[2009] Why Do We Shame People Out Of Walking Away?

bnoble · Dec 22, 2009

A short period of time can be 5 to 10 years and be perfectly acceptable terminology. There have been examples of this taking place with several resorts just in the last 5 or 10 years. Please don't twist what I'm saying.

I don't call 10 years a short amount of time---and five is borderline. But, let's assume you weren't purposefully going for the dramatic exaggeration and really mean this.

Doubling in 5 years is an annual MF increase rate of about 15% every year, give or take. There are two ways that's likely to happen.

One, the resort was chronically under-funded---either because the developer was artifically holding fees low to make the sale, or there was essentially no reserve fund. But, if you're reading the balance sheets that come home with your bill every year, (or, preferably, before you buy), you should have been worried long before the increases came.

The other reason? Wait for it....an ever-increasing spiral of deadbeat owners. And, going after them earlier rather than later, keeps that from happening.

Jya-Ning · Dec 22, 2009

ace2000 said:
Melinda,

So you are saying that you will be willing to pay anything that your resort asks you to pay for maintenance fees and assessments? And that would be regardless of any mis-management issues? And that would be true even if your maintenance fees double or triple over a short period of time?

I'm skeptical, but I'll give you or anyone else a chance to reply before I make up my mind.

This has no necessary relation. What is that personal's situation?

Few years ago, South Africa has one of the lowest MF. A few tugs own them, In few years, couple with the inflation and the exchange rate change. Its MF has double. Yet, it is still one of the cheapest MF compare to most US TS.

In 1980, inflation is double digit, if it stay for 7 years, you will see MF double for sure. Yet, most people's salary, especially those own TS that usually on the top tier of income earning are doubled also.

So, just because it double does not give anyone any reason to walk out.

Today, if you get lay off, and depends on the un-employment check, even if your MF get reduced, you just can not afford it.

Should you just walk off? No, you should talk to your resort first. That is between you and your resort. If your resort says walk away, let us handle the rest, I don't believe any tug care.

I don't think that is the case you were thinking right?

Just ask your local legislator to make rule that if a resort increase MF over a certain limit, you can walk out, and your assets in the state you live will be protected. If they do that, you can just walk away, you have the local law protect.

Otherwise, I don't think you are the only one that care about self interesting.

Jya-Ning

AwayWeGo · Dec 22, 2009

You Typed A Mouthful.

bnoble said:
The other reason? Wait for it....an ever-increasing spiral of deadbeat owners. And, going after them earlier rather than later, keeps that from happening.

Timeshare deadbeats have to be nipped in the bud.

Letting overdue accounts drag on is wasteful & costly & unfair to all the responsible, on-time fee-paying timeshare owners at the resort.

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

JMAESD84 · Dec 22, 2009

AwayWeGo said:
Timeshare deadbeats have to be nipped in the bud.

Letting overdue accounts drag on is wasteful & costly & unfair to all the responsible, on-time fee-paying timeshare owners at the resort.

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

I completely agree with you.

Well run resorts that control costs (including those associated with deadbeats) and that deliver the best value possible to the owners should as a result be delivering on that "value proposition" needed to retain a marketable product. This is most likely to occur at resorts where the owners are in control of the HOA and the developer/developer associated management company is no longer involved.

Spend and tax operations focused on fueling corporate profits, carelessly taxing the owners into the poor house and bent on destroying the "value proposition" ....well, IMO they reap what they sow.

rickandcindy23 · Dec 22, 2009

Yes, I agree too. I agree 100%.

I must reiterate how difficult it is to be a part of an independent resort, managed by a company of our choosing, and having no way to market weeks to outsiders. The current owners aren't wanting more weeks, many are wanting to deed back (which we do), and I am out of ideas for marketing them. I guess we don't really have a "marketable product."

There is no value to the blue weeks, so I don't even care about those, but the prime ski and summer weeks, there is a value to some of them, and many of those we haven't even foreclosed because of the cost to go through that process. We have to "rent" them to people on a year-to-year, RTU basis. How can you market something and say, "we don't really own this week because it will cost us $2K to foreclose, but would you take it on a year-to-year basis?" People don't want the weeks. They want deeds, and isn't that ironic. I would love a deal where I could just walk away from a timeshare after one week, if I didn't like it. We offer that product, and people don't want it.

I want to end Twin Rivers as a timeshare and just sell the units as condos, but I cannot do that without 100% owner cooperation, according to the by-laws. We cannot change the by-laws without a huge number of people agree to it. We are indeed between a rock and a hard place.

We are in a terrible situation at Twin Rivers, unless the owners just start sucking it up and accept that fees must go up. We started with fees of $200 28 years ago, and our fees are now $510. Does anyone see anything wrong with that picture? It isn't enough cash to pay the bills and build a reserve.

JMAESD84 said:
I completely agree with you.

Well run resorts that control costs (including those associated with deadbeats) and that deliver the best value possible to the owners should as a result be delivering on that "value proposition" needed to retain a marketable product. This is most likely to occur at resorts where the owners are in control of the HOA and the developer/developer associated management company is no longer involved.

Spend and tax operations focused on fueling corporate profits, carelessly taxing the owners into the poor house and bent on destroying the "value proposition" ....well, IMO they reap what they sow.

DanCali · Dec 22, 2009

JMAESD84 said:
You are supposed to have elected representatives representing you on the HOA and looking out for your best interests. Management is supposed to be working for you but is also tasked with enforcing the rules. Many of the rules where established by the developer and give individual taxpayers very limited rights within this relationship. The relationship can be ripe with abuse and often serves first the interests of the entity and those that profit from their continued involvement as part of the entity.

So when individual owners feel that they are being abused by "the resort" and that they are powerless within this relationship to effect any meaningful change....meaning you realize you've become the "sucker"....then they have to consider a way to get out of the relationship. When you can't sell or give away the timeshare that binds you to "the resort" to anyone that who would while making an informed decision "reject the onwership", you are left to "find the next sucker", "find the judgement proof buyer" or "walk away" and take whatever punishment that entails.

When you "find the next sucker" you're getting out, while the "sucker" is left to learn he's made a mistake. This approach is sort of like kicking the can down the road...."the resort" gets a different taxpayer but doesn't address the root cause of the problem.

When you "find the judgement proof buyer" you're getting out and "the resort" gets a non-paying taxpayer and after an expensive process owns more non-performing inventory (with or without clear title). This approach sticks it to "the resort" and left unchecked drives the need for increased taxes on remaining taxpayers until a revolt occurs (probably leading to the correction of the root cause of the problem) or a complete failure of "the resort".

When you "walk away" you'll be testing how judgement proof you are and "the resort" has you become the non-paying taxpayer and after an expensive process owns more non-performing inventory (with or without clear title). This approach sticks it to "the resort" and left unchecked drives the need for increased taxes on remaining taxpayers until a revolt (probably leading to the correction of the root cause of the problem) or a complete failure of "the resort".

The root cause of the problem is the destruction of the "value proposition" on which the timeshare is sold.

If there is no value in owning who's going to buy except the uninformed. We often ask ourselves how developer sales people can sleep at night, knowing the "value proposition" they insist exists during the sales presentation in fact does not exist(not at developer prices for sure).

Are we owners much different when we become the salespeople for what we wish to be rid of and is considered worthless?

Will we be explaining all the pitfalls, problems and risk to "the next sucker"?

AwayWeGo said:
However that may be, I can't blame you or anyone for assuming that the company-controlled timeshare HOA-BODs are cut from the same cloth as the full-freight timeshare selling operations. Under those conditions, all that constrains the company shills who call the shots are the provisions of state timeshare law, assuming the law is actually enforced & assuming further that the company HOA-BOD does not flout timeshare law on a Catch Me If You Can basis.

By contrast, an independent owner-controlled HOA-BOD is looking out for the interests of us regular walking-around timeshare owners rather than looking out for the timeshare company's bottom line.

JMAESD84 pretty much summed up my thoughts. I too have been saying that it's hard to blame "deadbeat" owners when MFs spiral out of control. Increases of 10%-15% a year, which seem to be the norm at many developer managed resorts mean MFs double every 5-7 years. This kills resale value. When an owner can't sell there is nothing much left to do...

Yes, you can say they should talk to the resort first, but I haven't heard of Marriott, Starwood, Hilton, Hyatt, DVC, Wyndham etc taking back weeks from owners. You can also say that they should replace management- that's much easier said than done... For starters owners can't communicate with each other easily. Even if you get a mailing list legally, you need to pay thousands in postage... and even if you got rid of Starwood or Marriott at a resort, once those resorts are out of the internal trading network or lose 24 day II priority resale value would die anyway.

This problem started when the economy was good and when people were paying. Developers/Management who artificially inflated MFs over the years are to blame for people walking away now. In my opinion this had nothing to do with underfunding but pure greed - when someone gets 10%-20% off the top it's nie if the "top" is a big number....But if the whole thing collapses like a house of cards they will be "a penny wise a Dollar foolish". And the people who don't see this, and blame "deadbeat owners" for walking away will walk away themselves when they are left to face reality. Looking for the next person to pick up the tab on a worthless (zero resale value) timeshare can only last for so long.

In Alan's words - " so goes it"

Dave*H · Dec 22, 2009

rickandcindy23 said:
We are in a terrible situation at Twin Rivers, unless the owners just start sucking it up and accept that fees must go up. We started with fees of $200 28 years ago, and our fees are now $510. Does anyone see anything wrong with that picture? It isn't enough cash to pay the bills and build a reserve.

I don't think people understand the value timeshares can provide. Where can you stay in a 2-3 bdrm condo for $510 for a week besides a timeshare?

bnoble · Dec 22, 2009

Increases of 10%-15% a year

I think you have the tail wagging the dog here. The one resort I own that did see an increase close to 15% this year was because uncollectable debt had already risen, after several years of much more modest increases. The increases aren't causing people to walk---people that are walking are causing the increases.

The problem with this resort is not that it is wasting MFs. The problem with this resort is that they are not taking steps that others are taking to collect on the MFs that are owed. And, you can bet that more people will walk because of this. They either need to get ahead of this, or suffer a death spiral. We'll see which one happens, but the board seems to understand the problem.

AwayWeGo · Dec 22, 2009

Something Stronger Than Shame Is Badly Needed.

bnoble said:
The increases aren't causing people to walk---people that are walking are causing the increases.

Those deadbeats could stand a good talking to.

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

Jya-Ning · Dec 22, 2009

DanCali said:
Yes, you can say they should talk to the resort first, but I haven't heard of Marriott, Starwood, Hilton, Hyatt, DVC, Wyndham etc taking back weeks from owners.

Don't know about DVC, Starwood, Hyatt since I did not pay too much attention to them. The only resort group that would not work is prob. Westgate. By the way, if you still own loans, the resort group is the one that take the week back. And I know it is case by case, but I do know the TS get take back. If you pay-off, the HOA or resort management group is the one that take the week back. Some of the HOA does take back, some does not. And you will be more likely not get HOA take back, instead of them take back. Then, as I said before, you explored all your options, and determine what is the best for you if the worse case situation happens.

Jya-Ning

e.bram · Dec 22, 2009

How is a TS supposed to collect from deadbeat owners? Send Giuseppe to break their kneecaps? or send Alonzo(Three Fingers) Colletti to "talk" to them?

JMAESD84 · Dec 22, 2009

bnoble said:
I think you have the tail wagging the dog here. The one resort I own that did see an increase close to 15% this year was because uncollectable debt had already risen, after several years of much more modest increases. The increases aren't causing people to walk---people that are walking are causing the increases.

The problem with this resort is not that it is wasting MFs. The problem with this resort is that they are not taking steps that others are taking to collect on the MFs that are owed. And, you can bet that more people will walk because of this. They either need to get ahead of this, or suffer a death spiral. We'll see which one happens, but the board seems to understand the problem.

You can claim that people walking away is the problem and that increased fees to cover bad debts/collections is the symptom. I claim both are symptoms of the same root problem.

Where I come from people don't walk away from "assets", if they're walking it's away from a "liability".

Absent the "value proposition" you are going to have troublesome symptoms which can indeed lead to a death spiral.

bnoble · Dec 22, 2009

And that's true. But, value is a product of both means and cost/benefit. The sharp increase in uncollectable debt in the last year in the presence of relatively steady cost/benefit, suggests that the difference is the means (real or perceived) of many to pay.

DanCali · Dec 22, 2009

bnoble said:
I think you have the tail wagging the dog here. The one resort I own that did see an increase close to 15% this year was because uncollectable debt had already risen, after several years of much more modest increases. The increases aren't causing people to walk---people that are walking are causing the increases.

The problem with this resort is not that it is wasting MFs. The problem with this resort is that they are not taking steps that others are taking to collect on the MFs that are owed. And, you can bet that more people will walk because of this. They either need to get ahead of this, or suffer a death spiral. We'll see which one happens, but the board seems to understand the problem.

Here are the maintenance fees for Westin Kaanapali 2BR Deluxe (corner) unit:

2005 $1,623.77
2006 $1,813.16 (11.7%)
2007 $1,954.27 (7.8%)
2008 $2,203.79 (12.8%)
2009 $2,459.73 (11.6%)
2010 $3,076.69 (25.1%)

Many Starwood resorts have followed a similar trend... 50%-90% over 5 years...

Can you blame someone who paid $1600 5 years ago if they leave today?

These still sell for high 4 figures, so owners can walk rather easily. This also implies that delinquencies are not even that serious (yet) because it's relatively easy to sell. This resort hasn't seen the worst yet in terms of delinquencies in my opinion...

Do I still have the tail wagging the dog?

(By the way - the 25% increase in 2010 is mostly due to higher taxes due to Maui, not delinquencies)

TUGBrian · Dec 23, 2009

Not to get off on a tangent, but ive been reading some articles (from ARDA actually) regarding them getting legislation passed in some states to greatly reduce the cost and trouble involved with mgmt companies/hoa's foreclosing on delinquent owners thus making it much easier and cheaper to do so.

I want to say that colorado was one of the states they mentioned as having these laws passed.

What I havent been able to find, is the details on these items.

Anyone have any info on these? I have an email in to ARDA to ask the same.

MuranoJo · Dec 23, 2009

DanCali said:
Here are the maintenance fees for Westin Kaanapali 2BR Deluxe (corner) unit:

2005 $1,623.77
2006 $1,813.16 (11.7%)
2007 $1,954.27 (7.8%)
2008 $2,203.79 (12.8%)
2009 $2,459.73 (11.6%)
2010 $3,076.69 (25.1%)

Many Starwood resorts have followed a similar trend... 50%-90% over 5 years...

Can you blame someone who paid $1600 5 years ago if they leave today?

These still sell for high 4 figures, so owners can walk rather easily. This also implies that delinquencies are not even that serious (yet) because it's relatively easy to sell. This resort hasn't seen the worst yet in terms of delinquencies in my opinion...

Do I still have the tail wagging the dog?

Gasp! I can't imagine what these would rent for.

DeniseM · Dec 23, 2009

muranojo said:
Gasp! I can't imagine what these would rent for.

I don't own a deluxe unit so my MF this year was $2,346 and I have my 2 bdm. rented for $3,500 for 2010. I don't know how long that will continue in this economy - I certainly wouldn't pay that much!

MuranoJo · Dec 23, 2009

Holy Cow. I know this is primo property, so sure it is worth it--not sure what your week is, Denise--but too rich for my blood. And congrats for already having 2010 locked in!

DanCali · Dec 23, 2009

DeniseM said:
I don't own a deluxe unit so my MF this year was $2,346 and I have my 2 bdm. rented for $3,500 for 2010. I don't know how long that will continue in this economy - I certainly wouldn't pay that much!

If this trend continues, the MFs for a 2BR will get to $3500 within 3 years... then you get the really bad scenario: resale prices go to zero, owners defaulting left and right, and no takers for these weeks. I highly doubt the 20,000 owners (WKORV and WKORV North) will stick with "what's right is right".

But I blame Starwood's shortsightedness in getting us here. And I'd blame Starwood if the whole thing collapses. If owners were to start walking away - to me that's understandable under these circumstances.

DanCali · Dec 23, 2009

muranojo said:
Gasp! I can't imagine what these would rent for.

The bigger "Gasp" should be when you consider the true cost of ownership there over those 5 years...

Using very rough numbers, consider that in 2005 (when MFs were $1600) resale prices for these 2BR Dlx units were $40K-$50K, depending on deeded view (even higher for developer prices). Now, with MFs of $3100, resale prices are $10K-$15K if not less. Whether resale prices fell because of the economy or the higher MFs is not even that relevant although I claim that if MFs were steady resale prices would have remained much higher. Starwood found various reasons over the years to raise MFs and the value of owning simply evaporated due to the higher MFs, and that is reflected in resale values.

So someone who bought in 2005, paid $1600-$3100 in MFs every year and also has a loss in the value of their equity of about $30K... or $6000 a year. So the cost of ownership was about $8000 per year on average, even before you account for the opportunity cost of investing the initial $40K-$50K in a more stable investment like short term US Treasuries, or a bank CD (where even with a modest return of $2%-3% for the $40K-$50K you get a pretty nice dollar amount)

In other words, if you don't like thinking of unrealized losses as actual losses, you could have stashed $50K under the mattress 5 years ago, rented from Denise at a rate of $3500 for 5 years ($17500 total, and much higher than MFs paid if you owned), bought the same unit today for $15K and you'd be much better off because you still have $17.5K left under the mattress... (free airfare?)

rickandcindy23 · Dec 23, 2009

TUGBrian said:
Not to get off on a tangent, but ive been reading some articles (from ARDA actually) regarding them getting legislation passed in some states to greatly reduce the cost and trouble involved with mgmt companies/hoa's foreclosing on delinquent owners thus making it much easier and cheaper to do so.

I want to say that colorado was one of the states they mentioned as having these laws passed.

What I havent been able to find, is the details on these items.

Anyone have any info on these? I have an email in to ARDA to ask the same.

I don't know where to find that, either, but we did have VRI tell us that Colorado now allows bundled foreclosures at a cost of $2K to get them done. This is a very recent change in the law. It's cheaper, and maybe we should just pay the cash to an attorney and get it done. If the board could do it, we would to save the owners money, and maybe we are able to do it. I don't know....

I am on the board at Val Chatelle, a RTU property. If someone doesn't pay, we get to foreclose by just saying, "Now your week is our week," after soft collections. No one argues it.

Thanks, Dave H. I agree that no one could stay in Winter Park/ Fraser for $510 for a full week, but owners keep telling me they can get a motel room. Not really, unless it's April 20th or somewhere around there.

Dave, did you get a lot of snow up in them thar hills last night? It's beautifully white in Denver....

bnoble · Dec 23, 2009

Many Starwood resorts have followed a similar trend... 50%-90% over 5 years...

What have the uncollectables been during those years?

It sounds as though despite the MF increases, there is still some value there vs. rental rates. I'd be interested in reading that resort's budget summaries over that time, though.

ace2000 · Dec 23, 2009

bnoble said:
I don't call 10 years a short amount of time---and five is borderline.

If your fees were doubling and tripling over a 5 - 10 year period, you would definitely consider that a short period of time... trust me. So, let's not play semantics here, please.

rickandcindy23 · Dec 23, 2009

ace2000 said:
If your fees were doubling and tripling over a 5 - 10 year period, you would definitely consider that a short period of time... trust me. So, let's not play semantics here, please.

Let's not play pretend, either.

What resort has had doubling or tripling of fees over 5-10 years that you own?

Doubling over ten years is not that outrageous, especially if the fees were set too low in the first place.

ace2000 · Dec 23, 2009

rickandcindy23 said:
Let's not play pretend, either. What resort has had doubling or tripling of fees over 5-10 years that you own?

Doubling over ten years is not that outrageous, especially if the fees were set to low in the first place.

I don't have any, and never claimed to. I've read about them on TUG though... just do a search you'll find them and it's real.

I also have never walked away from ANY debt obligation, period. Are you willing to make that statement here? Do you know someone that has? Are you willing to 'shame' them.

But, I'm not playing the 'holier than thou' game around here either. And if anything, I'm sympathetic to the ones that do decide to walk away. There are situations in life that make this choice inevitable. Hopefully, they did it because they had to, or were asking for help because they had to, but I'm not going to make that judgement as some around here are so quick to do.

I'm also a believer in people will 'reap what they sow'. So, yes there will be some sort of payback, there always is. But, it's not up to me to worry about that process. I just want to provide help to whomever asks. I don't have to answer anyone's question posted on TUG, and I definitely don't want to call anyone a 'deadbeat' and 'shame' them and sit on a pedestal.

[2009] Why Do We Shame People Out Of Walking Away?

bnoble

Jya-Ning

AwayWeGo

TUG Review Crew: Expert

JMAESD84

rickandcindy23

TUG Review Crew: Elite

DanCali

Dave*H

bnoble

AwayWeGo

TUG Review Crew: Expert

Jya-Ning

e.bram

JMAESD84

bnoble

DanCali

TUGBrian

MuranoJo

DeniseM

MuranoJo

DanCali

DanCali

rickandcindy23

TUG Review Crew: Elite

bnoble

ace2000

rickandcindy23

TUG Review Crew: Elite

ace2000