So I am here gathering info about how these schemes work to see if anything can be done to help this person. Not much from what I can tell.
Unfortunately, you're correct here. There is very likely no way your friend could hope to even recover the amount s/he still owes, let alone the purchase price. And, it is absolutely true that the developers prey on such people. It's a harsh reality, but
caveat emptor. As you say, your friend is a dumbass.
I'd be happy with saving on accomodations if I got in for a good price up front and fees were contractually constrained in some manner or I had some influence over them (like an association).
This is a good point. However, you don't want them to be contractually constrained, because that can leave your resort in a hole, with no way to cover increasing maintenance costs, etc. For example, consider Proposal A in Michigan. This limits the increase in residential property taxes---which sounds like a good idea, until, say, a community wants to raise more money for their own schools, and constitutionally can't vote to do so.
However, in most timeshares, there is an association which governs the budget and, hence, fees---and a savvy buyer will buy in a resort that has an owner-controlled board of directors, rather than a developer-controlled one. All three of my ownerships are at resorts with owner-controlled boards. An owner-controlled board can still screw up, but if they do, you vote them out and vote in someone who will do a better job. Generally, you'd expect annual fees to increase at roughly the same rate as the cost of rental lodging. But, since your basis is lower as an owner, the gap between owning and renting grows over time. If it doesn't, you need to have a heart-to-heart with your board.
There are other risks---storm damage, etc.---that an owner is subject to that a renter is not. Such are the privileges of ownership.
I have three litmus tests for any ownership I am considering:
1: It must be a resort I would be willing to use myself, within one day's drive. (If a mini-system, it must have at least one such resort "in-system" with good year-round availability).
2: The week must occur during school vacations. If a floating or points week, it must be bookable within same with good availability.
3: The carrying cost must be less than market rental rates by a reasonable margin. I compute carrying costs as 8% of the acquisition costs (purchase price plus closing costs/fees) plus annual fees. If this is close to or more than rental rates, no sale.
You'd be surprised at how many timeshares---even resale---fail test #3. If any of my ownerships have fees rise to the point where #3 is in danger, on the selling block it goes. It's still objectively got value, just not enough for me. But, because all of my ownerships are in decent resorts during school vacation periods, I expect to be able to get rid of them if necessary, even if I have to firesale them on ebay for $1. And I paid very little for those I currently own, so my total capital exposure is low even if I have to firesale.
You'll notice that my criteria are very close to your "long list of IFs" They put me in what I find to be a tolerable risk position, and provide a fair return on investment compared to rental rates.
It seems to me that this only makes sense for people who have free time to vacation, and who have free time to learn how to work the system.
Certainly the first is true---timeshare makes no sense if you can't make time to vacation. The second is not necessary---
if you follow a set of criteria similar to my own, and have done your due diligence to make sure the board is owner-controlled, etc. From that point on, you just use what you own, happy with your modest but fair return on investment.
That said, learning how to work the system is where the real money is. For example, I spent 11 days in Disney resorts over the past year. The rental rates from Disney for those resorts would have averaged about $475 per night, before taxes. The "market rental rate," renting from an owner at that resort, would have cost about $320 per night.
Adding up all out of pocket costs plus the 8% opportunity cost on the purchase price of the week I used, the cost to me was approximately $115 per night. I paid less for those nights all-in than an owner would have paid only in maintenance fees, let alone opportunity costs on the (very substantial) purchase price. And that's despite "throwing away" three extra nights that I could have used, but didn't. If I did use them, my cost per night would have dropped to $90.
To be fair the time I spent learning to work the system, if I were billing at my normal consulting rate, is worth a lot more than I saved on those Disney resort rooms. But, this is a hobby---I like the game of cat and, ahem, mouse.
