The economy and timeshare bad debt

[Tommart]

So are these dollar figures for unpaid mortgages, maintenance fees, or both?

I should let Doug reply, but I assume that the bad debt is mainly maintenance.

The initial purchase and resulting mortgage are not the HOA's responsibility. If someone defaults on the mortgage, that does not directly impact the HOA. It impacts wthe company that issued the loan.

With Massanutten, one has an option of a no interest loan with 50% down and 12 monthly payments. If you default, you lose at least half your money.

Or you could get a 18% interest mortgage for up to ten years. A third party takes the risk and that's why the interest rate is so great.

The $31.50 bad debt that I cited is mainly maintenance fee bad debt.

 

[scpoidog]

Polo Towers

All of our resorts don't report the allowance for bad debt as a line item but, four of those we own do. For anyone interested these are the figures I have for the last few years. It makes one wonder about the ability of timeshares to overcome this bad debt, how aggresive they are at recovering debt and what can be done to slow it down.

Marriott's Ocean Pointe:
2006 $46,978
2007 $48,641
2008 $186,558
2009 $303,170
2010 $561,034

Marriott's Grand Chateau:
2008 $37,098
2009 $173,169
2010 $746,300

Villa's at Polo Towers:
2009 $20,088
2010 $212,812
2011 $744,688

Suite's at Polo Towers:
2009 $37,098
2010 $173,169
2011 $746,300

Those that just walk away hurt us all. They hurt themselves by severely damaging their credit and those that remain are damaged by having to pick up the tab. There are some good reasons for having to default but, walking out of convenience doesn't hurt the developer, who's already been paid for the unit. It hurts the other owners who pick up the defaulters responibilties.

Are the Polo Towers in Vegas?

 

[Tommart]

No one care but me

Massanutten is a large resort with five separate HOAs. Woodstone is the largest of the five.

According to the 2010 budget, Woodstone had 19,995 owners. ( i.e. a single unit has 52 owners.) There are three types of units: Casa (lockable 2-bedroom), Deluxe (lockable 4 bedroom), and Luxury (lockable 4 bedroom). The 4-bedroom units have slightly higher maintenance fees than the Casa.

I'm too lazy to lookup the fees and numbers for the Deluxe and Luxury units. I'll just assume that the average Woodstone bad debit is $33/owner.

The Woodstone bad debt would be $33 x 19,995 = $650,515.

That's a lot of bad debt, but it's spread across 19,995 owners.

I don't know the size of Doug's four examples, but I suspect that each of his examples have a lot less than 19,995 owners.

I bet his per owner bad debt is quite high.

Tom


'

 

[dougp26364]

So are these dollar figures for unpaid mortgages, maintenance fees, or both?

It's just an allowance for dad debt as a line item expense on the MF's. Since this is the HOA and since the HOA doesn't carry the mortgage, I think you can eleminate mortgages. I would assume, but could be wrong, that the majority of bad debt expense is unpaid MF's.

 

[dougp26364]

Are the Polo Towers in Vegas?

Yes and so is Grand Chateau.

 

[dmbrand]

This thread is useful. I just received our HOA's 2011 budget with the bad debt increase. It may be time to attend the annual meeting this year, just to get answers to line items.

I follow our HOA's pursuit of delinquent maintenance fee's through our public circuit court access internet site. Maintenance fees have increased, but to a level that I am still comfortable with, given the region, resort size, and trade ability I have.

 

[dougp26364]

Massanutten is a large resort with five separate HOAs. Woodstone is the largest of the five.

According to the 2010 budget, Woodstone had 19,995 owners. ( i.e. a single unit has 52 owners.) There are three types of units: Casa (lockable 2-bedroom), Deluxe (lockable 4 bedroom), and Luxury (lockable 4 bedroom). The 4-bedroom units have slightly higher maintenance fees than the Casa.

I'm too lazy to lookup the fees and numbers for the Deluxe and Luxury units. I'll just assume that the average Woodstone bad debit is $33/owner.

The Woodstone bad debt would be $33 x 19,995 = $650,515.

That's a lot of bad debt, but it's spread across 19,995 owners.

I don't know the size of Doug's four examples, but I suspect that each of his examples have a lot less than 19,995 owners.

I bet his per unit bad debt is quite high.

Tom


'

The Villa's at Polo Towers has 10,400 intervals
The Suite's at Polo Towers has 16,422 intervals
Marriott's Grand Chateau has 21,578 intervals ($26/interval for bad debt)
Marriott's Ocean Pointe has 17,562 intervals ($17.08/interval for bad debt)

Neither the Villa's or the Suite's break down the cost per interval. Assuming 51 intervals (many resorts don't sell all 52 weeks but leave on for maintenace I've been told), they would work out to $71/interval at the Villa's at Polo Towers and $45.46/interval at the Suite's at Polo Towers.

 

[dougp26364]

Since Marriott breaks everything down by unit size and per interval costs, I've gone back to look at the bad debt expense in relationship to total MF. WHile the total number looks bad and, the fact it's increased significantly in a short period of time, the bottom line isn't nearly as scary.

For Grand Chateau the bad debt expense amounts to 2.3% to 2.7% of the total MF depending on the size of unit owned. With Ocean Pointe it's 1.7% of the total MF excluding property taxes, which are divided unequally between seasons with silver season owners paying less than platinum season owners.

I don't know if one can safely say that the default rate matches the percentage of the total MF but, I'd be willing to bet there's not a lot of difference. If that's true I'd hate to think what it would be like should 20 or 30% default and, if it's true I'd say the HOA's generally do a pretty good job of collecting MF's and keeping bad debt to a minimum. Especially when you consider the economic climate we've been going through these past couple of years.