It's time to pick up some Platinum weeks for cheap

[ondeadlin]

The annual fees - the only item you are certain of dealing with once you buy - could potentially sky rocket as the non-prime owners drop out (can't sell at any price or feel the annual fees aren't worth paying compared to value received) thus making even the prime weeks unattractive to purchase/own. This is in fact the most likely outcome at most largely seasonal resorts. It has started at many even before the economic problems and will accelerate in the near term as people deal with those unprecedented changes.

This is the point most people don't seem to understand.

There's been a ton of talk about, "Well, a ski week at Summit Watch will always be valuable ..."

It won't be if annual fees go to $2,000 a year. Think it can't happen? It's happened at Streamside Aspen after they left the Marriott system. You know why it happened? At least in part because everybody dumped their fall and summer weeks and the association was stuck with hundreds of defaulted weeks (and, in fairness, also because they then had to invest in modernizing the resort).

Streamside Aspen ski weeks now regularly go for a dollar on eBay.

This is an example, not a prediction. But when you see it happen once, you see the downside a lot better. At most ski resorts, two-thirds of the weeks are either completely undesirable (fall/spring) or marginally desirable (summer). That's a lot of exposure.

The downside isn't about prices as much as MF risk as people default IMO.

 

[BocaBum99]

This is the point most people don't seem to understand.

There's been a ton of talk about, "Well, a ski week at Summit Watch will always be valuable ..."

It won't be if annual fees go to $2,000 a year. Think it can't happen? It's happened at Streamside Aspen after they left the Marriott system. You know why it happened? At least in part because everybody dumped their fall and summer weeks and the association was stuck with hundreds of defaulted weeks (and, in fairness, also because they then had to invest in modernizing the resort).

Streamside Aspen ski weeks now regularly go for a dollar on eBay.

This is an example, not a prediction. But when you see it happen once, you see the downside a lot better. At most ski resorts, two-thirds of the weeks are either completely undesirable (fall/spring) or marginally desirable (summer). That's a lot of exposure.

The downside isn't about prices as much as MF risk as people default IMO.

This is definitely a real risk. I do know that delinquencies at many of the resorts are increasing. That does lead to higher maintenance fees as paying owners have to cover for non-paying owners.

The question is whether or not the resort manager can come up with a strategy for keeping owners paying maintenance fees. They can do that by creating and fostering a vibrant resale market so that owners who do have timeshares they want to get rid of can offer them to those who want to pay the maintenance fees and take the vacations.

They can also cut costs at the resorts by offering fewer services and amenities so that maintenance fees stay substantially below rental rates in the geographies with equivalent units. That would make it economically attractive to own vs. buy.

I have always felt that these two actions are critically important for the long term viability of any resort over time. I think this environment really makes it obvious that resort developers should take these actions. Otherwise, the delinquency trap could become a real problem.

I've wondered what the impetus would be for the resort developers to stop building and change their sales and marketing model. It appears that the credit crunch has helped immensely toward this reforming some of their actions.

Now, if delinquences dramatically pick up, I believe they will also take the remaining actions of amenties cost cutting at the resorts as well just for survival. This, in the end, is all good. Recessions, especially deep ones, kill off the weaker players and makes room for the stronger ones with the superior business models to flourish long term.

 

[timeos2]

May not be possible or at least not done very easily

They can also cut costs at the resorts by offering fewer services and amenities so that maintenance fees stay substantially below rental rates in the geographies with equivalent units. That would make it economically attractive to own vs. buy.

Much like my primary need for most resorts - varied fees between the top value times and the lower, off season times - accomplishing cost savings by cutting services and especially features could be hard to impossible to do. Varied fees often cannot be done (except possibly within a points based approach) as State laws require equal fees for all owners. It takes some real creativity to get around that if its even possible. Same with features and at least some services. They may be spelled out in the the original sales agreements/resort docs thus requiring an almost impossible to obtain majority owner vote to change. They often aren't within the rights of the Board to alter and doing so puts the Board at risk of owner lawsuits.

Timeshares tend to be tough places to run, tougher to change and REALLY tough to disband. If the current state of affairs leads to many or even any resort failures we'll find out just how hard it is to end a timeshare and get the owners to agree.

 

[BocaBum99]

Much like my primary need for most resorts - varied fees between the top value times and the lower, off season times - accomplishing cost savings by cutting services and especially features could be hard to impossible to do. Varied fees often cannot be done (except possibly within a points based approach) as State laws require equal fees for all owners. It takes some real creativity to get around that if its even possible. Same with features and at least some services. They may be spelled out in the the original sales agreements/resort docs thus requiring an almost impossible to obtain majority owner vote to change. They often aren't within the rights of the Board to alter and doing so puts the Board at risk of owner lawsuits.

Timeshares tend to be tough places to run, tougher to change and REALLY tough to disband. If the current state of affairs leads to many or even any resort failures we'll find out just how hard it is to end a timeshare and get the owners to agree.

I agree it could be tough. However, if it isn't tried, then it could be disasterous for the timeshare resort. I don't even believe it has been tried because many who govern the resorts have the same views as you do.

The good news is that if delinquencies get too bad and the resort must declare bankrupcy, then all agreements can be terminated and the resort can be sold off to pay off creditors. Believe it or not, owners may make out more in that case than holding on to a failed timeshare resort concept that doesn't make sense in a particular geography or setting. If the highest and best use for land in that particular area is something else, then the timeshare resort should be allowed to die in favor of that other better use.

In the armagedon scenario that Perry predicts, what would happen is a new industry would emerge for timeshare conversions back to condos. We all know that there has been some tremendous overbuilding in many geographies. It's probably time for some of that to emerge.

Perry did make a good argument for timeshare resorts having a definitive end after say 30 years. I completely agree with that. It should be terminated in favor of a new project with the net proceeds being distributed to current timeshare owners.

 

[JimIg23]

understand your upfront money may never be recovered much less provide any gain and that fees may rise quickly and without any recourse to owners.

I bought into Marriott believing this. When I did my "cost analysis" I did 10 year and 20 year projections, with the entire cost of the TS purchase and MF (with a 4% increase) to see what my true nightly cost would be. I assumed from the beginning one day my TS would be worth $1. Although I hope it wont, I bought thinking this, and I am happy with the price I paid for the value it has given my family, and hopefull will continue to. (Although I still am going to try to snag a dirt cheap EOY NCV so I can get 2 weeks at NCV EOY....)

Here is old link to a thread I started about it. http://www.tugbbs.com/forums/showthread.php?t=62261

Alot of people thought Marriott TSs would retain their value......................

 

[larue]

This is definitely a real risk. I do know that delinquencies at many of the resorts are increasing. That does lead to higher maintenance fees as paying owners have to cover for non-paying owners.

The question is whether or not the resort manager can come up with a strategy for keeping owners paying maintenance fees. They can do that by creating and fostering a vibrant resale market so that owners who do have timeshares they want to get rid of can offer them to those who want to pay the maintenance fees and take the vacations.

They can also cut costs at the resorts by offering fewer services and amenities so that maintenance fees stay substantially below rental rates in the geographies with equivalent units. That would make it economically attractive to own vs. buy.

I have always felt that these two actions are critically important for the long term viability of any resort over time. I think this environment really makes it obvious that resort developers should take these actions. Otherwise, the delinquency trap could become a real problem.

I've wondered what the impetus would be for the resort developers to stop building and change their sales and marketing model. It appears that the credit crunch has helped immensely toward this reforming some of their actions.

Now, if delinquences dramatically pick up, I believe they will also take the remaining actions of amenties cost cutting at the resorts as well just for survival. This, in the end, is all good. Recessions, especially deep ones, kill off the weaker players and makes room for the stronger ones with the superior business models to flourish long term.

I am probably really ignorant on this, but why would defaulting owners cause other owners' maintenance fees to go up? If maintenance fees per week owned are the same across the board, and Marriott takes back the defaulting weeks, how could Marriott pass those costs on to other owners? Marriott owns the defaulted weeks, right? It would seem that the developer would have to pay their share of maintenance fees on weeks that they own and have not yet sold or that they have reclaimed through default.

for example, the first person to buy a week at a newly developed resort does not have to pick up the entire costs of maintenance on the entire property, right? I think that Marriott and other developers are asking for a class action lawsuit if they up maintenance fees of other week owners when the developer maintains ownership of the defaulted units. Now, on the other hand, if Marriott offered those defaulted weeks to other owners at cost, with a condition of picking up the maintenance fees on that week, that would be a real partnership. Good luck, right?

 

[dioxide45]

I am probably really ignorant on this, but why would defaulting owners cause other owners' maintenance fees to go up? If maintenance fees per week owned are the same across the board, and Marriott takes back the defaulting weeks, how could Marriott pass those costs on to other owners? Marriott owns the defaulted weeks, right? It would seem that the developer would have to pay their share of maintenance fees on weeks that they own and have not yet sold or that they have reclaimed through default.

for example, the first person to buy a week at a newly developed resort does not have to pick up the entire costs of maintenance on the entire property, right? I think that Marriott and other developers are asking for a class action lawsuit if they up maintenance fees of other week owners when the developer maintains ownership of the defaulted units. Now, on the other hand, if Marriott offered those defaulted weeks to other owners at cost, with a condition of picking up the maintenance fees on that week, that would be a real partnership. Good luck, right?

There are cost in collecting delinquent MF. Also once they forclose, it is next to impossible for them to collect any back MF that were not paid. Those monies need to come from somewhere, in most cases the other owners.

 

[larue]

There are cost in collecting delinquent MF. Also once they forclose, it is next to impossible for them to collect any back MF that were not paid. Those monies need to come from somewhere, in most cases the other owners.

I realize you are probably right, but I don't know why Marriott, as the new owner of the defaulted week, gained for nothing more than foreclosure costs, would be able to pass those fees, back or otherwise, onto other owners who do not gain a beneficial interest in the defaulted week now owned by Marriott. I liken this to taking a tax deed on a property. The person who takes the tax deed does not get to pass off costs to other owners in the subdivision/homeowners association. They pay all costs, with the benefit being ownership of the defaulted week upon completion of foreclosure. If Marriott ends up being the sole owner of the defaulted week, which they do, why should the rest of us have to pay the costs associated with their gain?

 

[vacationtime1]

I am probably really ignorant on this, but why would defaulting owners cause other owners' maintenance fees to go up? If maintenance fees per week owned are the same across the board, and Marriott takes back the defaulting weeks, how could Marriott pass those costs on to other owners? Marriott owns the defaulted weeks, right? It would seem that the developer would have to pay their share of maintenance fees on weeks that they own and have not yet sold or that they have reclaimed through default.

It is not Marriott (or whoever the developer was) that takes back the defaulting weeks, it is the homeowner's association that takes them. That's how and why the risk of non-payment is on the remaining owners.

 

[ondeadlin]

I am probably really ignorant on this, but why would defaulting owners cause other owners' maintenance fees to go up? If maintenance fees per week owned are the same across the board, and Marriott takes back the defaulting weeks, how could Marriott pass those costs on to other owners? Marriott owns the defaulted weeks, right?

No, unfortunately, you have a very common misunderstanding about how things work with defaulted weeks.

When a week defaults, it goes back to the owner's association. Until it's sold and back to paying MF, all the other owners must split the remaining costs to be covered. Most of the weeks that default are typically low-season weeks, so in some cases the owner's association has trouble even giving them away. Even when the weeks have value, it takes time and effort to move them along, and a year or more's worth of fees often go unpaid.

Marriott has nothing to do with it, and does not take these weeks back.

To give a very simplified explanation, let's say there were only 8 "shares" in a particular timeshare, and they all split $1,000 in costs ($125 each). If 4 of those shares defaulted, the remaining 4 owners would still be obligated to pay the $1,000 in costs, so their MF would double to $250 each (which would then possibly result in even more defaults).

That - in a very simplified way - is how timeshare MFs work, except the numbers involve thousands of owners at a particular project.

 

[dioxide45]

I realize you are probably right, but I don't know why Marriott, as the new owner of the defaulted week, gained for nothing more than foreclosure costs, would be able to pass those fees, back or otherwise, onto other owners who do not gain a beneficial interest in the defaulted week now owned by Marriott. I liken this to taking a tax deed on a property. The person who takes the tax deed does not get to pass off costs to other owners in the subdivision/homeowners association. They pay all costs, with the benefit being ownership of the defaulted week upon completion of foreclosure. If Marriott ends up being the sole owner of the defaulted week, which they do, why should the rest of us have to pay the costs associated with their gain?

If Marriott does take those weeks back they do take on the MF costs. However, if the HOA takes ownership of those weeks, then the owners have to take the extra burden.

 

[thinze3]

If Marriott does take those weeks back they do take on the MF costs. However, if the HOA takes ownership of those weeks, then the owners have to take the extra burden.

Many Colorado weeks fall within this category. Spring, fall and most summer weeks are just about worthless. My Christie Lodge is a prime example. The HOA literally owns hundreds of these weeks and tries VERY hard to make rental of these weeks break even on an annual basis. This will become much more difficult with lower occupancy rates at hotels nationwide.


Terry

 

[london]

Platinum Weeks For Cheap

With over 100 posts, this thread has found much interest among our BBS group.

It appears that timeshare owners are now evaluating what their ownership costs gives them in real terms.

Granted there is some intrinsic value perceived by many owners.

 

[larue]

No, unfortunately, you have a very common misunderstanding about how things work with defaulted weeks.

When a week defaults, it goes back to the owner's association. Until it's sold and back to paying MF, all the other owners must split the remaining costs to be covered. Most of the weeks that default are typically low-season weeks, so in some cases the owner's association has trouble even giving them away. Even when the weeks have value, it takes time and effort to move them along, and a year or more's worth of fees often go unpaid.

Marriott has nothing to do with it, and does not take these weeks back.

To give a very simplified explanation, let's say there were only 8 "shares" in a particular timeshare, and they all split $1,000 in costs ($125 each). If 4 of those shares defaulted, the remaining 4 owners would still be obligated to pay the $1,000 in costs, so their MF would double to $250 each (which would then possibly result in even more defaults).

That - in a very simplified way - is how timeshare MFs work, except the numbers involve thousands of owners at a particular project.

So who sells and generates the revenues from the defaulted unit? I assume that Marriott is the exclusive agent for sales on behalf of the HOA, probably at the same commission rate of 40% that they charge for selling anyone else's unit? If that is the case, it likely accounts for why the HOA is taking a bath. They are getting right back in bed with the developer that caused the defaults by selling at rates that cannot be sustained in the secondary market.

It would be interesting to see what would happen if the HOA offered the defaulted weeks back to current owners (if they had the power to do so), for the costs of foreclosure and an agreement by the party assuming the week to pay maintenance fees thereafter.

 

[ondeadlin]

I've never actually heard of Marriott re-selling weeks for the HOA. I'd imagine that's because, again, the weeks are typically not platinum weeks, and because until now, the largest numbers of defaults would typically be at the older resorts. It might also be because, in the case of the better weeks, the HOA doesn't want to give Marriott a cut.

It might be helpful for you to realize that Marriott and the HOA boards are often in fairly adversarial relationships, not buddy-buddy. Marriott is trying to maximize the fees it gets for managing, while the HOA are trying to minimize those fees. Marriott does not go out of its way to help the HOA at its resorts once the developer units have been fully sold.

In many cases, the HOA sell the weeks in bulk to a reseller like Holiday, and they end up on eBay for minimum starting bid.

 

[Garnet]

I've never actually heard of Marriott re-selling weeks for the HOA. ............

In many cases, the HOA sell the weeks in bulk to a reseller like Holiday, and they end up on eBay for minimum starting bid.

I'm surprised at that Marriott doesn't re-package and resell. I know of a few that did (in HI). However, thanks to the HOA, I picked up a DSVII GOLD at a pretty good price ($2500).

So, Marriott has stopped building Shadow Ridge Enclaves (Palm Springs area, CA). What do you think was the cost per sq foot to build? Might seem cheaper these days to buy foreclosures and repackage. (Like those DSVII's that were sold by Riverside County Tax Auctions, run by Bid$Assets, or something?) When we were looking to add an addition to our house (but not in this economy...) our architect (SF Bay Area, suburbs) thought $300 per sq ft (NOT touching the kitchen). Palm Desert, particularly new construction is probably less,...but still...

 

[larue]

In many cases, the HOA sell the weeks in bulk to a reseller like Holiday, and they end up on eBay for minimum starting bid.

Have you ever heard of an HOA offering defaulted weeks back to the existing owners? I would think that would be a way to increase the stake of existing owners in the future success of the timeshare. If I were an HOA, I would much rather have fewer owners owning multiple weeks rather than more buyers owning single weeks.

Thanks to everyone for the helpful responses. I learned a lot about HOA's and the process of reclaiming defaulted weeks.

 

[timeos2]

So who sells and generates the revenues from the defaulted unit? I assume that Marriott is the exclusive agent for sales on behalf of the HOA, probably at the same commission rate of 40% that they charge for selling anyone else's unit? If that is the case, it likely accounts for why the HOA is taking a bath. They are getting right back in bed with the developer that caused the defaults by selling at rates that cannot be sustained in the secondary market.

It would be interesting to see what would happen if the HOA offered the defaulted weeks back to current owners (if they had the power to do so), for the costs of foreclosure and an agreement by the party assuming the week to pay maintenance fees thereafter.

There are a whole host of problems with defaulting weeks. First they are past due on fees. That means the association has unpaid fees due that are in the budget thus a shortfall for the year. They have to cut the budget and leave things undone or raise fees to those that pay to cover the missing funds. if it goes through the proper collections procedures and still isn't paid then the expensive ($1000/week or more), long (can be months or even years) foreclosure process starts. Money paid by the Association - billed to paying owners. More higher fees. Then once that process finishes, most likely with thousands in fees due and costs to foreclose, the Asociation now owns those weeks. But they may not have much resale value - heck, the old owner was willing to take a major credit hit and suffer a foreclosure to get away. So selling them isn't easy and may not generate anything close to the fees due and the costs expended. The other owners pay.

But that isn't all. They may not only be past due on fees but also mortgage if they have one. If that's the case then the Association claim is secondary to the mortgage holder. Even if they foreclose they can't resell the week as it is encumbered by the mortgage. Many mortgages have bee sold off to other buyers - the base of the mortgage crisis - and many of those don't bother to try to clear up the mortgage. They sit in limbo for years and possibly forever. Almost impossible for the resort to clear up. More virtually permanent delinquent weeks, higher fees to cover those weeks.

The problem of delinquent weeks has always been a big one, getting worse and likely to impact all resorts even those with "premium, platinum weeks" in a negative way. Those great weeks aren't isolated from the impact and the fees are likely to diminish the value if things continue to slide and cause delinquencies.

 

[Quimby4]

I'm surprised at that Marriott doesn't re-package and resell. I know of a few that did (in HI). However, thanks to the HOA, I picked up a DSVII GOLD at a pretty good price ($2500).
So, Marriott has stopped building Shadow Ridge Enclaves (Palm Springs area, CA). What do you think was the cost per sq foot to build? Might seem cheaper these days to buy foreclosures and repackage. (Like those DSVII's that were sold by Riverside County Tax Auctions, run by Bid$Assets, or something?) When we were looking to add an addition to our house (but not in this economy...) our architect (SF Bay Area, suburbs) thought $300 per sq ft (NOT touching the kitchen). Palm Desert, particularly new construction is probably less,...but still...

Thanks to the HOA? Did you buy from the tax auction?

The Maint. dues are separate from the CA taxes. Chances are good that if an owner doesn't pay the maint. fee, they also won't pay the annual property tax. Interesting that the County takes posession when likely more money is owed to the HOA then the county. Anyone have any insight to this?

 

[timeos2]

The tax man cometh - bye bye fees

Thanks to the HOA? Did you buy from the tax auction?

The Maint. dues are separate from the CA taxes. Chances are good that if an owner doesn't pay the maint. fee, they also won't pay the annual property tax. Interesting that the County takes posession when likely more money is owed to the HOA then the county. Anyone have any insight to this?

The fees that were due to the Association are wiped out (never collected) in a tax sale. The new owner of a week purchased through a tax sale starts out with only the current use year fees due if the use date hasn't passed. If it has then they only owe starting the next year (first year with a use right they can actually take advantage of).

Tax sales are not a good thing for the resort or the paying owners as, again, they take a big hit.

 

[AwayWeGo]

Renting Out Delinquent Weeks.

Am I correct in assuming that once a timeshare week goes delinquent, the owner is locked out & the HOA-BOD has the right to rent out the unpaid week, using the proceeds (if any) to offset what's owed ?

Also, I think I remember reading (here on on Yahoo) that some creative HOA-BODs were bundling up their limbo weeks into RTU leaseholds that were being offered to the public -- not deeded units, in that the title situation remains encumbered by mortgage defaults, but leaseholds in which the HOA-BOD essentially sells its clearly recognized right to rent out units whose owners are locked out because of nonpayment.

I would think a timeshare HOA-BOD could easily wrap itself around the axle as it tries to do the right thing on renting out delinquent weeks. On the 1 hand, the HOA-BOD would want to rent'm out for the highest prices possible, to offset as much as they can of the amount that's owed. On the other hand, the HOA-BOD would want to rent'm out cheap so that they'll at least get something for'm instead of nothing, in case nobody rents'm when the prices are high & so they go unused, bringing in no money.

In short, a timeshare HOA-BOD trying to rent out delinquent weeks for the benefit of the owners is like a person with a mouthful of blazing hot coffee -- whatever they do next is bound to be the wrong thing.

In any case, this sort of vexing problem illustrates once more why it is that collections is the No. 1 most important job of any timeshare HOA-BOD.

-- Alan Cole, McLean (Fairfax County), Virginia, USA.​

 

[Robert D]

Couple comments. First, I don't understand why a property taxing authority selling a TS for the amount of delinquent taxes would wipe out past due maintenance fees. This makes no sense. When you buy a foreclosed property, you buy it subject to all liens and encumbrances and it sure seems like this would include past due maintenance fees. Also, if a mortgage holder takes back a TS, that lender has to pay the maintenance fee to protect their collateral or the HOA should be able to seize the TS and resell it.

Also, regarding rapidly increasing maintenance fees, I think a big part of the problem is that there's a disconnect between the HOA's in big name resorts such as Marriott and the TS owners. Marriott is in it for themselves, not for the owners. They look as a TS as a continuing profit center and increasing maintenance fees keeps their profits growing. My experience is that independent TS's do a much better job of controlling costs and I think one reason is they don't have a big dominant company breathing down their throats and probably in most cases, the big company such as Marriott, controls the HOA board and they exercise this control to their benefit and to the long term detriment of the owners.

 

[Garnet]

ooops, misleading...got from ebay

Thanks to the HOA? Did you buy from the tax auction?

The Maint. dues are separate from the CA taxes. Chances are good that if an owner doesn't pay the maint. fee, they also won't pay the annual property tax. Interesting that the County takes posession when likely more money is owed to the HOA then the county. Anyone have any insight to this?

Sorry-I see that was "thanks to HOA" was misleading. I guess I was thinking thanks they didn't take back into inventory (contacting delinquent owners, whatever. I purchased off ebay. I looked into the Riverside County tax auctions...there was a discussion a bit ago. Didn't register as there wasn't any info on getting title transferred, notifying Marriott, questions would Marriott recoginize me as owner (in a timely fashion at least) etc.

 

[RLG]

When you buy a foreclosed property, you buy it subject to all liens and encumbrances and it sure seems like this would include past due maintenance fees.

Not correct.

To my knowledge in all US states, you buy it subject to any liens that were SENIOR to the lien which was foreclosed. Any liens which are subordinate are extinguished by the foreclosure. (Assuming proper notice, etc.) In many/most/all jurisdictions, HOA fees are very junior in priority, unlike taxes. HOA's which let delinquent fees accumulate are unlikely to collect.