Timeshare fraud and How to Avoid It
this guide deals with the techniques that wire fraud perpetrators use to trick timeshare sellers and how to recognize and avoid them
So You want to sell your timeshare and think you at last have a buyerSo, you want to unload your timeshare in Mexico or wherever? You and everyone else who was talked into buying one during the halcyon days of timeshare sales. (Obviously this is a worldwide problem, not just concentrated in Mexico.) Fraudsters, preying on this desire, are very aggressive with the timeshare scam, typically posing as timeshare buyers or intermediaries, either here in the US or in country. They may be using such slogans as *we will buy your timeshare* in ads. They may pose as agents (even licensed real estate brokers) and indicate they have buyers ready, willing and able to buy your timeshare in real time. They may ask for a substantial up-front commission or earnest money payment or other transaction related fees by wire transfer, PayPal, certified check or money order. They will often refuse to accept credit cards as their use gives rise to traceable transactions and may result in *chargebacks*. Frequently, this is just a scam, the *buyer* steals your money as upfront fees or supposed tax payments for a sale that never takes place. However, there are some red flags that allow you to spot a fraud:
* A request for upfront fees before the *buyer* or representative has done anything. This is typically how they drain your money off using fraud. Do not give in to the demand for cash or wire transfer payments*the latter is very common in any Mexican timeshare fraud. In a bona fide transaction, actual money hardly ever changes hands until the closing/settlement where such fees are allocated between buyer and seller on the settlement sheet. An escrow agent will be used to hold the money who is legally bound not to release it to the buyer except under clearly specified conditions (such as a default by the buyer or seller). Unfortunately, the scammers have figured this one out. I have seen sham escrow agents set up designed to lull sellers into a false sense of security.) Conduct due diligence! Often, legit agents have to have a special license allowing them to do this under local law or will be otherwise licensed s lawyers or notaries depending on the country involved. Check them out using google and/or the registry of professionals in the state or country.
* Unrealistic Promises * The scammer may tell you the market is very active or *on fire*, they have lots of buyers lined up, and *guarantee* results within a specified time frame. Remember that a guarantee by a non-existent company or fly by night entity is worthless.
* Use of a front man; *straw man* intermediary, unauthorized use of an actual name or unrevealed purchaser. Generally, the *buyer* is nonexistent. However, I have seen the use of the name of a legit company (which in fact has no clue about the transaction) as a front.
* Pressuring you to act quickly, stating you do not need to understand the documents, just to *trust them* and sign.
* Obvious lack of professionalism in documentation and/or contracts, such as:
* use of idiomatic or broken English,
* improper terminology,
* possible legal transgressions,
* amateurish brochures and docs,
* Use of purposely complicated or meaningless language,
* unwillingness to explain terms and definitions.
Warning Signs: What to watch out for/Hallmarks of Timeshare FraudProtect yourself. This is a partial list of things to watch out for:
* Be wary of anyone who contacts you directly and/or who uses aggressive sales tactics.
* Have realistic expectations about the value of your timeshare. In most cases, the sale of a timeshare takes time and effort and will possibly only yield a fraction of your initial investment. A buyer who offers an unrealistic price given the market conditions without giving a genuine reason therefor is automatically suspect. The story has to make sense.
* Know your ultimate buyer and/or broker or other intermediary*do the due diligence to find out who it is, why they want to buy, the nature of their relationship to the ultimate buyer, etc. Unfortunately, the scammers have figured this out as well and will front a real company which would indeed have an excellent reason to purchase, if only they were actually buying. For example, I recently assisted a prospective buyer where an offshore conglomerate was supposedly buying several Mexican timeshares so it would always have a place to house its traveling executives and guest. It only took a couple of phone calls to the home office to reveal the fraud.
* Never pay upfront fees, especially in cash or wire transfers. The latter is very common in Mexican timeshare fraud. If there is a claim that an up front fee is due to a governmental entity, check that out by calling that entity directly to confirm the existence and amount of the fe in US currency.
* Never provide personal information such as your Social Security number, credit card or bank information.
* Get everything in writing, preferably in an enforceable contract. Be aware however, that if the fraudster moves on they will hide their tracks making it impossible to find them and enforce the contract or other documents in court. Also, cross border law suits add an additional layer of complexity to the mix.
* get advice from a knowledgeable independent third party and be prepared to be guided by it (see below)
* Don*t succumb to pressure * take your time and do the necessary due diligence
* Call on the timeshare or resort company itself. Also, the company or owner*s association may know whether the buyer has had unconsummated or suspicious transactions in the past or alternately that the it is bona fide. But don*t rely on that alone.
* Do adequate due diligence or better yet hire an expert to do it for you (see below)
* Check to see if the agent if any is bonded and/or insured for errors and omissions. Check them out. Ask for a certificate of insurance and bonding.
* If feasible visit the agents or buyer*s offices or merely offer to do so and see what reaction you get.
* Check out any company that you deal with using the Better Business Bureau (www.bbb.org) and do a supplementary online search under their name and follow the path that the research may take you on thru to the end.
* Check for legal transgressions of entities and their principals with the local authorities where possible and do so here in the States with the state attorneys general.
* Check complaint sites like scam.com for issues others have experienced with your buyer and/or intermediary.
* Don*t be fooled because the upfront money is ostensibly for preregistration of the sale or for you to be a seller in country or for some nonexistent ad valorem ta, registration fee or duty.
* Remember that the thieves are working on volume. They may only demand a small fee relative to the supposed value of the overall transaction but may be collecting a similar sum from dozens of hapless sellers.
Best Practices in Selling Timeshares to Avoid FraudA better way to sell your timeshare:
If available, use a resort or timeshare association resale or buyback program. Where unavailable, advertising yourself is OK but it is best not to try and go it alone. Instead of operating in the blind, use a professional timeshare expert to back you up and to perform due diligence. Why?
* They will know tricks and techniques for testing for fraud that you could not likely come up with or perform even if you could.
* They will spot cues that you in your exuberance to finally unload your *white elephant* perhaps even at a profit supposedly will overlook or not even see for what it really is.
* They will know the fraudulent techniques being used in the local environment.
* They will be up on which if any up-front payments are legit.
* They will know who is really buying timeshares.
* They may well be familiar with the fraudulent people or entities or be able to spot them.
* They will very likely have developed an *in* with the local constabulary and courts which can assist them in this regard.
* Most importantly, through long experience they will have developed a sixth sense and will typically be able to spot a proposal that just does not pass the *smell test*.
Finally, LISTEN to your expert. Remember, they have nothing to gain or lose (except perhaps their reputation) and can afford to view your *wonderful* deal with a realistic (if not jaundiced) eye. An expert may seem expensive but it is likely to be well worth the cost if they save you from an ill-advised transaction and financial loss or hopefully provide you with the peace of mind that comes from knowing that your transaction is real.
DislaimerNote: This article is meant to provide general information and not to provide legal or tax advice.