Timeshare Scams and Other Fairy Tales

It's unfortunate that there are people who exist only to take advantage and prey upon others misfortune. The timeshare industry is no exception. The following narratives are examples of some of the more common and inventive "abuses" that you might encounter in the timeshare industry.

Please send any corrections, updates or additions via e-mail to mailto:mark_perry@bigfoot.com

Last Update: 16-Aug-2001

TUG's Advice section includes an income tax advice article which Wonka and I wrote. Little did we know that someone would take that article, change it to distort our analysis of the tax law, and use it to promote the following "business venture":

The Pitch
"Mr. Smooth" contacts a number of people who have advertised their timeshare weeks for sale. "I would like to buy your T/S." He says. "In fact, I'll come to your city, we can meet at a hotel there, and I'll buy your T/S. Bring your deeds with you so that we can finalize the deal on the spot."

Based on various phone calls, several potential sellers agree to meet with him. At the designated date and time, a meeting is held in a small conference room of a hotel in a major city. Potential sellers of unwanted timeshares hear that XYZ Company will buy their timeshares for fair market value. They have each been given a folder with information as to the price that will be paid. All of them are ecstatic, because it appears they can finally get rid of these unwanted timeshares.

Best of all, Mr. Smooth tells them that any loss on the sale would be tax deductible. How sure is he? "Just take a look at this article that our CPAs wrote for us. The article makes it clear that the loss is deductible." Sure enough. The article handed out makes that assertion. (The article was copied from TUG's web site and then changed to make the improper claim. It still had Wonka's and my names at the top.)

One additional detail. Mr. Smooth tells them that they can buy into a fabulous vacation club that provides discounts on hotels, car rentals, air fares, cruises, condo weeks, etc. How much? The price is so low that it can only be discussed in individual meetings.

The Individual Meetings
At this point, the group meeting adjourns. Mr. Smooth and his associates each meet separately with the people who attended. In the meeting that we here at TUG are observing today, Mr. Smooth tells an elderly lady that she can buy into the travel club for "only" $6,995. Once she buys the membership, the vacation club will buy her five T/S weeks for a total of $4,000. No more headaches or maintenance fees. Thus, she pays a net of "only" $2,995. And her tax losses on the T/S sales will pay for the cost of membership, according to Mr. Smooth.

Reality
In fact, Mr. Smooth and his associates are selling "vacation club" memberships of the type that are often given as an incentive for taking a T/S sales tour. Total value? Somewhere between $0 and a couple of hundred bucks, depending on how one uses the membership.

So the result would be that the individual pays $2,995, gives up the ownership to five T/S weeks, has an almost worthless vacation club membership, and is not entitled to the tax benefits that are promised. No thanks.

The Aftermath
It turns out that the elderly lady's daughter also attended the meeting at the hotel - to protect her mother's interests. She was suspicious and didn't let her mother close the deal, although it was clear that some others did go through with the deal. Later on, the daughter did an Internet search and stumbled on to TUG and the real tax article that Wonka and I wrote. She contacted Wonka (whose e-mail address is associated with the article) and we soon got the details that I have summarized  above.

We engaged counsel in the state where this venture has its business address. In a process that has just been concluded, Mr. Smooth and his associates agreed to turn over all copies of the altered tax article and to cease any further use of the article and of Wonka's and my names in their business efforts.

Morals of the Story
There are many lessons. If it appears too good to be true, it almost certainly is. Don't ever, ever, buy (or sell) on the spot without taking time to evaluate whether you are getting a good deal. And we could add many more.... (Wonka and I haven’t learned our lesson yet. We are still writing T/S tax articles.)

Thanks
Wonka and I are deeply indebted to a wonderful woman named Gwen for making the effort to find us and share the details of her mother's experience, including a copy of the altered tax article and the names, addresses and telephone numbers of Mr. Smooth and his associates. The information she provided was essential in following up on this matter.

Dragnet (Badge 714) Disclaimer
The story you have just read is true. Some of the names and facts have been changed to protect.... (If you’re over 55, you know the rest.)