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Scam Alert

Crackdown Intensifies Against Time-Share Reselling Scams

Federal Trade Commission and state attorneys general issue new warnings

Efforts to combat time-share reselling scams have intensified since Scam Alert exposed fast-growing schemes that are preying on desperate owners trying to unload their units.

Since that story, which appeared in the June 2010 issue of the AARP Bulletin and online, the Federal Trade Commission and several state attorney general offices have issued new warnings about the false promises and required upfront fees fueling this trickery.

Responding to the article, hundreds of AARP members wrote in saying that they had been taken in by these schemes—many reporting they lost between $500 and $5,000 after paying upfront fees on the promise that resellers had already secured a buyer. In every case, they report, the reseller took their money but never delivered. Scores of others said they were in the midst of dealing with dubious time-share resellers, and were able to avoid being victimized.

In Florida, where many time-share reselling companies operate, state Attorney General Bill McCollum recently announced new lawsuits against the companies. Currently, there are at least 49 open investigations and nine active lawsuits — three times as many as reported in the Scam Alert story. At least 8,500 consumer complaints have been reported to his office this year.

Meanwhile, AARP has asked the FTC to consider launching a nationwide investigation of time-share resellers, who usually target seniors. Although most time-share resellers solicit customers across the United States, state attorneys general can only bring injunctions that affect their residents or against companies that operate in that state.

How the scam works

Resellers identify time-share owners through public records or lists bought and sold from resort developers, then contact them by phone or letter. If the owner expresses interest in selling — and many do because they no longer regularly use the unit, can't pay rising maintenance fees or simply need the money from the sale — scammers claim they have a buyer. They may provide false documents to make the potential deal seem legit and sometimes have an associate pretend to be the buyer, who urges a quick transaction.

But before the deal can be sealed, upfront fees must be paid — purportedly for refundable security deposits, taxes or other administrative costs. Once the money is sent — usually via wire transfer or a check sent to a post office box or a temporarily rented office space — the resellers vanish, sometimes reopening under a different company name.

"Seniors living on fixed incomes and persons suffering the effects of the economic downturn may be especially vulnerable to the scam, because they may view their seldom-used time-shares as a source of much needed money," notes Illinois Attorney General Lisa Madigan, who issued a consumer warning on these scams last week.

Protect yourself

In addition to nonexistent buyers and upfront fees, scamming resellers often promise a hefty sale price. But in reality, one-week time-shares that may have sold for $20,000 new a few years ago now fetch as little as a few thousand dollars on the resale market, depending on market conditions.

Better ways to try to sell an unwanted time-share:

  • Check with your resort about any resale programs it offers, newsletters with "for sale" listings or partnerships with local real estate agents. (Expect to pay 10 to 30 percent commissions to legitimate agents for time-share resales.)

  • When listing your time-share online (or to rent it to offset maintenance fees), stick with legitimate websites such as redweek.com or tug2.net, which may charge up to $35 a year. Scammers often run their own websites, but listing there costs hundreds — with no return.

  • Always check a reseller's reputation with the Better Business Bureau and with your resort. Confirm licensing claims with your state real estate commission.

Report time-share reselling swindles to your state AG's office and to the FTC.

Sid Kirchheimer is the author of Scam-Proof Your Life (AARP Books/Sterling).

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