by Cliff Hagberg: ivs@capecod.net
April 3, 2000
On February 2, 2000 the First Annual Timeshare Resale Symposium was held in Florida, sponsored by Tom Woodall at
Garrett Communications and Andy Roosa at Tammac. The following is exerpted from the body of Cliff Hagberg's Keynote
Speech, and is printed with permission.
A lifelong resident of Cape Cod and licensed real estate broker with offices MA, RI and NH, Mr. Hagberg began
his real estate career in 1978 in Hyannis, specializing in commercial & investment property and land. In 1986,
he expanded his real estate company, Hagberg Realty, into property development with the purchase of the Smuggler's
Beach Motor Lodge in Bass River. In addition to his own projects, Mr. Hagberg has been a real estate consultant
for several large firms in New England and California, representing over 400 real estate agents. His sales and
marketing expertise have also led to consulting positions throughout Europe. Mr. Hagberg has also been qualified
as an expert witness in the timeshare industry. He has been a featured speaker at the American Resort Development
Association's International Convention for each of the past 4 years in addition to speaking at local meetings.
Mr. Hagberg is the current Chairman of ARDA's Resale Task Force. Cliff Hagberg is President of IVS
Realty, the oldest and largest timeshare resale and real estate company in New England.
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There's no doubt that timeshare resales is becoming an increasingly important topic for all of us in the timeshare
industry.
As many of you know, last year the American Resort Development Association adopted a set of ethical guidelines
for resale companies. What many of you don't know is that ARDA also adopted a Model Timeshare Resale Act that could
be used by states considering timeshare resale legislation.
In 1997, I took over the chairmanship of ARDA's Resale Task Force with a clear directive to create a set of ethical
guidelines for companies engaged in resale activities. These guidelines would be enforceable under ARDA's existing
Code of Ethics. Over the next two years, the Resale Task Force drafted and redrafted proposed guidelines. After
input from all segments of our industry and many, many somewhat heated discussions, in April of 1999, we presented
our final recommendations to ARDA's Board of Directors. These guidelines were adopted by the Board and are now
a permanent part of ARDA's Code of Ethics.
The guidelines that were adopted were intended to provide the Ethics Committee with a set of standards to use when
alleged violations were brought to their attention. They are not a complete and comprehensive list, but are, instead,
a working document that will continue to be refined, amended and added to over the years. We discussed many items
that are not included in the guidelines and probably should be. Hopefully, these items will be included as the
guidelines are tested and modified by the Ethics Committee.
While this isn't the appropriate forum for a discussion of the guidelines in detail, I do think it's important
to point out some of the highlights. They are and were intended to be somewhat general in nature. This was done
to give the Ethics Committee the freedom to refine and interpret the guidelines as specific situations were brought
before them.
There is one area that I believe needs some explanation - and that is the area of advance fees. Many people in
the industry felt that ARDA should take a strong stand on advance fees and prohibit members from charging them
at all. Others felt that advance fees should not be addressed by ARDA in any way. At the Resale Task Force, we
opted for a middle ground. Most of us believed that ARDA has no right to tell it's members how they can charge
for their services. ARDA would never consider telling attorneys that they couldn't charge retainers and we felt
that ARDA has no right to tell resale companies whether or not they can charge an advance fee or place limits on
how much companies can charge.
The problem in the industry is not advance fees. It's the fact that some companies mislead consumers in order to
get them to pay an advance fee that's the problem. Some companies tell sellers that their week will sell quickly,
that they have buyers in their computer and may have an instant match for their week just as soon as they pay the
so called registration fee, or that their week is worth much more than it really is worth. Worst of all are those
companies that pretend they're going to buy the week "just as soon as they have an appraisal to satisfy the
bank".
We're all familiar with the lies told by some companies in order to collect an upfront fee. One of the worst areas
of abuse at the moment is requiring sellers to have an appraisal before the company can list their week for sale.
Not only is an appraisal absolutely not necessary to list a week for sale, some of the appraisals I've seen from
these companies have absolutely no basis in reality. I've seen outrageously inflated figures of what a week is
worth. I've seen comparable sales information for properties that aren't comparable at all and, in some cases,
they produced no appraisal at all, just the appraisal charge. Every company that I know of that requires an appraisal,
also seems to own the appraisal company that they recommend. In most cases, it's simply a dodge to collect an advance
fee by calling it something else and they often use the name of a national real estate franchise for credibility.
I've never seen a situation where the resale company's credibility is derived from their actually selling weeks
that are listed with them. Instead, it's based on a well known real estate name and not performance.
I don't know of a single national company or a company using a national franchise name that will discuss their
actual sales so that we can see if they're effective or not. If they are actually able to achieve significant sales
results from their programs, I'd be one of the strongest advocates for their type of operation. And it would be
relatively easy for a national company to prove their effectiveness. All they need to do is to prove that their
commission income would at least be enough to cover their expenses. If they can't cover their expenses from their
commission income then they're not, in my opinion, a successful resale company. In fact, I'd even question if they
are in the resale business at all. If they depend on the advance fee to be profitable, then they must be in the
business of generating advance fees - not in resales.
From a personal standpoint, I can easily envision situations where an upfront or advance fee would make sense and
be a legitimate charge by the resale company. For example, in New England I've found that about 40% of the weeks
that are listed for sale with IVS Realty have a title problem of one sort or another. Although we don't currently
do so, I think it would be reasonable for us to charge a small fee to have the title checked before offering the
week for sale, in order to be sure we can actually close a sale. In most cases, the owner is able to provide us
with enough information to determine the status of title and we frequently do title checks at the various registries
where we do business. While we don't charge a fee for this service, as we continue to grow and have more and more
resorts and listings, it becomes increasingly difficult and expensive for us to check every individual title prior
to a sale. In a situation such as this, I think it would be reasonable to charge the seller a modest fee to cover
the costs of a title check. I also believe that, if an advance fee is charged, the company should make full disclosure
as to what the fee is for so that the consumer can make an informed decision about whether or not to pay the fee.
In general, ARDA's Resale guidelines require resale companies to make full disclosure, to eliminate false, deceptive
and misleading practices and to conform to applicable law wherever they operate. While these guidelines may seem
reasonable enough, the implications for our industry are far reaching.
In most cases, a timeshare interval is clearly an interest in real property and, as such, is subject to all of
the real estate laws and regulations in each state. In practice this simply means that every company engaged in
resale activities must follow real estate law and regulations in the states where they operate and this seems to
be where there's a great deal of confusion.
It's fascinating to me that, if we were talking about single family homes and Realtors, we wouldn't even be having
this discussion. I am a Realtor and a member of the local, state and national associations of Realtors. In that
capacity, it's abundantly clear, not only to me, but to everyone else in the real estate business that, if I want
to list a house for sale, I need a real estate license in the state where the house is located. Now, I happen to
be licensed in Massachusetts, among other states.
If I list a house in Florida for sale, it's clear that I will be conducting brokerage activities in the state of
Florida, whether my office is in Florida or not. Because I'll be conducting brokerage activities in Florida, the
state of Florida requires that I have a real estate license in order to assure the public that I have at least
a minimum competency in Florida law as it applies to real estate. Likewise, if a Florida broker wants to list a
home in Massachusetts for sale, Massachusetts requires that broker to have a Massachusetts real estate license.
A Florida license just won't cut it.
I don't know why people have so much trouble with this idea. It's not a strange concept, nor is it even a matter
for debate in the real estate industry. I believe that one of the reasons it's not an issue in the real estate
business is the fact that the real estate business is local in nature so we simply don't have real estate brokers
listing houses all over the United States. Buyers simply do not call a Florida real estate broker if they want
to buy a home in Massachusetts. It wouldn't make any sense. In many ways, the timeshare resale business is also
local in nature. At IVS Realty, we have cooperative agreements with other resale companies to sell their listings
if we have a buyer and vice versa. To date, these co-brokerage arrangements generate less than 1% of our total
sales. All of the resale companies that I know of that are actually successfully in selling weeks operate pretty
much like a real estate broker and concentrate on a specific state or a specific area.
As far as I know, we've never had a timeshare company outside of New England sell one of our listings. They just
don't run into buyers in California, Florida or Hawaii that want New England timeshare. With our program currently
in more than twenty resorts in New England, we're in a perfect position to cross promote all of our resorts. Even
with that advantage, about 80% of our sales are done with owners, exchangers and renters at a particular resort
and not from switching a prospect from one resort to another.
Since most of our buyers want to return to the same resort, they tend to buy at the resort where they've stayed.
If we are successful in convincing them to purchase at another resort, they want to visit the resort to see what
they're buying. The only real exceptions to this are people who are buying just for exchange. They tend to buy
the least expensive week with the lowest maintenance fee.
This is not at all unlike the real estate business. The fact that people want to see the resort before they purchase
and the fact that they pretty much know what area they want to be in tends to supports the premise that timeshare
resales are local in nature and not national in scope. I believe that this is the reason why the large national
companies have to charge advance fees to be profitable. When you try to offer inventory to the general public and
that inventory is all over the world at hundreds or thousands of resorts, how do you begin to sell a prospect on
a specific week in a specific unit at a specific resort in a specific location? I have buyers getting confused
if I offer them a summer week in a two bedroom unit at two different resorts on Cape Cod! As I said before, these
companies are not in the business of selling timeshare, they're in the business of generating advance fees. While
I do believe that there will be a successful national resale company at some point, that company is going to have
to think globally, but act locally and not nationally to be successful. It is also the reason why I don't see licensing
law to be a major impediment to a national company. It won't be a problem with a network of local brokers who act
locally, but cooperate nationally.
It is absolutely incredible to me that many of us in the timeshare industry believe that we can conduct brokerage
activities without a license and that we should, for some reason, be exempt from real estate laws and regulations
because it's not "really" real estate, it's timeshare. The fact is, it is real estate and there's no
way we can pretend it's anything else.
Whether or not there's a need for a national timeshare license or some other regulation that would allow companies
to conduct sales from state to state with the same license in each one is irrelevant. The point is, you simply
can't do that at the present time. In New Hampshire, where I also have a real estate broker's license, state law
requires me to report companies that are conducting brokerage activities without a license. Every timeshare resale
company that has a listing at a timeshare resort in New Hampshire and doesn't have a New Hampshire real estate
license is violating the law and if I don't turn them in, I can lose my license! So, it's a simple warning, if
you're in the resale business and you have a listing in New Hampshire, don't let me find out about it because I'll
have to turn you in to the authorities or you can turn me in to the authorities for not reporting you and I'll
lose my license!
Which brings us to another point. Now that we have a resale Code of Ethics and we all know there are resale companies
that are violating our Code and state laws, what should we do? I firmly believe that if we don't police ourselves,
at some point the government will step in and do it for us. We saw this happen last year in Nevada and I believe
we'll see it more and more. If a company is a member of ARDA and is violating our Code of Ethics, you need to file
a formal complaint with the Ethics Committee. That's why we have an Ethics Committee. If they're not a member of
ARDA, we can still take action although it's a bit more time consuming.
At IVS Realty, we go to great lengths to find out who the actual investigators are in each state when we hear of
a resale scam. When we know of a consumer who's been scammed by a resale company, we ask the consumer to prepare
and sign an affidavit stating exactly what happened and to provide any supporting documentation that they have.
We then forward all of the information on to the proper authorities. For some time now, we have been collecting
and passing on information about several companies right here in Florida that I believe are scamming people. If
all of us made a commitment to do the same thing, we could quickly inundate the authorities with all the information
they need to quickly prosecute these companies and put them out of business and some of the principals behind bars.
It happened in Ohio in the Oscar Bradley scam. I know because I testified against them and they did go to jail.
All of us must do our part to protect our industry and our reputations and I urge all of you to be proactive in
eliminating scam artists from the resale business.
There's been one other item of significance that happened with ARDA last year. The state of Nevada decided that
it needed new legislation to regulate timeshare resales.
When ARDA looked for information to provide to Nevada, they found and sent a model timeshare act that had been
prepared in 1989. Shortly after that, it was decided that ARDA needed to be more current in the information we
had available. The State Legislative Committee was assigned the task of preparing a new Model Legislative Act that
could be used by ARDA. While it took years to adopt resale guidelines that are only enforceable against ARDA members,
a model legislative act was adopted by the ARDA board of directors after only a few months of limited debate. After
the act was adopted by the Board I was told that, while it may need more work, it was important for ARDA to have
something to provide state regulators as quickly as possible even if it wasn't perfect. In my own opinion, the
proposed Model Legislative Act is far from perfect and needs more work.
The problem in my view is this. Since most timeshare is real estate, we already have a huge body of law to regulate
the business of real estate. I am not aware of a single abuse in the timeshare resale industry that could not be
completely eliminated by enforcing existing law and regulations rather than creating new ones. Of course it is
much simpler to just hand regulators a sample of proposed legislation rather than spend the time and money to educate
them to the fact that we already have laws on the books that adequately protect the consumer if only the states
will enforce them. While I still do not agree with the need for Model Legislation, the fact is, ARDA is going to
have a proposed act anyway.
In the proposed act, there are disclosure requirements that go far beyond anything required of any other profession,
including real estate brokers. The act calls for a resale company to disclose the ratio of total listings to the
number of listings sold. At first this doesn't seem so bad. But wait a minute. Would we consider making real estate
companies disclose the number of listings they take versus the number of sales they make? Are we going to require
accountants to tell us how many returns they prepare versus how many get audited? Are we going to require lawyers
to tell us how many cases they try and how many they lose? if you haven't taken the time to review the act and
you are in the resale business, you must make your thoughts known to ARDA. While most of us in ARDA agree that
it's vital that we take the lead in cleaning up the resale industry, again, in my opinion, this is absolutely not
the way to go about it. Get involved now and make your voice heard or don't complain to me when your business is
legislated out of existence.
Another concern I have is about the future of timeshare resales. In spite of the fact that many people in the industry
would just as soon see resales go away, they aren't going to go away. Instead, resales are going to be steadily
increasing as more consumers turn to the resale market. It just doesn't make economic sense for a person to buy
a week from a developer for $10,000 when they can buy the same week at the same resort on the resale market for
only $5,000.
I hear a lot of complaints about low prices on the resale market. Low prices are a result of only one thing - a
huge supply of inventory and little or no market. I have a situation right now at a resort on Cape Cod where an
owner is so desperate to sell his off season week that he's offered to sell his week for $1 and then pay the buyer
another $600 to cover a couple of years maintenance fees and he'll pay me $500 if I can find someone to take the
deal. Anyone??? That's just the problem.
Whether it's resales or developer sales, we have the same problem. There is little or no demand for our product.
If there were, developers wouldn't be paying $200 or more to get a potential customer to visit the resort. It is
interesting to me that, while our industry has grown tremendously, we still market and sell our product pretty
much the same way we did 20 years ago. I don't hear developers tell me about how many weeks they sold to people
who just showed up at their doorstep because they wanted to buy a week of timeshare. While it's not quite the same
in the resale market, it's not that much different. Most people don't get up in the morning and say "Hey honey,
let's go out and see if we can get a good deal on a week of timesharing!"
Most of the people buying on the resale market are people who already own a timeshare. Now that they own and use
the product they discover that they want to own more and, as they become more familiar with timesharing, they learn
about the resale market - and what they see is eyeopening. On any given day, they can look in USA Today or even
their local paper and see red weeks in Florida for only $500. They see associations offering delinquent weeks for
just the maintenance fee. They see auctions where you can bid on weeks with no minimum reserve. Everywhere they
turn, they see lower and lower prices.
Almost 90% of our business at IVS Realty is from people who own or have stayed at a resort where we have a resale
program. The other 10% is a mixed bag including people who know nothing about timeshare but want to learn about
it. Like many other resale brokers I've spoken with, advertising is just not an effective way of generating buyers.
It's a great way of finding sellers as you'll notice that all of the companies that charge advance fees spend millions
of dollars every year advertising their companies.
The pricing problem, in my opinion, is only going to get worse. As the backlog of sellers wanting to sell gets
larger and larger, they begin to compete with each other to lower their price in order to sell faster. When a resort
with 2,500 owners takes back 200 off season weeks and dumps them on the market for just the cost of the maintenance
fee, all prices drop. When you have a resort with floating time and it doesn't matter which week people buy, they
buy the lowest price they can find - and sellers compete with each other to be that lowest price.
They only thing that is really holding the resale market back is the ability to communicate with the public. As
more and more of the public becomes aware of the prices on the resale market, there is less and less reason for
them to purchase from developers. Nowhere has this been more evident than right here in Orlando. Everywhere you
go you see information about timeshare resales. It's only surprising to me that more people aren't buying on the
resale market.
I still believe that the reason for this is simply that we don't have a product that most people think they need.
We still need to essentially "bribe" them to come to our resorts where we hope to get them so excited
that 10% will buy our product. I can't think of another product that is sold like ours.
But what will happen to us as more and more people see timeshare as something they need to have? Are we going to
end up like real estate or will we be something entirely different? I believe that we are only beginning to get
glimpses of what timeshare will like in the next few years.
Imagine for a moment a guy named "Bob". Bob and his wife receive an invitation to tour a timeshare resort
from a developer. They take their tour and are so impressed, they purchase a week. That night, just for fun, Bob
decides to go on the Internet to see what he can find out about the resort.
He enters the name of the resort in Alta Vista and hundreds of matches show on his screen. Among the matches are
several resale companies. Out of curiosity, Bob visits three resale company's web sites and finds several listings
of the same size unit for the same week he purchased earlier that same day. The problem is, Bob paid $15,000 from
the developer and he now sees that he can buy the same week in a similar unit for only $7,500! He e-mails the resale
company for more information.
The next day, in his electronic mailbox, he receives a package of information about the resort from the resale
company including resort amenities, a calendar, a complete set of disclosures about the condition of the resort,
a recent financial statement, floor plans, a set of condominium documents and a link that will take Bob on a virtual
tour of the resort. The last thing Bob looks at is a Purchase and Sale Agreement confirming that he can purchase
the week for only $7,500. Bob decides to buy from the resale company and sends a cancellation letter to the developer.
After a series of e-mails with the sales rep at the resale company, Bob visits RCI's web page where he gets even
more information about the resort. He decides he's ready to buy so he prints out the Purchase and Sale agreement,
signs it and sends it on to the resale company. Bob receives an e-mail confirming receipt of the agreement and
instructions for wiring the balance of the purchase price directly to the resale companies escrow account. Bob
wires the money and two weeks later, receives confirmation of the sale.
Sound far out? Not at all. Bob purchased his week from IVS Realty in exactly this way last November. Last December,
at the New England ARDA meeting, I had a chance to talk with several New England developers. In the course of those
conversations, we were able to identify six people exactly like Bob. All of these people had toured the developers
resort and later gone surfing on the web. They found their way to our site and purchased a resale week from IVS
Realty after canceling with the developer. Now six cancellations is not a lot, but a year ago, there were none.
Next year we expect a lot more as people become more and more familiar with the Internet and resales.
As most of you know, the language of web sites is called HTML which stands for (Hyper Text Mark Up Language). This
language allows search engines to catalogue web sites for display through the search engines. Now while HTML is
very powerful, there is a new language on the horizon that will change the way all of us do business. This language
is called XML which stands for (eXtensible Mark Up Language) and it is the next generation.
Let's go back and visit with Bob again and see what changes have taken place. This time, Bob doesn't even bother
with the search engine. He opens his personal Internet assistant, a software program that's available now, and
enters the following information. "Find the cheapest two bedroom unit in the month of July at Vistana Resort."
While he's checking his e-mail, his assistant, with the help of the XML programming language, is able to check
every web site on the Internet that is offering a July week for sale at Vistana. These web sites include not only
the developer, but resale companies and even individuals who are simply listing their week on their own personal
home page.
In less than a minute, the assistant prints out a list of every July week for sale at Vistana in order of price
from the least to the most expensive, along with web and e-mail addresses for more information. In addition, the
assistant lists several other sites that might be of interest to Bob including RCI, Interval International, a site
that offers a virtual tour of Vistana and several sites that offer financing for timeshare weeks.
Bob decides to see if there are other resorts in the area that might offer a better deal, so he asks the assistant
to check all resorts in Orlando for the least expensive two bedroom unit for week 28. Almost instantly, Bob gets
a list of every week 28 available in Orlando sorted by price, along with links to each resort for more information.
Bob also notices that there are five week 28s in Orlando that are currently being auctioned off. Bob clicks on
the auction link and sees the bid activity and closing date for each week.
Bob decides that there is a week for sale at a give away price being offered by a resale company. He sends them
an e-mail for more information.
That evening, Bob receives an e-mail from the resale company that has everything Bob could ever want to know about
Vistana and the week for sale. He downloads a complete set of floor plans with unit numbers, an inventory list
for the unit, a copy of the most recent newsletter, a set of financial statements, a complete set of condominium
documents and disclosures and a promotional video of the resort that he can play back on his computer. In the e-mail
is also a link that Bob can click and be taken to a site where he can apply for financing and be approved in 24
hours.
Bob clicks on the link and completes an on line mortgage application. The next day, Bob receives an approval from
the lender and all the documents necessary to complete the financing. He goes back to the original e-mail from
the resale company and completes the Purchase and Sale agreement with an electronic signature and sends it back
to the resale company. The finance company notifies the resale broker that Bob has been approved for financing.
The resale company forwards the purchase and sale agreement to the seller for electronic signature and notifies
the escrow company of the pending transaction. The escrow company prepares the deed and sends it to the seller
for electronic signature.
Bob fills out a credit card form on the resale companies web site for the down payment which will be deposited
directly into the escrow companies account. The escrow company accesses the Registry of Deeds over the Internet
to perform a title check and notifies everyone automatically by e-mail that the title is clear. Bob accesses his
bank account on line and transfers the balance of the purchase price directly into the escrow company's account.
The escrow company then closes the sale electronically and disburses the funds directly into the appropriate bank
accounts. The resale company notifies the resort and exchange company of the change in ownership and files the
membership application forms with the exchange company. Total time for Bob from start to finish is about an hour,
including filling out the forms.
For those of you who think this is far fetched, be aware that the technology is here right now - today. Recently,
my office sold a week at the Ponds at Foxhollow in Lenox MA for $10,000 to a buyer in Hong Kong who found the resort
on our web site. He had never seen the resort and all the information he received came directly from our web site.
The entire sale was handled by e-mail and wire transfer and we never even spoke to the buyer. In 2000, we expect
that our sales from the Internet will increase to about 25% of our total annual volume.
What will this mean to those of us in the resale business in the future? The Internet is creating the era of the
"empowered consumer". It will be easier and easier for the consumer to shop for everything and to quickly
compare prices and values. A few weeks ago, I was about to order a book from Amazon.com. Just to try it out, I
had a shopping assistant search the web to see if the book was available for less money than Amazon wanted. Within
seconds, I was notified that the same book was available from Barnes and Noble for less money and the shipping
was a little cheaper as well. I ordered the book from Barnes and Noble.
The next great leap will be into Web based transaction platforms where all aspects of the resale transaction will
be tracked on line. Buyers, sellers, resale companies, finance companies and escrow companies will be able to access
every detail of every sale - from initial contact all the way through closing. The next major step will be acceptance
of electronic signatures which will allow valid and enforceable contracts to be executed electronically. California
has already adopted a version of the new model Uniform Electronic Transactions Act and other states are considering
similar legislation. Both the House and the Senate passed electronic signature bills in 1999 and we're waiting
to see if President Clinton will sign them.
All of this is leading to a world where personal interaction in the sales process will become less and less necessary.
We're not very far away from the day when a person can find a timeshare week and complete the entire transaction
without ever talking to a real person. Listing agreements, disclosure documents, Purchase and Sale Agreements,
mortgage applications, notes and other sale contracts will be available on line for immediate and binding execution.
The day is already here when savvy timeshare buyers are searching the net for better deals. As more and more of
the public goes on line and becomes familiar with on line shopping, more and more consumers will be questioning
traditional pricing on almost everything we buy, including timeshare. There is a site right now where the more
people there are that buy a product, the lower the price they all pay. Why would a consumer buy a week from a developer
if the same week is available through a resale broker or directly from the seller for a lot less money? How are
we, as resale brokers, going to protect our position when the Internet not only allows, but encourages direct transactions
between buyers and sellers? What special areas of expertise can we offer sellers to encourage them to list with
us? Real estate brokers have already started changing the way they do business because of the Internet and we'll
have to do the same.
Companies like Amazon and E-Bay are changing the way the world does business. At any given time, you can log on
to E-Bay and see 40 to 50 timeshare weeks being auctioned off. Specialized sites already exist where resorts can
auction off unused inventory - both for rental and for sale. There have been several attempts to create a national
timeshare Multiple Listing type service that would link resale brokers from all over the country. There are more
sophisticated sites that will be here shortly.
We have seen and are seeing the timeshare industry merge and consolidate into bigger and stronger companies. Large
hotel and travel companies are becoming more and more involved in our industry. It is only a matter of time before
the resale industry starts to attract the same kind of attention and investment to provide an effective outlet
for hundreds of thousands of owners who need or want to sell. And as the Internet puts more and more power directly
into the hands of consumers, all of us, resale companies, developers, management companies and exchange companies
are going to have to work together or the new economy will turn us all into dinosaurs.
So, what will we become in the next few years in order to stay successful? First, we need to realize that brokers
of all kinds are already becoming a thing of the past. For years, brokers were the source of information. We controlled
the listings and access to the market. With the growth of the Internet, we can no longer expect to control the
market. When an individual can successfully compete with a company and it becomes just as easy for a consumer to
find a week directly from an individual, what role does the resale company have?
More than anything else, we need to become facilitators and transactional brokers. We need to become the conduits
of information for both buyers and sellers. We can provide information about what timeshare is, how it's used and
what the advantages and disadvantages of owning timeshare are likely to be. We can coordinate a sale between buyer,
seller, finance company, management company and exchange company. We become a third party to the transaction in
much the same way that an escrow company operates. I believe that we will be less reliant on commission income
and that we will be compensated by transaction fees instead. I believe that, eventually, we'll be able to offer
a menu of services for both buyers and sellers and that our compensation is likely to be a combination of fees
and commissions.
This means that we will need to be computer driven and literate. The successful companies will be those that can
combine traditional brokerage services with high tech database management, information and communication. We will
need to have cooperative agreements with management companies, exchange companies, developers, real estate brokers,
travel agents, airlines, rental companies and others in the vacation, travel and leisure industries.
Eventually, it may mean that we evolve into companies where there is no agency relationship at all. We become an
educational business and service company. It is my belief that the first company to embrace these concepts with
sufficient capital, will control the resale marketplace. While small local resale companies will probably never
be replaced, the potential market is so enormous that the industry needs one or more large companies to fill the
void. We need the economies of scale.
One of the main impediments to doing business on a large scale is the lack of cooperation in the industry. Many
state laws require that certain disclosures be made to consumers when they purchase a timeshare on the resale market.
In most cases the only ones who have the knowledge necessary to make these disclosures are the management companies
or resort management itself. There are many effective and legitimate resale companies out there that need this
information and can't get resort management to cooperate. Information about occupancy, overdue maintenance fees,
special assessments, lawsuits and liens must be disclosed to new buyers and it's generally required that the management
of the resort provide this information.
The owners at every resort need and deserve a resale outlet for their weeks. Resort management needs to have a
policy and procedure for providing the information necessary for their owners to sell. When I look at listings
that other resale companies have for weeks at resorts in New England, I'm amazed at the amount of misinformation
that's out there. Unit sizes and occupancies are incorrect. Maintenance fees quoted are wrong. Colors of weeks
are wrong. The truth is, many owners don't have a clue what they own. It's up to the resale company to verify the
information provided by the owner for accuracy and it's up to the management of the resort to provide that information.
Resort management should be able to provide or verify this information for legitimate resale companies when they
need it. While most of us in the resale business realize that it would be very difficult for a resort to provide
this information whenever some resale company calls, the resorts could, at the very least, provide resale companies
with a procedure to follow to verify the information.
Management companies need to realize that, for the most part, they do not belong in the resale business. You know,
it reminds me of when I was a commercial real estate broker in the early 80's and specialized in selling motels.
It always seemed that every motel owner I knew wanted to expand and to use the money they'd made in the motel business
- to buy a restaurant. It never made sense to me and most of them failed. While they were very good in the motel
business, that expertise does not necessarily translate into the restaurant business.
The same holds true for timeshare. Management companies are very good at managing. Resale companies are very good
at selling, but I wouldn't want a resale company to manage my resort!
It would seem to make much more sense to me for a management company to have some type of arrangement with a reputable
resale company that can bring some specialized marketing and sales expertise to the owners at a resort. I know
of very few management companies that are doing a great job in both areas. Likewise, developers need to realize
that resale companies need not be the enemy. There are many ways that developers and resale companies can work
together and generate profit for both. We'll be exploring some of those areas at the ARDA convention in Las Vegas
this coming April. Don't forget to come!
A developer asked me several years ago when he should start to think about a resale program for his resort. I told
him that he should start working with resales the day after his company sells their first week! As of today, this
developer still doesn't have any type of resale program and I know for a fact that both his owner satisfaction
rate and his maintenance fee collection rate are both on the way down.
All of us in the timeshare industry must begin finding ways to work together. In the information age, we need to
be able to share information.
Resorts, developers, management companies, exchange companies, escrow companies, finance companies and resale companies
must find ways to work together. Hopefully, forums such as this will help to start the dialogue.
There are some great resale companies out there and they're all over the country. This is wonderful time we're
living in - full of optimism and opportunity and the technology to change the way we work and play. It's also the
perfect time to begin the relationships and alliances that our owners deserve.
I'm excited about the future and I hope you are too.