10 ms·

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

by vl 2y ago

jabroni_salad 2y ago
Here is an example as to why: $0 to buy, maint fee $1076 https://www.redweek.com/posting/R1228603 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.
- wolpoli 2y ago
  Is there a business model where people could pay to sell their timeshares to a shell company and then having the company go insolvent?
  - lisper 2y ago
    IANAL but I'm pretty sure that would be considered fraud.
    - crooked-v 2y ago
      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-definition-5225888 https://www.investopedia.com/texas-two-step-bankruptcy-defin...
      - csinode 2y ago
        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-dismissed-by-us-appeals-court-filing-2023-01-30/ https://www.reuters.com/legal/jjs-ltl-units-bankruptcy-dismi...
        maccard 2y ago
        If you need to take your case to an appeals court to be protected, it's not a protection for an everyday person.
      - lisper 2y ago
        Heh, TIL.
      - MereInterest 2y ago
        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 https://en.wikipedia.org/wiki/Texas_two-step_bankruptcy
  - xxr 2y ago
    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.
    - bawolff 2y ago
      Couldn't you just find a real person who is on the verge of bankruptcy and offer them $10 to take the timeshare?
      - beaglesss 2y ago
        Sounds like fraudulent conveyance.
        bawolff 2y ago
        Reading https://en.m.wikipedia.org/wiki/Fraudulent_conveyance https://en.m.wikipedia.org/wiki/Fraudulent_conveyance it doesnt seem like it fits to me, but ianal.
        lnxg33k1 2y ago
        Oh because a contract that is like a cronic disease is the highest point of lawfulness
        vkou 2y ago
        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.
  - wmil 2y ago
    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.
    - setopt 2y ago
      Is that considered a legal contract?
      - sandworm101 2y ago
        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.
        immibis 2y ago
        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.
        sandworm101 2y ago
        >> 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.
        setopt 2y ago
        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.
- lupire 2y ago
  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.
  - mminer237 2y ago
    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.
    - deleted 2y ago
      [deleted]
    - deleted 2y ago
      [deleted]
    - beaglesss 2y ago
      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.
      - jdyer9 2y ago
        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
        twelve40 2y ago
        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?
- aleph_minus_one 2y ago
  > > 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.
  - NovemberWhiskey 2y ago
    If prices are negative, there will only be a market if sellers can afford (and are willing) to pay buyers the market price.
- bernawil 2y ago
  now I wonder if identity thieves go around signing people up for timeshares.
Jorge1o1 2y ago
Ebay is full of $1 timeshares. There’s even a website with 17,000 timeshares for a dollar called sellmytimesharenow.com
tomrod 2y ago
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?
lisper 2y ago
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.
jfengel 2y ago
There's a sucker retiring every minute.
aorloff 2y ago
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.
astura 2y ago
Because you can't give away a timeshare, it's a liability.

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

by vl 2y ago

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 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.

wolpoli 2y ago
Is there a business model where people could pay to sell their timeshares to a shell company and then having the company go insolvent?
- lisper 2y ago
  IANAL but I'm pretty sure that would be considered fraud.
  - crooked-v 2y ago
    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-definition-5225888 https://www.investopedia.com/texas-two-step-bankruptcy-defin...
    - csinode 2y ago
      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-dismissed-by-us-appeals-court-filing-2023-01-30/ https://www.reuters.com/legal/jjs-ltl-units-bankruptcy-dismi...
      - maccard 2y ago
        If you need to take your case to an appeals court to be protected, it's not a protection for an everyday person.
    - lisper 2y ago
      Heh, TIL.
    - MereInterest 2y ago
      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 https://en.wikipedia.org/wiki/Texas_two-step_bankruptcy
- xxr 2y ago
  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.
  - bawolff 2y ago
    Couldn't you just find a real person who is on the verge of bankruptcy and offer them $10 to take the timeshare?
    - beaglesss 2y ago
      Sounds like fraudulent conveyance.
      - bawolff 2y ago
        Reading https://en.m.wikipedia.org/wiki/Fraudulent_conveyance https://en.m.wikipedia.org/wiki/Fraudulent_conveyance it doesnt seem like it fits to me, but ianal.
      - lnxg33k1 2y ago
        Oh because a contract that is like a cronic disease is the highest point of lawfulness
        vkou 2y ago
        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.
- wmil 2y ago
  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.
  - setopt 2y ago
    Is that considered a legal contract?
    - sandworm101 2y ago
      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.
      - immibis 2y ago
        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.
        sandworm101 2y ago
        >> 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.
      - setopt 2y ago
        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.
lupire 2y ago
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.
- mminer237 2y ago
  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.
  - deleted 2y ago
    [deleted]
  - deleted 2y ago
    [deleted]
  - beaglesss 2y ago
    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.
    - jdyer9 2y ago
      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
      - twelve40 2y ago
        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?
aleph_minus_one 2y ago
> > 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.
- NovemberWhiskey 2y ago
  If prices are negative, there will only be a market if sellers can afford (and are willing) to pay buyers the market price.
bernawil 2y ago
now I wonder if identity thieves go around signing people up for timeshares.

Jorge1o1 2y ago

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

tomrod 2y ago

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?

lisper 2y ago

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.

jfengel 2y ago

There's a sucker retiring every minute.

aorloff 2y ago

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.

astura 2y ago

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