. I spent the last hour+ searching the NJ statutes and while things have been tightened up, they still take the same general approach that they do not hold regulatory authority over "princiapl" trades in real estate including timeshares, regardless of intent, unless other laws have been broken. These other laws are where much of potential problems could originate as they cover areas such as non-disclosure, fair practice, escrow management, etc.

While I have been arguing a point of law with you that sides with the "liguidators" on their cloice of closers, rest assured that I am pro-owner 110%. Basically I want to go the Heaven someday and I don't think I'll be joined by many in the timeshare industry

The next question that arises is once you are considered a "developer" are you then required to let the buyer choose their own closing company the way a licensed "broker" would be. Or are you allowed to reguire a specific closing company.

Interesting story...I recently purchased a Wyndham/Fairfield timeshare in St. Thomas off of EBay. The seller wanted to use a closing company he doesn't own but one that kicks back $200 per deal to him. He agreed to let me self-close in exchange for getting the same $200. I still saved $200 and was happy.

I am torn about dealing with the Ebay folks who sell the "ill gotten" inventory but I debate whether it matters as the person "scammed" was "taken" long before I ever found the cheap timeshare. Frankly every timeshare ever sold by a developer was a scam of sorts because virtually no timeshare seems to ever command it's original purchase price. Probably because the average timeshare seller has 40-50% marketing and sales overhead as a function of sales price (as per ARDA). So does that make the entire resale business unethical because someone probably lost money who originally bought it? I just don't know.

Would love to see what you find in the "developer" requirements section of the NC law. There may be something in the law sections titled "rules of fair practice" (or something close). Used to have lexis access, now just the web.

 

[johnmfaeth]

PS. One of the recent NJ changes is that timeshares are just now regulated by the Real Estate Commission. The northeast states historically had the best consumer protection laws in real estate in general (same with insurance as did IL and CA). Looks like they fell behind in timeshares being real estate.

 

[BocaBum99]

Forcing buyers to use a pre-determined closing company is not these companies worst offense. They do far more that could get them fined and jailed than that. The law will catch up with them eventually.

 

[Carolinian]

North Carolina General Statute 93A-40: "...itshall be unlawful for a time share developer to sell or offer to sell a time share located in this State without first obtaining a certificate of registration...

North Carolina General Statute 93A-54 allows the Real Estate Commission to impose a $500 civil penalty for each violation, and violations are also made class 1 misdemeanors in criminal law under NCGS 93A-56.

There is a list under 93A-54 of things for which the civil penalty (and criminal sanctions) can be imposed and they include:
(1) Making any willful or negligent misrepresentation or any willful or negligent ommission or material fact about any time share or time share project;
(2) Making any false promises of a character likely to influence, persuade, or induce;
(3) Pursuing a course of misrepresentations or making of false promises through agents, salespersons, advertising or otherwise;
(5) Acting as a time share salesperson or time share developer in a manner as to endanger the interest of the public
(7) Any other conduct which constitutes improper, fraudulent, or dishonest dealing;
(8) Performing or undertaking to perform any legal service (i.e. preparing a deed) as set forth in GS 84-2.1...
(10) Failing to deliver to a purchaser a public offering statement containing the information required by GS 93A-44 and any other disclosures that the Commission may by regulation require
(12) Failing to comply with the provisions of GS 93A-48 in furnishing complete and accurate information to purchasers concerning any exchange program which may be offered to such purchaser
(14) Violating any rule or regulation promulgated by the Commission.

Hi Carolinian,

While most will consider this thread boring legalese, thank you for pointing out this fascinating definition in NC law. I spent the last hour+ searching the NJ statutes and while things have been tightened up, they still take the same general approach that they do not hold regulatory authority over "princiapl" trades in real estate including timeshares, regardless of intent, unless other laws have been broken. These other laws are where much of potential problems could originate as they cover areas such as non-disclosure, fair practice, escrow management, etc.

While I have been arguing a point of law with you that sides with the "liguidators" on their cloice of closers, rest assured that I am pro-owner 110%. Basically I want to go the Heaven someday and I don't think I'll be joined by many in the timeshare industry

The next question that arises is once you are considered a "developer" are you then required to let the buyer choose their own closing company the way a licensed "broker" would be. Or are you allowed to reguire a specific closing company.

Interesting story...I recently purchased a Wyndham/Fairfield timeshare in St. Thomas off of EBay. The seller wanted to use a closing company he doesn't own but one that kicks back $200 per deal to him. He agreed to let me self-close in exchange for getting the same $200. I still saved $200 and was happy.

I am torn about dealing with the Ebay folks who sell the "ill gotten" inventory but I debate whether it matters as the person "scammed" was "taken" long before I ever found the cheap timeshare. Frankly every timeshare ever sold by a developer was a scam of sorts because virtually no timeshare seems to ever command it's original purchase price. Probably because the average timeshare seller has 40-50% marketing and sales overhead as a function of sales price (as per ARDA). So does that make the entire resale business unethical because someone probably lost money who originally bought it? I just don't know.

Would love to see what you find in the "developer" requirements section of the NC law. There may be something in the law sections titled "rules of fair practice" (or something close). Used to have lexis access, now just the web.

 

[johnmfaeth]

Very broad law, it sounds like a bigger problem than forcing the use of their related closing company is selling without registration in the state which sounds like a requirement.

I also ponder what is the liability of ANY conventional timeshare developer under item #5 when selling timeshares for 5-10+ times the price the exact same item fetches on the reale market. Doesn't sound like the public's interest to me.

But I see nothing there concerning the mandatory use of their closer, nor the kickback.

When you think about it, no timeshare developer gives buyers the right to pick their closer. In fact, they put outrageous deed prep/recording charges in the contracts. Wyndham/Fairfield does exactly that and charges $600 for it. So, one can construe, only in terms of the original discussion of this thread, that being categorized as a developer is good for these "dumpers". The first paragraph of this message is where I believe the meat resides to get them.

Keep in mind that when a law is overly broad or reaching in it's wording or application (interpretation), it opens the door for the court to interpret based upon commonly accepted legal beliefs and prior case law.

This law possibly seems to be doing just that via it's broad definition of developer. For instance, technically, anyone who inherits a NC timeshare than goes to sell it because they have no desire to use it is a developer by their definition. Anyone who bought the salesperson's pitch that it is an investment and then tries to sell it is also a developer.

For someone like these companies, it would be harder to hide from the definition of being a "casual" seller by nature of their operation and advertising volumes alone.

Very interesting....go get em...

 

[johnmfaeth]

Hi Boca Bum,

Could you detail some of these items you feel are illegal? I've dealt with most of these companies and they may certainly be immoral (especially those who charge to take a unit), but illegal is a finer line. Thus this thread.

Thanks!

 

[Carolinian]

All of the closing companies I know of are located out of state, and I would bet are not licensed in North Carolina. They prepare deeds in violation of this statute (and also in violation of the criminal statutes on unauthorized practice of law enforced by the North Carolina State Bar).

My original point was that these people are not going to want the spotlight to shine upon themselves with ANY issue with the Real Estate Commission. If you suggest raising the closing company issue with the Real Estate Commission, it opens up a whole can of worms for these eBay sellers and they are not going to want that. Agreeing to let you use your own closer may the path of least resistance to them.

The issue of the project developers is related. They are required to designate a project broker who must have a North Carolina real estate broker's license who must handle the transaction. I am aware of a few situations with HOA's, which are also treated as developers under North Carolina law, where buyers have asked to use their own closer and the questions has been asked of the Real Estate Commission whether they could use their own choice of closer rather than the HOA's project broker, and the answer has been that they could as long as it was a real estate broker or attorney who was licensed in North Carolina. HOA's, and the local store front timeshare broker, have tended to be very cooperative with buyers on that issue and even taken the question to the commission on the buyers behalf.

Very broad law, it sounds like a bigger problem than forcing the use of their related closing company is selling without registration in the state which sounds like a requirement.

I also ponder what is the liability of ANY conventional timeshare developer under item #5 when selling timeshares for 5-10+ times the price the exact same item fetches on the reale market. Doesn't sound like the public's interest to me.

But I see nothing there concerning the mandatory use of their closer, nor the kickback.

When you think about it, no timeshare developer gives buyers the right to pick their closer. In fact, they put outrageous deed prep/recording charges in the contracts. Wyndham/Fairfield does exactly that and charges $600 for it. So, one can construe, only in terms of the original discussion of this thread, that being categorized as a developer is good for these "dumpers". The first paragraph of this message is where I believe the meat resides to get them.

Keep in mind that when a law is overly broad or reaching in it's wording or application (interpretation), it opens the door for the court to interpret based upon commonly accepted legal beliefs and prior case law.

This law possibly seems to be doing just that via it's broad definition of developer. For instance, technically, anyone who inherits a NC timeshare than goes to sell it because they have no desire to use it is a developer by their definition. Anyone who bought the salesperson's pitch that it is an investment and then tries to sell it is also a developer.

For someone like these companies, it would be harder to hide from the definition of being a "casual" seller by nature of their operation and advertising volumes alone.

Very interesting....go get em...

 

[johnmfaeth]

Hi again Carolinian,

My last posting was specifically referring to those who do the listings on Ebay and their not being registered. The closing companies are not in the category of doing selling and are exempt from the "developer" label as I read it.

Yes, deed preparation can get dicey. There is a whole body of test cases and appeals out there on that one due to low cost legal "storefronts" that have opened up nationwide the last 10 years.. They get around the "being a lawyer in that state's bar" issues by only completing the blanks of deed forms which are created by lawyers, and not "giving legal advice". One could argue that by simply replicating the last deed with the new names and notary block (location info of notary), one is exempt under the same behavior as a closing company.

These storefronts do deeds, wills, contracts, divorce filing paperwork, etc. and are staffed by non-lawyers.

So I interpret this as the sellers themselves have non-registration liabilty, the closing co's are off the hook, and the right to pick the closing co may exist only if it is a NC timeshare property (see next paragraph on that one).

One also has to ask the relevance of the sales contract they have you sign which often will contain something like: "For legal purposes, buyer and seller agree that this transaction occured in the State of Florida and will be subject to Florida State law". Some consumer rights can be waived by signing such a statement, other rights are too important and the courts do not let you sign them away. I do not believe you can enforce "alien" jurisdiction when in the state where a property exists (in the case of NC timehares) as it is an inherent (and historical) right from established case law. An tangential example of this are lien/ucc filings which can only be made in the location where a property resides, regardless of where the lien/ucc transaction originated.