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Comment by lolinder | Hacker News Reader

That article is useful context for this—it points out that there are way more people trying to sell timeshares than buy them, which means that people who want to get out from under one can't do so easily. That creates an environment ripe for scammers who can promise to finally take this bad investment off your hands.

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I do not know about other US states, but in mine, it is not uncommon to hear radio advertisements for lawyers who specialize in getting people out of timeshares. We have a large population of 50+ individuals who like to spend a good chunk of the year in Florida and they are absolute suckers for timeshares and other methods that promise them cheap or discounted ways to do so.

It's so bad, I bet some of you can guess which state I live in.

I don’t know why anyone would want a timeshare. I don’t know exactly how they work. All I know is that I hear way more ads pushing ways to get out of a timeshare than I hear ads for timeshares. So all I know is that people want to get out of them, but can’t!

The basic idea is reasonable enough: split ownership of a vacation home among multiple owners so that they can all efficiently use it for vacations, with each co-owner having a regular time slot assigned. But in practice the contracts around them are often predatory, with excessive financing costs and annual maintenance fees. And since it's a share that you own, you (nominally) can't get out of the fees without transferring your share to someone else. However, since the downsides have become well-known, people have sometimes found that they can't even give away their shares, let alone recoup much of their initial purchase cost.

The thing is you can keep your money and spend it on going anywhere you want on vacation later on. It makes no sense.

Group ownership is pretty much a massive hassle. Different people have wildly different visions for things like maintenance and how a house should be outfitted.

I've always taken the philosophy of putting the money in my piggy bank with no cost and obligation. Given certain circumstances, could investing in real estate been a good deal? Almost certainly. But not without risk or future obligation.

Yeah. With a lot of assumptions, they can maybe work outside of financial shenanigans. But people often want to travel at the same time. They want to vary locations. If you always want to go to the same location multiple times per year and are pretty flexible about dates? Maybe?

Buy a house, put it on airBnB through a management company, go to other AirBnB’s using rental income from first AirBnB. Or you could not try and run a business and simply invest nominally while paying market rate for a rental.

Sharing informally between friends and family when people have vacation properties in desirable locations works better but the barriers to entry are really high.

My parents had a vacation home in Mexico for a while that they rented out (pre-AirBnB). But, being Mexico, they had on-site staff, my mother was retired, and the whole thing still seemed way more hassle than I would have had any interest in. (Building it was also pretty much a nightmare.)

I do use my brother's second home up in Maine and that works pretty well.

They don't have to advertise. Some outfit may gift you a week of timeshare, or a hotel concierge might be in cahoots with timeshare salespeople, and offer you boat rides or whatever in exchange for a sit with the TS salespeople. They push as if their lives were on the line for each sale. It's intense. You can find touts for the salespeople offering goodies at certain airports, lining the only exit aisle.

Only TS I recall unloading was the one in Waikiki that was sold to another corporation. Weeks went poof, but so did the fees.

SF bay radio has lots of "get rid of your timeshare" ads.

> It's so bad, I bet some of you can guess which state I live in.

FL: NY's graveyard.

Growing up in Ontario, a couple of my friends families had timeshares in Florida or Carolina. Are they pretty universally understood to be a bad investment?

After doing basic napkin math I've always thought it was pretty obvious. Buy-in + annual maintenance fees that are pretty close to what a condo rental outside of a contract would be. Then you add in the other factors such that you're locked into certain locations and whatever timeframe is not booked, don't actually own anything other than a lease, and the only way to get out of it is to sell it yourself... no thank you.

They aren't an investment, period. You generally can't sell them. The complex can assess whatever maintainance fee they wish with little to no requirements for justification.

Well, I'm in Florida, and we have the same ads here. Not sure which state you're in. Michigan?

Indeed! Perhaps the ads for lawyers getting people out of timeshares is part of the Great Timeshare Conspiracy between our two states.

Indiana is like this but I'd guess a lot of the Midwest is similar.

But why don’t they go down in price until there is an equilibrium?

Here is an example as to why: $0 to buy, maint fee $1076

https://www.redweek.com/posting/R1228603

The relationship is perverse. You cannot simply leave, so there is zero reason for the timeshare company not to bleed you dry in fees. You can sell your share for $0 or even pay someone to take it, but the management company still gets their due. They are not like a landlord who would ever have to contend with an empty unit if they get too uppity.

> > But why don’t they go down in price until there is an equilibrium?

> Here is an example as to why: $0 to buy, maint fee $1076

Prices can also be less than 0 USD.

Such negative prices do occur in an economy, for example to get free from obligations that accompany the object, which is the case here.

If prices are negative, there will only be a market if sellers can afford (and are willing) to pay buyers the market price.

Is there a business model where people could pay to sell their timeshares to a shell company and then having the company go insolvent?

The contracts usually state that they can go after the original owner if the new one can't pay. So even paying a terminally ill patient to take it over won't work.

Is that considered a legal contract?

Well, it is either a legal contract or an illegal contract that you will have to fight about in court. Rich people who can afford attorneys generally do not buy timeshares. No lawyer would ever suggest that any client buy a timeshare. So, in other words, anyone with access to a family lawyer would never buy a timeshare.

That’s why many countries have government “watchdogs” you can report illegal contracts to, who will investigate it and potentially sue the company if they believe its a scam or somehow against consumer rights.

If it's illegal, you can simply not pay, and THEY have to fight it in court.

You can also do this if it's legal, but the court might not be favourable to you.

>> you can simply not pay, and THEY have to fight it in court.

Yes. They will sue you in court. Then, when you don't answer and/or attempt to represent yourself, you will end up paying the default judgement. A judge isn't going to nullify a contract on their own. You have to explain to them why the contract is illegal, which is not as easy as everyone seems to think. That is what lawyers are paid to do.

I believe most timeshare owners are contractually bound only to sell to individuals, not to LLCs or some other legal entity for this exact purpose.

Couldn't you just find a real person who is on the verge of bankruptcy and offer them $10 to take the timeshare?

Sounds like fraudulent conveyance.

Oh because a contract that is like a cronic disease is the highest point of lawfulness

It's not a question of what's lawful or not, it's a question of how much of a pain the litigation is going to be.

Reading https://en.m.wikipedia.org/wiki/Fraudulent_conveyance it doesnt seem like it fits to me, but ianal.

IANAL but I'm pretty sure that would be considered fraud.

The "Texas two-step" has been used by plenty of companies and is structured around exactly those sort of shenanigans. https://www.investopedia.com/texas-two-step-bankruptcy-defin...

The "Texas two step" is also notably controversial and has been overturned by courts several times, including the most recent attempt: https://www.reuters.com/legal/jjs-ltl-units-bankruptcy-dismi...

If you need to take your case to an appeals court to be protected, it's not a protection for an everyday person.

Though from the wikipedia article [0], it looks like it has only been used successfully three times (2017, 2019, and 2020). There's a fourth in-progress by Johnson&Johnson, where the summaries state that the bankruptcy has been twice dismissed by courts as being invalid.

[0] https://en.wikipedia.org/wiki/Texas_two-step_bankruptcy

Heh, TIL.

Permanent timeshares should absolutely be illegal. It's ridiculous to allow a permanent obligation to maintain a property that the "owner" isn't allowed to destroy.

How do you destroy an apartment? It's the same legally as any condo. When you bought it, you promised all the other owners to help maintain the building in exchange for them all doing the same. You need everyone's consent to undo that. You can't get out of a contract because it's a bad deal. Timeshares are just such a bad idea because you dilute the ownership to worthless levels and the management companies add on exorbitant fees of their own.

> You can't get out of a contract because it's a bad deal.

I think there is a difference between something that you dont know is a bad deal because it depends on future events (real estate market shifts or whatever) vs something that is a bad deal because you were mislead or didn't understand the contract.

If you take a risk and it doesn't work out - that is life. However that is a little different from the timeshare case, which seems less about risk and more about tricking people.

There's much worse tricks, like convincing you to fight a war as a soldier where you can't leave under threat of arrest or death, depending on the country, for example.

Ok... your point? That is also awful and bad.

This reads as yet another symptom of the US mentality which sees government regulation and taxes as evil, but property rights and contracts as sacrosanct.

It shouldn't be possible to sign a contract that binds you to arbitrary amounts of future fees. When buying a property, you shouldn't be locked into doing whatever maintenance the co-property fancies unless you at least own a voting stake in that co-property. (And even then, only within reasonable limits.)

This is the same mentality that somehow sees student loans with >10% interest rate as anything but a symptom of a disfunctional economy.

At the very least, for cases like these, the government should tell scammers creating those constracts "You're free to put that ink on paper, but we're not going to use our monopoly on legitimate violence to enforce it".

The UK is way ahead on this one. Enter into a contract to own part of a property as an "affordable" option. Get screwed by service charges that have no limit.

https://www.theguardian.com/money/2024/sep/22/affordable-sha...

> It shouldn't be possible to sign a contract that binds you to arbitrary amounts of future fees.

In the US? Cable TV? Cell phone service? Restaurant bill?

I've never had to sign a contract to eat in a restaurant. Are you referring to a specific restaurant?

Contracts don't necessarily need a signature to be valid. If you order food at a restaurant, there is an implied contract that you will pay for the meal.

However, this amount is almost always stated in the menu, so it isn't arbitrary. In fact, in each of the above cases, the amount you pay is almost never arbitrary, but based on usage or a preset price.

I think they just mean that in many restaurants you pay only after receiving your food, but it's really not a very good comparison for a number of reasons.

Especially since all of the above listed things, but especially restaurants, have stated prices and often a means of negotiating them down or being entirely un-obligated if the providing party fails too severely.

And since, though not fully related, a restaurant can choose not to accept credit cards for instance, but there's often an obligation to state that clearly and visibly somewhere obvious beforehand, and always (in the US) an obligation to accept cash for debts owed in this manner.

Service charge? Mandatory tip?

Tip is never mandatory, a service charge has to be clear up front to be valid.

I am allowed to cancel my cable service and cell phone plan. You can't cancel a timeshare.

But you still have no idea how much you'll actually pay when you sign up. Even if you can cancel it later.

I don't know how these contracts work in the US, but in the UK if you buy a leasehold apartment where you own the individual unit without having ownership of the building itself, there will be clause in the agreement that states if you fail to pay the maintenance fees or to keep the unit in good repair ownership can be reclaimed by the owner of the building.

There are no end of issues with leasehold properties, but there is at least a way out if you decide you can't deal with the maintenance fees attached. You'll probably end up with a terrible credit record for defaulting on your mortgage, but at least you can get out.

Yeah, it's the same. The timeshare association can reclaim the timeshare, but again, if it's worth approximately -$2,000, why would the timeshare association reclaim that unless it absolutely has to?

Condos are also generally a scam. Owning real estate but not the land under it is to become a victim of incredibly perverse economic motives.

Presumably the difference with a condo is that the condo owner has a fair vote in the buildings management (usually an HOA in the US) and enough votes can be used to destroy the building if it achieves high enough liability-to-value ratio. That does not exist for a timeshare, the timeshare owners can never band together to change the governance of the building

That's a great observation. I've always wondered while biking past old apartment complexes in Mountain View being torn down: who foots the bill for the value destroyed, and who makes those decisions. If you owned one of those units, could you just get outvoted a lose a million-dollar condo like that?

> If you owned one of those units, could you just get outvoted a lose a million-dollar condo like that?

You'd have a share of the claim on the value of the land.

Presumably everyone voted to tear it down because the building costs more to maintain as-is, than to tear down and rebuild.

My guess is the condo votes to sell the land to someone else, distribute the money to the condo owners and then dissolve. Generally the condo isn't worth a million dollars anymore though as the building is old. Or maybe it is worth a million but you were paid 1.1 million to get out as whatever replaces it is that much more valuable (if it really was worth a million I'd guess not, but the million dollar condos of 1950 are not worth nearly that much today but the land itself is worth a new million dollar condo.

It is also possible the condo voted to tear down the building and build new - if you owned the condo before you will have one again in 2 years, but you are required to live elsewhere in the mean time. (Million dollar condos in Iowa implies you can afford a second house/apartment, while in San Francisco it would not)

Where do you live that this is the condo ownership model?

Generally, condo owners have an undivided interest in the land on which the property is built.

now I wonder if identity thieves go around signing people up for timeshares.

Because a time share is not an asset, it's a liability. It is sold as "ownership" but in fact it is an obligation to pay for a vacation rental in perpetuity, except that "rent" is called "maintenance fees". It is a scam pure and simple, and no one in their right mind would ever buy one at any price.

Ebay is full of $1 timeshares. There’s even a website with 17,000 timeshares for a dollar called sellmytimesharenow.com

Much like most trades above a negligible threshold, there are too many rules in place for it to be a free market (which would allow an equilibrium to occur).

Perhaps AirBnB should focus on timeshares instead?

Because the equilibrium is $0.

The timeshare maintenance fees are the entire cost of ownership.

With the exception of a few top end timeshares, the residual value is not more than 0.

Because you can't give away a timeshare, it's a liability.

There's a sucker retiring every minute.

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