MINNEAPOLIS -- Timeshares are tough to sell, even in the best of times. Now a perfect storm of trouble has turned some of those slices of paradise into albatrosses, making the shared vacation properties and their hefty annual fees nearly impossible to unload and breeding a horde of scam artists preying on motivated sellers.
Nearly 8 million people -- about 7 percent of U.S. households -- own a timeshare, which is basically a vacation property owned by many people who take turns using it.
The down economy and the fact that the first generation to buy timeshares 35 years ago has been retiring means many people are looking to sell. Craigslist, eBay and specialized listing service RedWeek are chock-full of offerings.
But how much they're worth is a different issue. One Florida listing service estimates that most timeshares are selling for no more than 10 percent of the original price. Some owners are lucky to get pennies.
"We've never seen the resale market where it is now," said Brian Rogers, head of the Timeshare Users Group, a consumer advocacy group in Jacksonville, Fla., that runs the listing service. Most owners "huff away mad" when told their timeshare has depreciated like a Yugo, he said.
Then there are the scams.
Resale scammers feeding on desperation have run so rampant that the Better Business Bureau last month named timeshare resale swindles one of the top rip-offs of 2010.
Generally, the swindles go like this. In one, someone tells you they have a buyer lined up, just pay a flat fee. In another, some company says they'll take your unwanted timeshare off your hands and sell it for an upfront fee that can be thousands of dollars. Many like to advertise by postcard.
Florida has launched a statewide crackdown on timeshare resale fraud. Its attorney general's office has investigations open on at least a dozen companies.
Even the top industry group, the American Resort Development Association in Washington, has issued five consumer advisories on resale scams in the last six months. "In a down market they come out of the woodwork," said CEO and President Howard Nusbaum.
Indeed, timeshare sales plunged 35 percent to $6.3 billion in 2009, the latest year for which data are available, according to the resort association. Sales have dropped 40 percent from the 2007 peak.
Owners continue to fall behind on timeshare loans, although overall default rates are down from their peak in January 2010, when one in 10 timeshare owners was in default, according to Fitch Ratings, which tracks securitized timeshare loans that are bundled up an resold to investors. The annualized default rate was 8.51 percent in December.
Nusbaum blames the current trouble on the recession and credit freeze, as well as the demographics of retiring baby boomers. Not only have cash-strapped consumers cut back on luxuries, but resort developers have found it harder to line up the credit to offer consumers. Most new timeshares are sold directly by resort developers such as Hilton, Marriott, Wyndham and Starwood, who provide their own financing.
"All of those lines kind of collided to kind of make this a little noisier than it used to be," Nusbaum said.
There are just not as many consumer protections in the secondary market, where timeshares get resold, he said. "We're kind of where the used car industry was in 1962," he said.
Some desperate owners try to hand timeshares back to the resort developer under a so-called quit claim deed. But resorts won't take them unless they think they can resell the property, experts say.
Not all timeshares are equal. The cream -- say a Disney resort -- holds its value better than the rest. "If you bought a converted motel room in 1982 in Gatlinburg, Tenn., for the first week of December ... I don't think it has a whole lot of economic life," Nusbaum said.
People have to give up thinking that timeshares are a financial or real estate investment, he added. It's a lifestyle investment, and its real value is the use owners get out of it.
But Bernie Wiklund hasn't been to his Cape Cod timeshare in nearly seven years. The retired engineer who lives in Ramsey, Minn., is working as a security guard to make ends meet, and can't afford to fly out to Cape Cod, or fork out $1,000 a year in fees.
He's advertised his two-week timeshare on Craigslist for nearly six years and marked it down to $5,000, a fraction of the more than $14,000 he paid in the 1980s. He's gotten responses, but only people trying to sell the timeshare for him -- for a fee.
"I'd like to retire," he said. "I'm 72."
Kim Holbrook knows the feeling. The 56-year-old Brooklyn Park, Minn., resident has been trying for six years to sell the four timeshares she and her husband bought years ago when they lived in the South and the resorts were quick getaways.
Now the children are grown, and she and her husband are spending more than $2,000 a year in annual fees on properties that they don't use like they used to. She can exchange some of the timeshares for stays at resorts in different places, she said, but there are fees for that, too.
Her advice for first-time buyers: Don't. "There isn't a market. You can't resell," Holbrook said. "Everything I've seen ... it's for pennies on the dollar."
That's great news for buyers, of course. Mike Spillane, 67, picked up his eighth timeshare weeks ago: a one-week stay in a four-bedroom, four-bath unit in historic Williamsburg, Va. It's a "gold crown rated" unit, referring to a timeshare exchange system's top rating, that would cost as much as $30,000 if he bought it directly from a resort developer.