WEBVTT 00:00:00.000 --> 00:00:02.339 Welcome back to the Deep Dive. I want you to 00:00:02.339 --> 00:00:04.339 picture a scenario. It's one you might have lived 00:00:04.339 --> 00:00:07.139 through or, you know, at least heard horror stories 00:00:07.139 --> 00:00:10.300 about from a slightly traumatized relative. Oh, 00:00:10.359 --> 00:00:12.060 I think we all have one of those stories. Right. 00:00:12.220 --> 00:00:15.179 You're on vacation. You've got a drink with a 00:00:15.179 --> 00:00:16.980 little umbrella in it. The sun is shining. Your 00:00:16.980 --> 00:00:20.539 guard is way, way down. And then a very friendly 00:00:20.539 --> 00:00:23.800 person in a branded polo shirt approaches you 00:00:23.800 --> 00:00:28.500 and asks a simple disarming question. Do you 00:00:28.500 --> 00:00:31.320 have 90 minutes to hear about a way to vacation 00:00:31.320 --> 00:00:33.520 like a millionaire for the rest of your life? 00:00:33.640 --> 00:00:36.179 And just like that, the sun goes behind a cloud. 00:00:36.280 --> 00:00:38.560 You know exactly where this is going. You feel 00:00:38.560 --> 00:00:40.740 that pit in your stomach. Because we were talking 00:00:40.740 --> 00:00:43.119 about the T word. Timeshares. Timeshares. Or 00:00:43.119 --> 00:00:45.219 as they like to call it now, vacation ownership 00:00:45.219 --> 00:00:48.240 or club membership. Yeah. But we know what it 00:00:48.240 --> 00:00:51.359 is. We do. And it is, I mean, it is arguably 00:00:51.359 --> 00:00:53.799 the most loaded word in the entire travel industry. 00:00:54.060 --> 00:00:56.960 It carries immediate cultural baggage. It really 00:00:56.960 --> 00:00:59.960 does. You hear timeshare. And you don't think 00:00:59.960 --> 00:01:02.920 of beaches. You think of aggressive sales tactics, 00:01:03.079 --> 00:01:06.040 guys in cheap suits, and that overwhelming feeling 00:01:06.040 --> 00:01:08.579 of being trapped in a windowless room until you 00:01:08.579 --> 00:01:10.980 sign a check just to make it all stop. It has 00:01:10.980 --> 00:01:13.180 a reputation right up there with used car sales 00:01:13.180 --> 00:01:15.340 and, you know, multi -level marketing schemes. 00:01:15.599 --> 00:01:18.040 For sure. But here's the thing, and this is why 00:01:18.040 --> 00:01:20.439 we wanted to dig into this specific stack of 00:01:20.439 --> 00:01:24.260 research today. Right. It is also a massive... 00:01:24.750 --> 00:01:28.349 multi -billion dollar industry that millions 00:01:28.349 --> 00:01:30.810 of people actually participate in. And in some 00:01:30.810 --> 00:01:33.840 cases. genuinely enjoy. That's the part that's 00:01:33.840 --> 00:01:36.780 so fascinating. It is. So our mission today isn't 00:01:36.780 --> 00:01:38.500 just to bash the industry, although, believe 00:01:38.500 --> 00:01:40.420 me, we are going to talk about the horror stories 00:01:40.420 --> 00:01:42.099 and the scams. We're getting to that. We are. 00:01:42.260 --> 00:01:45.040 But we want to look at the machinery. We need 00:01:45.040 --> 00:01:47.019 to strip away the stigma for a minute and look 00:01:47.019 --> 00:01:50.099 at the engine. What is a timeshare legally? Exactly. 00:01:50.099 --> 00:01:52.719 How did it morph from what was actually a very 00:01:52.719 --> 00:01:55.840 friendly, logical European concept into this 00:01:55.840 --> 00:01:59.140 massive, controversial industry? And critically, 00:01:59.340 --> 00:02:01.569 we need to look at the math. at the end of the 00:02:01.569 --> 00:02:04.730 day, a timeshare isn't just a vacation. No. It 00:02:04.730 --> 00:02:07.569 is a complex financial product that you happen 00:02:07.569 --> 00:02:10.210 to sleep in. That is a terrifying way to put 00:02:10.210 --> 00:02:13.050 it, but it seems completely accurate based on 00:02:13.050 --> 00:02:15.669 these documents. So let's start with the absolute 00:02:15.669 --> 00:02:18.009 basics, just so we are all on the same page before 00:02:18.009 --> 00:02:22.629 we get into the wild history. When we say timeshare, 00:02:22.770 --> 00:02:26.759 what are we actually defining? At its core, Stripped 00:02:26.759 --> 00:02:29.240 of all the marketing loss, a timeshare is a property 00:02:29.240 --> 00:02:32.599 with a divided form of ownership or use rights. 00:02:32.819 --> 00:02:35.979 That is the legal definition. OK. Usually we 00:02:35.979 --> 00:02:38.780 are talking about resort condominium units, apartments 00:02:38.780 --> 00:02:41.439 essentially. But instead of one person owning 00:02:41.439 --> 00:02:44.020 that unit 100 percent of the time, the usage 00:02:44.020 --> 00:02:47.900 is just. It's sliced up. Right. Multiple parties 00:02:47.900 --> 00:02:50.020 hold rights to use that same accommodation, and 00:02:50.020 --> 00:02:52.560 each owner is allotted a specific period of time, 00:02:52.639 --> 00:02:55.280 usually a week. So practically speaking, instead 00:02:55.280 --> 00:02:57.439 of me buying a vacation home in Florida that 00:02:57.439 --> 00:02:59.939 just sits empty for 50 weeks a year while I'm 00:02:59.939 --> 00:03:01.479 working. Right, which most people can't afford 00:03:01.479 --> 00:03:04.139 anyway. Exactly. Instead, 50 people buy it and 00:03:04.139 --> 00:03:06.979 we each take a turn. Precisely. It is an efficiency 00:03:06.979 --> 00:03:10.400 model. In theory, it eliminates waste. Why pay 00:03:10.400 --> 00:03:14.360 for a house that is empty 90 % of the time? But... 00:03:14.539 --> 00:03:17.020 as we are going to see the way you hold that 00:03:17.020 --> 00:03:19.900 right whether you own the actual dirt or just 00:03:19.900 --> 00:03:22.939 a license to use it that changes the entire legal 00:03:22.939 --> 00:03:25.680 landscape And looking at the scope of what we 00:03:25.680 --> 00:03:28.520 have to cover, it is fascinating. We have everything 00:03:28.520 --> 00:03:31.479 from the psychological tricks used in the sales 00:03:31.479 --> 00:03:33.520 tour. Oh, that's a whole segment. To the specifics 00:03:33.520 --> 00:03:35.680 of the resale market, which is a whole other 00:03:35.680 --> 00:03:37.780 beast. It is. We're going to look at the different 00:03:37.780 --> 00:03:40.979 flavors of ownership, like deeded versus right 00:03:40.979 --> 00:03:43.460 to use. We'll talk about the major players who 00:03:43.460 --> 00:03:45.840 legitimize the industry, you know, the Disneys 00:03:45.840 --> 00:03:47.599 and the Marriotts. Right. And we have to talk 00:03:47.599 --> 00:03:50.379 about the law. Because this industry was so wild 00:03:50.379 --> 00:03:53.039 in the beginning, specific laws had to be written 00:03:53.039 --> 00:03:55.319 just to protect consumers from the high -pressure 00:03:55.319 --> 00:03:57.620 environment. That's a wild ride. But let's go 00:03:57.620 --> 00:03:59.560 back to the beginning, because this was the biggest 00:03:59.560 --> 00:04:02.139 surprise for me in the research. I always assumed 00:04:02.139 --> 00:04:04.719 this was some corporate scheme cooked up in a 00:04:04.719 --> 00:04:07.319 boardroom in the 70s to squeeze money out of 00:04:07.319 --> 00:04:09.460 tourists. That's what everyone thinks. But it 00:04:09.460 --> 00:04:11.699 actually started way more innocently than that, 00:04:11.759 --> 00:04:13.639 didn't it? It really did. It didn't start as 00:04:13.639 --> 00:04:15.819 a corporate scheme at all. It started in Europe, 00:04:15.900 --> 00:04:18.620 specifically in the UK, and then it kind of expanded 00:04:18.620 --> 00:04:22.540 onto the continent in early 1960s. The 60s. The 00:04:22.540 --> 00:04:25.399 60s. And they didn't call it timeshare back then. 00:04:25.439 --> 00:04:28.360 It was vacation home sharing. Vacation home sharing. 00:04:28.579 --> 00:04:30.500 That sounds so pleasant, like something you do 00:04:30.500 --> 00:04:32.420 with your neighbors. That is exactly what it 00:04:32.420 --> 00:04:35.660 was. The original model was typically four families, 00:04:35.899 --> 00:04:39.620 friends, extended family, or just neighbors. 00:04:39.980 --> 00:04:42.620 They would get together and jointly purchase 00:04:42.620 --> 00:04:46.519 a vacation cottage. Okay, so four families, one 00:04:46.519 --> 00:04:49.620 house. Simple enough. Right. And the math was 00:04:49.620 --> 00:04:51.939 simple. There are four seasons in a year, so 00:04:51.939 --> 00:04:54.459 each family had exclusive use of the property 00:04:54.459 --> 00:04:58.139 for one of the four seasons. That seems... Remarkably 00:04:58.139 --> 00:05:01.759 fair and logical. It was. And to keep it fair, 00:05:01.980 --> 00:05:04.379 they would rotate the seasons annually. So if 00:05:04.379 --> 00:05:06.180 you had spring this year, you'd get summer next 00:05:06.180 --> 00:05:09.199 year and so on. That way, everyone eventually 00:05:09.199 --> 00:05:11.920 got a turn at the prime vacation slots. I love 00:05:11.920 --> 00:05:14.120 that. It relies entirely on cooperation. And 00:05:14.120 --> 00:05:16.860 that was the key. And also the limitation. It 00:05:16.860 --> 00:05:19.720 relied entirely on trust. There was no property 00:05:19.720 --> 00:05:21.759 manager. There was no homeowners association. 00:05:22.240 --> 00:05:24.990 Just a handshake deal. Pretty much, just four 00:05:24.990 --> 00:05:28.069 families sharing the keys and the bills. But 00:05:28.069 --> 00:05:31.810 as with many utopian ideas, reality set in. Most 00:05:31.810 --> 00:05:34.029 families couldn't actually vacation for a full 00:05:34.029 --> 00:05:36.149 season. I mean, who has three months of vacation 00:05:36.149 --> 00:05:39.269 time? Nobody. Right. So the house sits empty 00:05:39.269 --> 00:05:41.689 for weeks at a time, even though technically 00:05:41.689 --> 00:05:44.910 someone's season is happening. Exactly. The properties 00:05:44.910 --> 00:05:47.569 were often vacant for long periods or, you know, 00:05:47.589 --> 00:05:50.610 imagine the conflict. Family A leaves the place 00:05:50.610 --> 00:05:53.550 a mess and family B arrives for their turn and 00:05:53.550 --> 00:05:56.279 has to clean up. Yeah. So trust breaks down pretty 00:05:56.279 --> 00:05:59.180 quick. The inefficiency crept back in. So British 00:05:59.180 --> 00:06:00.699 businesses looked at this and thought, we can 00:06:00.699 --> 00:06:03.480 professionalize this. They decided to slice the 00:06:03.480 --> 00:06:05.819 pie thinner. Thinner than four seasons. Much 00:06:05.819 --> 00:06:07.480 thinner. Instead of four seasons, why not 50 00:06:07.480 --> 00:06:11.139 weeks? 50 weeks, not 52. Right. There are 52 00:06:11.139 --> 00:06:13.439 weeks in a year. They divided the resort room 00:06:13.439 --> 00:06:16.139 into 150 of the ownerships. They kept two weeks 00:06:16.139 --> 00:06:18.079 aside for maintenance and repairs, which is actually 00:06:18.079 --> 00:06:20.759 a very smart operational detail that the four 00:06:20.759 --> 00:06:23.160 families lacked. And they sold the other 50. 00:06:23.519 --> 00:06:25.720 Okay, so now you have 50 owners for one unit. 00:06:25.959 --> 00:06:28.500 That's a lot of cats to herd. You can't just 00:06:28.500 --> 00:06:30.199 leave the key under the mat for that. No, you 00:06:30.199 --> 00:06:33.139 can't. And that's where the maintenance fee was 00:06:33.139 --> 00:06:35.720 born. Since you can't rely on 50 strangers to 00:06:35.720 --> 00:06:38.579 come in and fix the roof or mow the lawn, the 00:06:38.579 --> 00:06:40.839 business charges each owner a fee to cover those 00:06:40.839 --> 00:06:43.639 operational costs. The dreaded maintenance fee. 00:06:43.800 --> 00:06:46.480 The birth of it. It took about a decade for this 00:06:46.480 --> 00:06:48.639 to really smooth out in Europe, but eventually 00:06:48.639 --> 00:06:51.259 it became a successful business venture. And 00:06:51.259 --> 00:06:55.509 then? Across the Atlantic, 1974. 1974. The United 00:06:55.509 --> 00:06:57.810 States. This is where things really started to 00:06:57.810 --> 00:06:59.750 accelerate, right? This is the pivotal moment 00:06:59.750 --> 00:07:03.709 for the American market. 1974. A company called 00:07:03.709 --> 00:07:06.970 Caribbean International Corporation, or CIC, 00:07:07.230 --> 00:07:10.550 based in Fort Lauderdale, Florida. They are really 00:07:10.550 --> 00:07:13.009 the granddaddies of the U .S. timeshare model. 00:07:13.269 --> 00:07:15.089 But they weren't selling real estate at first, 00:07:15.189 --> 00:07:17.819 were they? The documents say something different. 00:07:18.040 --> 00:07:20.819 No, and this is a crucial distinction. They offered 00:07:20.819 --> 00:07:23.579 what they called a vacation license. A license? 00:07:23.879 --> 00:07:25.740 Like a driver's license? What does that even 00:07:25.740 --> 00:07:28.040 mean? It's a similar concept. You didn't own 00:07:28.040 --> 00:07:30.100 the room. You had a license to use the room for 00:07:30.100 --> 00:07:32.180 a period of 25 years. So it had an expiration 00:07:32.180 --> 00:07:36.560 date. A hard expiration date. CIC owned two resorts, 00:07:36.660 --> 00:07:39.339 one in St. Croix and one in St. Thomas in the 00:07:39.339 --> 00:07:41.120 U .S. Virgin Islands. Okay, so I pay them some 00:07:41.120 --> 00:07:43.720 money, and for 25 years I get to go to the Virgin 00:07:43.720 --> 00:07:46.389 Islands. What was the pitch? Why would I do that 00:07:46.389 --> 00:07:49.189 instead of just booking a hotel? The pitch was 00:07:49.189 --> 00:07:52.769 all about inflation. This is the aha moment for 00:07:52.769 --> 00:07:55.230 the sales strategy. You have to remember the 00:07:55.230 --> 00:07:59.089 economic context of the mid -1970s. Inflation 00:07:59.089 --> 00:08:02.160 was a real... tangible fear for people. Prices 00:08:02.160 --> 00:08:04.639 were going up fast, so CIC broke down the math. 00:08:04.819 --> 00:08:07.300 Walk us through that math. Okay, so you pay the 00:08:07.300 --> 00:08:10.019 purchase price for the license up front. Then 00:08:10.019 --> 00:08:13.120 the contract stated you only had two extra charges. 00:08:13.379 --> 00:08:16.779 You had to pay a $15 per diem, that's per night, 00:08:16.899 --> 00:08:22.399 for the room. $15. $15. And that rate was frozen 00:08:22.399 --> 00:08:25.850 for the life of the contract. Frozen. For 25 00:08:25.850 --> 00:08:29.610 years. For 25 years. Plus a small $25 switching 00:08:29.610 --> 00:08:33.820 fee if you wanted to swap resorts. The bet they 00:08:33.820 --> 00:08:36.539 were asking you to make was this. They projected 00:08:36.539 --> 00:08:39.480 that hotel rates, which were maybe $30 or $40 00:08:39.480 --> 00:08:42.659 at the time, were going to skyrocket to over 00:08:42.659 --> 00:08:45.879 $100 a night over the next 25 years. So they're 00:08:45.879 --> 00:08:47.960 selling financial security. They're saying lock 00:08:47.960 --> 00:08:51.440 in your vacation costs now at 1974 prices. And 00:08:51.440 --> 00:08:53.639 in 1990, you'll be laughing at everyone paying 00:08:53.639 --> 00:08:56.039 full price. That's the entire pitch. Exactly. 00:08:56.159 --> 00:08:59.419 And here is the kicker. What? They were right. 00:08:59.740 --> 00:09:01.659 They were. The math actually worked out. It did. 00:09:01.820 --> 00:09:04.320 By 1999, which would have been the end of those 00:09:04.320 --> 00:09:07.120 25 -year contracts, inflation in the U .S. had 00:09:07.120 --> 00:09:09.860 boosted the per diem cost of a parable room to 00:09:09.860 --> 00:09:13.019 about $52 or more. So if you were locked in at 00:09:13.019 --> 00:09:15.879 15, you were saving significant money every single 00:09:15.879 --> 00:09:18.200 night. That's fascinating. So the early adopters 00:09:18.200 --> 00:09:20.779 actually got a good deal. In that specific inflation 00:09:20.779 --> 00:09:24.000 hedge sense, yes. It validated the initial savings 00:09:24.000 --> 00:09:27.000 assumption. But of course, the industry saw this 00:09:27.000 --> 00:09:29.299 and realized there was enormous profit to be 00:09:29.299 --> 00:09:32.440 made. Entrepreneurs figured out they could sell 00:09:32.440 --> 00:09:36.460 the same room 52 times. In the mid -70s, the 00:09:36.460 --> 00:09:40.500 average price was about $3 ,500 per week. So 00:09:40.500 --> 00:09:43.940 wait, do the math on that. 3 ,500 times 50 weeks? 00:09:44.120 --> 00:09:48.440 Yeah. That's $175 ,000 for a single condo unit. 00:09:48.620 --> 00:09:52.940 In 1975... Money. Wow. Precisely. The margins 00:09:52.940 --> 00:09:55.580 were astronomical. And naturally, when there 00:09:55.580 --> 00:09:57.320 is that much money flying around, things got 00:09:57.320 --> 00:09:59.620 a little cowboy. The Wild West. That's when the 00:09:59.620 --> 00:10:01.779 Florida Real Estate Commission stepped in. They 00:10:01.779 --> 00:10:04.059 looked at these vacation licenses and decided 00:10:04.059 --> 00:10:06.159 they needed to be regulated like real estate. 00:10:06.299 --> 00:10:08.279 Because people were just handing over thousands 00:10:08.279 --> 00:10:10.700 of dollars for a promise to use a building in 00:10:10.700 --> 00:10:12.559 the Caribbean. I can see the problem. Right. 00:10:12.919 --> 00:10:15.379 If the company went bust, your license was just 00:10:15.379 --> 00:10:17.820 a worthless piece of paper. So Florida enacted 00:10:17.820 --> 00:10:20.419 legislation to make them fee simple ownership 00:10:20.419 --> 00:10:23.019 transactions. Fee simple. That's a legal term. 00:10:23.080 --> 00:10:25.320 What does that mean for the buyer? It means you 00:10:25.320 --> 00:10:28.259 actually own a slice of the real estate. You 00:10:28.259 --> 00:10:31.379 own the dirt or at least a fraction of it. This 00:10:31.379 --> 00:10:34.100 shifted the model significantly. It mandated 00:10:34.100 --> 00:10:36.799 the creation of homeowners associations, HOAs, 00:10:36.860 --> 00:10:39.820 and formalized those maintenance fees. It gave 00:10:39.820 --> 00:10:41.879 the consumer more protection because they held 00:10:41.879 --> 00:10:44.620 a deed, but it also locked them into the perpetual 00:10:44.620 --> 00:10:47.980 responsibilities of property ownership. Which 00:10:47.980 --> 00:10:49.940 brings us neatly to the next segment, because 00:10:49.940 --> 00:10:52.580 ownership. in the timeshare world isn't always 00:10:52.580 --> 00:10:55.240 straightforward. We have these different flavors 00:10:55.240 --> 00:10:58.779 of contracts. You mentioned fee simple or deeded, 00:10:58.820 --> 00:11:01.600 but there's also right to use. What's the impact 00:11:01.600 --> 00:11:03.519 of this? Do you actually own the dirt or not? 00:11:03.850 --> 00:11:05.830 This is the first thing you have to check if 00:11:05.830 --> 00:11:08.169 you are ever looking at a contract. The legal 00:11:08.169 --> 00:11:10.450 difference is absolutely huge. OK, let's start 00:11:10.450 --> 00:11:12.090 with the deeded contract. This is the fee simple 00:11:12.090 --> 00:11:14.350 one we were just talking about. Yes. A deeded 00:11:14.350 --> 00:11:17.169 contract is real property. It's fractional ownership. 00:11:17.309 --> 00:11:19.769 Just like buying a house, you get a deed recorded 00:11:19.769 --> 00:11:22.769 in the public record. So it's legally mine. Legally 00:11:22.769 --> 00:11:26.299 yours. Because it is real property, you can essentially 00:11:26.299 --> 00:11:28.159 do whatever you want with it. You can use it, 00:11:28.220 --> 00:11:29.480 you can rent it out, you can give it away to 00:11:29.480 --> 00:11:31.139 a friend, you can leave it to your heirs and 00:11:31.139 --> 00:11:33.600 your will, or you can try to sell it. And because 00:11:33.600 --> 00:11:35.419 it's real estate, does that mean I'm paying property 00:11:35.419 --> 00:11:39.110 taxes on it? It does. You are liable for your 00:11:39.110 --> 00:11:42.350 portion of the real estate taxes. Usually these 00:11:42.350 --> 00:11:44.070 are collected as part of the maintenance fees, 00:11:44.149 --> 00:11:46.509 but it also means there is potential for tax 00:11:46.509 --> 00:11:48.389 deductibility, depending on your jurisdiction 00:11:48.389 --> 00:11:51.009 and your personal tax laws. Okay, that sounds 00:11:51.009 --> 00:11:53.490 secure at least. But there's a nuance here too, 00:11:53.570 --> 00:11:56.860 aside in the notes. Leasehold deeds. Right. You 00:11:56.860 --> 00:11:59.500 see this more in places like the U .K. or Hawaii 00:11:59.500 --> 00:12:02.679 sometimes. A leasehold deed offers ownership, 00:12:02.779 --> 00:12:06.840 but for a fixed period, say 99 years. After that 00:12:06.840 --> 00:12:09.620 99 years is up, the ownership reverts to the 00:12:09.620 --> 00:12:11.840 freeholder, the person who actually owns the 00:12:11.840 --> 00:12:14.320 land underneath. So it's ownership, but with 00:12:14.320 --> 00:12:16.720 an expiration date, effectively. A very long 00:12:16.720 --> 00:12:18.879 one, but still. Exactly. It's not perpetual. 00:12:19.139 --> 00:12:21.480 Got it. Now compare that to the right to use 00:12:21.480 --> 00:12:24.360 or RTU contract. This sounds more like that original 00:12:24.360 --> 00:12:28.120 1974. license. It is very similar. With a right 00:12:28.120 --> 00:12:31.059 to use contract, you do not own the dirt. The 00:12:31.059 --> 00:12:33.460 developer retains ownership of the property. 00:12:33.799 --> 00:12:36.279 You are just signing a contract that gives you 00:12:36.279 --> 00:12:38.320 the right to use the property for a specific 00:12:38.320 --> 00:12:41.159 number of years, maybe 10, 20 or 50 years. And 00:12:41.159 --> 00:12:44.379 when the contract expires, your rights evaporate. 00:12:44.379 --> 00:12:47.320 You walk away with nothing. That sounds less 00:12:47.320 --> 00:12:50.600 good. It depends on your goals, but it definitely 00:12:50.600 --> 00:12:53.990 carries different and I would argue. bigger risks. 00:12:54.450 --> 00:12:57.009 The biggest risk is that it often takes the form 00:12:57.009 --> 00:12:59.649 of a club membership. If the controlling company 00:12:59.649 --> 00:13:02.070 goes under or if they sell the property to a 00:13:02.070 --> 00:13:04.629 developer who wants to turn it into regular condos. 00:13:04.730 --> 00:13:07.309 Your right to use could just vanish. It might 00:13:07.309 --> 00:13:09.710 be lost. Yeah. Wait so I could pay twenty thousand 00:13:09.710 --> 00:13:11.950 dollars for a 20 year right to use and in year 00:13:11.950 --> 00:13:14.870 five the company goes bankrupt and I'm just out. 00:13:15.340 --> 00:13:17.600 It depends heavily on the local laws and the 00:13:17.600 --> 00:13:19.820 specific contract. But yes, that is the nightmare 00:13:19.820 --> 00:13:22.299 scenario. This is particularly common in Mexico. 00:13:22.340 --> 00:13:24.720 Why Mexico specifically? Because the Mexican 00:13:24.720 --> 00:13:27.860 Constitution has restrictions on foreign ownership 00:13:27.860 --> 00:13:31.360 of land near the coast and borders. So for a 00:13:31.360 --> 00:13:33.940 long time, the only way for a U .S. citizen to 00:13:33.940 --> 00:13:37.919 buy a timeshare in Cabo or Cancun was through 00:13:37.919 --> 00:13:41.059 a right to use or a trust mechanism. You aren't 00:13:41.059 --> 00:13:44.190 buying the real estate directly. That is a crucial 00:13:44.190 --> 00:13:46.710 detail to know. So we have the legal structure 00:13:46.710 --> 00:13:49.330 deeded versus right to use. But then we have 00:13:49.330 --> 00:13:51.649 the schedule structure. How do they decide when 00:13:51.649 --> 00:13:54.370 I get to go? Because everybody wants Christmas 00:13:54.370 --> 00:13:56.950 week or the 4th of July. This is where the calendar 00:13:56.950 --> 00:14:00.529 systems come in. The oldest and most rigid system 00:14:00.529 --> 00:14:02.929 is fixed week ownership. This is what my grandparents 00:14:02.929 --> 00:14:06.330 said. You own week 51. Exactly. The resort has 00:14:06.330 --> 00:14:08.870 a calendar usually starting in January. Week 00:14:08.870 --> 00:14:11.409 51 is typically Christmas week. If you own week 00:14:11.409 --> 00:14:13.830 51, you go that week every single year. Great 00:14:13.830 --> 00:14:15.889 for routine. Fantastic for routine. You know 00:14:15.889 --> 00:14:18.169 exactly when your vacation is. But it's terrible 00:14:18.169 --> 00:14:20.450 for flexibility. If your cousin is getting married 00:14:20.450 --> 00:14:23.029 that week or you just want to go skiing in February 00:14:23.029 --> 00:14:25.509 instead, you're out of luck unless you can trade 00:14:25.509 --> 00:14:28.340 it somehow. So to solve that, They invented floating 00:14:28.340 --> 00:14:31.379 week ownership. Right. In this model, you might 00:14:31.379 --> 00:14:33.919 buy a summer week. You don't own a specific date. 00:14:34.080 --> 00:14:36.500 You own the right to book any one week within 00:14:36.500 --> 00:14:39.039 the summer window. That sounds better, more flexible. 00:14:39.240 --> 00:14:42.649 In theory. But the problem is competition. If 00:14:42.649 --> 00:14:45.610 there are 100 owners who all bought summer weeks 00:14:45.610 --> 00:14:48.570 and everyone wants the week of July 4th, not 00:14:48.570 --> 00:14:50.629 everyone is going to get it. Exactly. You have 00:14:50.629 --> 00:14:52.830 to call the second the booking window opens and 00:14:52.830 --> 00:14:54.929 compete with your fellow owners. So it's like 00:14:54.929 --> 00:14:56.769 trying to buy Taylor Swift tickets. A little 00:14:56.769 --> 00:14:59.690 bit, yes. A very specific vacation -based version 00:14:59.690 --> 00:15:02.929 of that. And then you have rotating or flex week. 00:15:03.279 --> 00:15:06.259 ownership. This was an attempt to be fair. The 00:15:06.259 --> 00:15:09.120 weeks rotate forward or backward yearly. So you 00:15:09.120 --> 00:15:12.759 have week 25 this year, week 26 next year. So 00:15:12.759 --> 00:15:15.120 eventually everyone gets the prime weeks. Yes. 00:15:15.259 --> 00:15:18.059 But as the source notes, while it is fair, it 00:15:18.059 --> 00:15:20.419 is not actually flexible. You don't get to choose. 00:15:20.519 --> 00:15:22.299 You just get what the calendar gives you that 00:15:22.299 --> 00:15:24.620 year. It seems like every solution just creates 00:15:24.620 --> 00:15:28.240 a new problem. Fixed is too rigid. Floating is 00:15:28.240 --> 00:15:31.019 too competitive. Which brings us to the big revolution, 00:15:31.360 --> 00:15:36.259 the early 90s. Enter the mouse, Disney. In 1991, 00:15:36.600 --> 00:15:39.539 the Disney Vacation Club, or DVC, really changed 00:15:39.539 --> 00:15:41.679 the game. They popularized the points system. 00:15:41.879 --> 00:15:44.240 I feel like almost everyone uses points now. 00:15:44.850 --> 00:15:47.309 How did Disney change the structure so drastically? 00:15:47.549 --> 00:15:49.889 Disney was clever. They combined a deeded interest 00:15:49.889 --> 00:15:53.049 with a points system. So legally, you still have 00:15:53.049 --> 00:15:54.929 a real property interest, which gives you that 00:15:54.929 --> 00:15:57.389 security. You own a piece of it. So you have 00:15:57.389 --> 00:15:59.190 the deed. You have the deed. But instead of buying 00:15:59.190 --> 00:16:02.250 a week, you buy an annual allotment of vacation 00:16:02.250 --> 00:16:04.690 points. So the points are like a currency. Exactly. 00:16:04.769 --> 00:16:06.649 That's the best way to think of it. It's vacation 00:16:06.649 --> 00:16:10.210 currency. Every night at every resort has a price 00:16:10.210 --> 00:16:13.809 tag in points. A studio apartment on a Tuesday 00:16:13.809 --> 00:16:17.330 in October might cost 10 points a night. A three 00:16:17.330 --> 00:16:19.929 -bedroom villa on New Year's Eve might cost 100 00:16:19.929 --> 00:16:22.549 points a night. That offers massive flexibility. 00:16:22.870 --> 00:16:24.769 It does. You can spend your points on different 00:16:24.769 --> 00:16:27.029 unit sizes. Maybe one year it's just you and 00:16:27.029 --> 00:16:29.029 your spouse, you get a studio. The next year 00:16:29.029 --> 00:16:31.029 you bring the whole family and get a three -bedroom. 00:16:31.169 --> 00:16:33.669 You can change resorts, change times of year. 00:16:33.950 --> 00:16:38.100 And crucially, BBC introduced... Banking and 00:16:38.100 --> 00:16:40.840 borrowing. Banking and borrowing. If you don't 00:16:40.840 --> 00:16:43.200 use all your points this year, you can bank them 00:16:43.200 --> 00:16:45.980 to use next year. So you have a bigger pool of 00:16:45.980 --> 00:16:49.059 points for a longer trip. Or if you want a really 00:16:49.059 --> 00:16:51.820 big vacation this year, you can borrow points 00:16:51.820 --> 00:16:54.399 from next year's allotment. That really does 00:16:54.399 --> 00:16:56.860 solve the virginity problem. It feels much more 00:16:56.860 --> 00:16:59.139 modern. It does. And that's why the entire industry 00:16:59.139 --> 00:17:02.259 adopted it. Hilton, Marriott, Hyatt, Wyndham, 00:17:02.360 --> 00:17:05.500 they all moved toward this points -based model. 00:17:05.700 --> 00:17:08.230 It allows... for fractional stays too. You don't 00:17:08.230 --> 00:17:10.009 have to stay a full week. You can stay for three 00:17:10.009 --> 00:17:11.750 days if that's all you want. There's a catch, 00:17:11.930 --> 00:17:14.390 right? There's always a catch. The catch is complexity 00:17:14.390 --> 00:17:17.549 and, well, points inflation. The points chart 00:17:17.549 --> 00:17:19.769 determines the value of your currency. If the 00:17:19.769 --> 00:17:21.809 resort decides to reallocate the points chart 00:17:21.809 --> 00:17:25.589 next year, your evatation might cost more points 00:17:25.589 --> 00:17:27.970 than it did this year. Effectively devaluing 00:17:27.970 --> 00:17:30.190 my ownership. Right. So you have to keep buying 00:17:30.190 --> 00:17:32.049 more points to stay in the same place at the 00:17:32.049 --> 00:17:34.710 same time. In some systems, yes. That can happen. 00:17:34.930 --> 00:17:37.319 Okay. So we know what they are. Now let's talk 00:17:37.319 --> 00:17:39.519 about how they get you to buy them. Because the 00:17:39.519 --> 00:17:43.579 timeshare presentation is, it's legendary. It's 00:17:43.579 --> 00:17:46.599 a cultural trope for a reason. It is theater. 00:17:46.720 --> 00:17:50.380 High stakes, psychological theater. And it has 00:17:50.380 --> 00:17:54.019 been refined over decades to be incredibly effective. 00:17:54.339 --> 00:17:55.839 Let's walk through the tour. It usually starts 00:17:55.839 --> 00:17:58.920 with bait. Always. You're on vacation. maybe 00:17:58.920 --> 00:18:01.519 in Vegas or Orlando. You see a booth offering 00:18:01.519 --> 00:18:04.519 free show tickets or deeply discounted Disney 00:18:04.519 --> 00:18:08.059 tickets or a $100 dinner voucher. All you have 00:18:08.059 --> 00:18:10.400 to do is give them 90 minutes of your time. 90 00:18:10.400 --> 00:18:12.240 minutes. I've never heard of one actually lasting 00:18:12.240 --> 00:18:14.660 90 minutes. The stories are always four, five, 00:18:14.660 --> 00:18:17.440 six hours long. It rarely does. So you accept 00:18:17.440 --> 00:18:20.819 the bait. You arrive at the resort. You are taken 00:18:20.819 --> 00:18:23.180 to a hospitality room. This is the setup. There's 00:18:23.180 --> 00:18:25.180 coffee, maybe some snacks. It's comfortable. 00:18:25.339 --> 00:18:27.400 They want your defenses down. Right. You are 00:18:27.400 --> 00:18:30.059 assigned to tour guide. Now, this person might 00:18:30.059 --> 00:18:32.559 be a licensed real estate agent or they might 00:18:32.559 --> 00:18:34.740 just be a guide. And they are your new best friend. 00:18:34.920 --> 00:18:37.299 Your new best friend. They want to know about 00:18:37.299 --> 00:18:40.660 your family, your dreams, your vacations. Then 00:18:40.660 --> 00:18:43.609 comes the podium. A speaker welcomes everyone, 00:18:43.849 --> 00:18:46.549 usually shows a slick promotional video with 00:18:46.549 --> 00:18:49.230 drone shots of beaches and happy families. Then 00:18:49.230 --> 00:18:51.490 the physical tour. Right. They take you out to 00:18:51.490 --> 00:18:53.589 see the units. And they are not going to show 00:18:53.589 --> 00:18:55.470 you the standard unit. They are going to show 00:18:55.470 --> 00:18:57.470 you the best unit that fits your family's needs 00:18:57.470 --> 00:19:00.490 or, you know, slightly exceeds them. They want 00:19:00.490 --> 00:19:03.369 you to visualize yourself in that space. Picture 00:19:03.369 --> 00:19:06.450 your family here for Christmas. Exactly. And 00:19:06.450 --> 00:19:08.920 then you go back to the table. And this is where 00:19:08.920 --> 00:19:11.759 the trap snaps shut. The dream question. This 00:19:11.759 --> 00:19:14.160 is a classic tactic. They hand you an exchange 00:19:14.160 --> 00:19:18.259 book, a massive glossy catalog of resorts from 00:19:18.259 --> 00:19:21.079 RCI or Interval International. And they ask, 00:19:21.220 --> 00:19:23.180 where would you like to visit? And you say, I've 00:19:23.180 --> 00:19:25.700 always wanted to go to Hawaii or I want to ski 00:19:25.700 --> 00:19:29.579 in the Alps. And boom, the entire pitch is now 00:19:29.579 --> 00:19:31.980 tailored to that answer. They aren't selling 00:19:31.980 --> 00:19:34.619 you a pondo in Orlando anymore. They are selling 00:19:34.619 --> 00:19:36.960 you that ski trip to the Alps. They're selling 00:19:36.960 --> 00:19:39.480 the dream of global travel. And then comes the 00:19:39.480 --> 00:19:42.759 pressure. The pressure is intense. The defining 00:19:42.759 --> 00:19:46.099 characteristic of timeshare sales is the buy 00:19:46.099 --> 00:19:50.019 today mandate. Why today? Why can't I go home 00:19:50.019 --> 00:19:52.039 and think about it for a week? They will tell 00:19:52.039 --> 00:19:54.599 you that the discounted price or the special 00:19:54.599 --> 00:19:57.220 interest rate is only authorized for today. The 00:19:57.220 --> 00:20:01.440 source notes explicitly. This is untrue. It is 00:20:01.440 --> 00:20:04.799 a fabrication to force urgency. Because if you 00:20:04.799 --> 00:20:07.319 leave the room, the spill is broken. That's it. 00:20:07.420 --> 00:20:09.279 They know that once you walk out that door and 00:20:09.279 --> 00:20:12.359 you Google timeshare resale value, you will never, 00:20:12.380 --> 00:20:14.559 ever come back. So what happens if you say no? 00:20:14.720 --> 00:20:16.980 I mean, really stick to your guns. You meet the 00:20:16.980 --> 00:20:19.059 T .O. The T .O. What's a T .O.? The takeover 00:20:19.059 --> 00:20:22.279 man or the sales manager. If the initial guide 00:20:22.279 --> 00:20:24.500 can't close you, they call in the boss. This 00:20:24.500 --> 00:20:26.940 is the good cop, bad cop routine or sometimes 00:20:26.940 --> 00:20:29.910 good cop, better cop. What does the TO do that's 00:20:29.910 --> 00:20:31.430 different? They come in with a whole new set 00:20:31.430 --> 00:20:33.210 of incentives. Oh, you know what? We actually 00:20:33.210 --> 00:20:35.390 have a traded -in unit from another owner that 00:20:35.390 --> 00:20:37.650 just came available. It's half the price. Or 00:20:37.650 --> 00:20:40.170 I can authorize a special developer discount 00:20:40.170 --> 00:20:42.630 just for you. So they just keep chipping away 00:20:42.630 --> 00:20:45.519 at the price. They will barrage you with lower 00:20:45.519 --> 00:20:48.539 and lower price points until you either buy or 00:20:48.539 --> 00:20:51.339 you make it absolutely physically clear you are 00:20:51.339 --> 00:20:53.839 leaving. Sounds exhausting. It is designed to 00:20:53.839 --> 00:20:56.720 be exhausting. They wear you down until signing 00:20:56.720 --> 00:20:59.339 a check feels easier than saying no one more 00:20:59.339 --> 00:21:02.480 time. And that leads us to the hangover, the 00:21:02.480 --> 00:21:05.240 economics. You've signed the papers. You own 00:21:05.240 --> 00:21:07.920 the timeshare. Was it a good financial decision? 00:21:08.140 --> 00:21:10.680 The developers will argue yes. Their argument 00:21:10.680 --> 00:21:13.599 is rent versus own. They say, look, you are going 00:21:13.599 --> 00:21:16.160 to vacation anyway. Hotel rates always go up. 00:21:16.220 --> 00:21:18.480 If you buy this, you are locking in your costs. 00:21:18.980 --> 00:21:21.420 Ideally, over 20 years, the timeshare is cheaper. 00:21:21.559 --> 00:21:23.940 But that math leaves out some pretty big numbers. 00:21:24.140 --> 00:21:26.619 Huge numbers. First, the maintenance fees. These 00:21:26.619 --> 00:21:28.539 are perpetual. They never go away and they almost 00:21:28.539 --> 00:21:31.339 always go up, often faster than inflation. They 00:21:31.339 --> 00:21:34.579 include property taxes, insurance, upkeep, management 00:21:34.579 --> 00:21:36.599 salaries, everything. And the mortgage interest 00:21:36.599 --> 00:21:38.839 if you financed it. If you finance the purchase 00:21:38.839 --> 00:21:42.170 through the developer. And most people do. Interest 00:21:42.170 --> 00:21:45.670 rates on timeshares are notoriously high, often 00:21:45.670 --> 00:21:49.549 10 % to 18%. That alone destroys the value proposition 00:21:49.549 --> 00:21:52.390 right there. But the real killer is the depreciation 00:21:52.390 --> 00:21:55.470 cliff. How bad is it? It is catastrophic. A new 00:21:55.470 --> 00:21:58.190 car loses maybe 20 % of its value when you drive 00:21:58.190 --> 00:22:01.089 it off the lot. A timeshare can lose 50 % to 00:22:01.089 --> 00:22:04.089 90 % of its value the moment the rescission period 00:22:04.089 --> 00:22:08.069 ends. 90%. You mean I could pay $50 ,000 and 00:22:08.069 --> 00:22:10.740 the next week it's worth $5 ,000? In many cases, 00:22:10.799 --> 00:22:13.740 yes. If you look at eBay or timeshare resale 00:22:13.740 --> 00:22:15.839 sites, you will see people selling timeshares 00:22:15.839 --> 00:22:21.299 for $1. Literally $1. Why? Why would anyone sell 00:22:21.299 --> 00:22:23.960 something they paid $20 ,000, $30 ,000 for for 00:22:23.960 --> 00:22:27.180 $1? To get out of the maintenance fees. The asset 00:22:27.180 --> 00:22:30.900 has become a liability. The $1 is just the legal 00:22:30.900 --> 00:22:32.779 consideration for the contract. They just want 00:22:32.779 --> 00:22:36.240 the bleeding to stop. That is sobering. But surely 00:22:36.240 --> 00:22:38.390 there are exceptions. What about the big brands? 00:22:38.690 --> 00:22:41.309 There are rare exceptions. High demand weeks 00:22:41.309 --> 00:22:44.029 like Christmas in Aspen or ski season in prime 00:22:44.029 --> 00:22:47.170 locations or large penthouses and top tier brands 00:22:47.170 --> 00:22:49.869 like Disney or Marriott. They might hold some 00:22:49.869 --> 00:22:52.309 value. So Disney is different. Disney Vacation 00:22:52.309 --> 00:22:54.809 Club, for example, has a fairly robust resale 00:22:54.809 --> 00:22:56.990 market where you might get 50 to 60 percent of 00:22:56.990 --> 00:22:58.750 your money back, maybe more depending on when 00:22:58.750 --> 00:23:01.269 you bought. But that is the outlier, not the 00:23:01.269 --> 00:23:03.710 rule. Now, speaking of resale, this is where 00:23:03.710 --> 00:23:06.789 it gets really interesting. Let's say I'm smart. 00:23:07.259 --> 00:23:10.579 And I find a cheap timeshare on eBay, a Marriott 00:23:10.579 --> 00:23:13.440 for 500 bucks. Can I just buy it and I'm good 00:23:13.440 --> 00:23:16.799 to go? Maybe, but you have to get past the ROFR. 00:23:17.400 --> 00:23:20.039 ROFR. Another acronym. Right, a first refusal. 00:23:20.900 --> 00:23:24.859 This is a fascinating mechanism. Many major developers, 00:23:25.059 --> 00:23:28.789 Disney, Hilton, Marriott. Write a clause into 00:23:28.789 --> 00:23:30.630 the contract. It says that if you want to sell 00:23:30.630 --> 00:23:33.130 your timeshare to a third party, you must first 00:23:33.130 --> 00:23:35.089 send the contract to the developer. And they 00:23:35.089 --> 00:23:37.029 can say no. They can step in and match the price. 00:23:37.250 --> 00:23:39.390 So if you agree to sell your Disney points to 00:23:39.390 --> 00:23:42.029 me for $50 a point, which is way below the retail 00:23:42.029 --> 00:23:44.170 market. Disney can say no, wait. They can say 00:23:44.170 --> 00:23:46.990 no, we will buy it for $50 a point instead. And 00:23:46.990 --> 00:23:49.009 they take it. Why would they do that? Two reasons. 00:23:49.710 --> 00:23:52.970 One, to acquire inventory cheaply that they can 00:23:52.970 --> 00:23:55.710 then turn around and resell to a new buyer at 00:23:55.710 --> 00:23:58.799 full retail price. Two, and more importantly, 00:23:58.960 --> 00:24:02.839 to maintain a price floor. If people see timeshare 00:24:02.839 --> 00:24:05.880 selling for $1, it destroys the perception of 00:24:05.880 --> 00:24:07.920 value for the new buyers in the sales center. 00:24:08.400 --> 00:24:11.079 By scooping up the lowball offers, they keep 00:24:11.079 --> 00:24:13.839 the resale market artificially propped up. That 00:24:13.839 --> 00:24:17.119 is devious and brilliant. It is. If they exercise 00:24:17.119 --> 00:24:20.279 the ROFR, they become the owner, they pay the 00:24:20.279 --> 00:24:22.380 HOA fees to themselves, essentially, and they 00:24:22.380 --> 00:24:24.339 put it back on the shelf to sell for thousands 00:24:24.339 --> 00:24:27.019 more. What about other restrictions? I read about 00:24:27.019 --> 00:24:29.200 Holiday Inn Club Vacations having some strict 00:24:29.200 --> 00:24:32.380 rules for resale buyers. Yes, developers hate 00:24:32.380 --> 00:24:34.099 the resale market because it competes with them. 00:24:34.160 --> 00:24:36.420 It's that simple. So they penalize resale buyers. 00:24:36.779 --> 00:24:38.960 With Holiday Inn Club Vacations, for example, 00:24:39.059 --> 00:24:41.279 if you buy resale, you might lose the ability 00:24:41.279 --> 00:24:43.539 to use your points at other resorts. So you're 00:24:43.539 --> 00:24:46.140 stuck. You are locked into your home resort only. 00:24:46.460 --> 00:24:48.819 It significantly degrades the product you thought 00:24:48.819 --> 00:24:50.900 you were buying. So you buy a second -class version 00:24:50.900 --> 00:24:53.200 of the ownership. We have to talk about the scams. 00:24:53.730 --> 00:24:55.789 Because if there are people desperate to sell, 00:24:55.930 --> 00:24:58.230 there's sharks circling them. The exit industry. 00:24:58.740 --> 00:25:01.039 This is the dark underbelly of the whole thing. 00:25:01.240 --> 00:25:03.299 You have owners who are desperate to get out 00:25:03.299 --> 00:25:05.900 of their fees. They're often elderly on a fixed 00:25:05.900 --> 00:25:09.299 income. And scammers know this. How does it work? 00:25:09.460 --> 00:25:12.160 They cold call owners and say, we have a buyer 00:25:12.160 --> 00:25:15.619 for your unit. They are willing to pay $15 ,000. 00:25:15.700 --> 00:25:18.920 We just need you to wire us $2 ,000 for the closing 00:25:18.920 --> 00:25:22.180 cost staxis transfer fees. And the buyer doesn't 00:25:22.180 --> 00:25:23.980 exist. The buyer never exists. The money just 00:25:23.980 --> 00:25:26.920 vanishes into an offshore account. The notes 00:25:26.920 --> 00:25:30.859 mention a specific bust in Spain. Yes. In 2017, 00:25:31.140 --> 00:25:34.819 it was a huge case. Spanish police arrested 35 00:25:34.819 --> 00:25:37.880 people on the Costa del Sol. They had an operation 00:25:37.880 --> 00:25:40.740 that made an estimated 11 million pounds. That's 00:25:40.740 --> 00:25:43.640 pounds, so even more in dollars scamming 500 00:25:43.640 --> 00:25:46.380 victims. That's awful. It's a massive industry 00:25:46.380 --> 00:25:49.180 of fraud built on the despair of people trying 00:25:49.180 --> 00:25:52.869 to exit their contracts. It's tragic. So let's 00:25:52.869 --> 00:25:54.410 pivot to something that's supposed to be a benefit, 00:25:54.569 --> 00:25:57.569 the exchange. This is the dream they sell you 00:25:57.569 --> 00:26:00.349 in that room. Buy in Orlando, travel the world. 00:26:00.809 --> 00:26:03.049 How does the trading actually work with companies 00:26:03.049 --> 00:26:05.990 like RCI and Interval International? The concept 00:26:05.990 --> 00:26:08.109 is great. You deposit your week into the pot 00:26:08.109 --> 00:26:10.549 and you pull out a week somewhere else. RCI and 00:26:10.549 --> 00:26:13.289 two are the giants here. They have over 7000 00:26:13.289 --> 00:26:15.589 resorts combined in their networks. But it's 00:26:15.589 --> 00:26:18.160 not a straight one for one trade, is it? I can't 00:26:18.160 --> 00:26:20.259 just swap my week for any other week in the book. 00:26:20.380 --> 00:26:22.680 No, absolutely not. It's governed by trading 00:26:22.680 --> 00:26:25.500 power. It's pure supply and demand. Give us an 00:26:25.500 --> 00:26:27.500 example. Okay, take the example from the source 00:26:27.500 --> 00:26:30.960 text. Palm Springs, California. Beautiful place. 00:26:31.180 --> 00:26:34.900 But in July and August, it is over 110 degrees 00:26:34.900 --> 00:26:37.279 Fahrenheit. Brutally hot. It is brutally hot. 00:26:37.339 --> 00:26:39.740 If you own a week in Palm Springs in July... 00:26:40.029 --> 00:26:42.509 the trading power of that week is very, very 00:26:42.509 --> 00:26:46.150 low. No one is dying to swap their beachfront 00:26:46.150 --> 00:26:48.970 week in Hawaii for your week in the desert oven. 00:26:49.069 --> 00:26:50.970 So you can't trade a bad week for a good week. 00:26:51.109 --> 00:26:53.589 Right. You can't buy a cheap off -season week 00:26:53.589 --> 00:26:55.690 in a less desirable location and expect to trade 00:26:55.690 --> 00:26:58.289 it for Christmas in the Caribbean. Plus, you 00:26:58.289 --> 00:27:00.390 have to pay membership fees to RCI or two just 00:27:00.390 --> 00:27:02.589 to be in the system, and then you pay an exchange 00:27:02.589 --> 00:27:05.410 fee every time you successfully swap. It seems 00:27:05.410 --> 00:27:08.250 like the recurring theme here is fees on top 00:27:08.250 --> 00:27:11.029 of fees. That is the business model, plain and 00:27:11.029 --> 00:27:13.890 simple. So given all of this, the pressure sales, 00:27:14.130 --> 00:27:18.289 the fees, the complexity, the scams, what protections 00:27:18.289 --> 00:27:21.250 actually exist for the consumer, if I get swept 00:27:21.250 --> 00:27:23.430 up in the moment and sign a contract, am I just 00:27:23.430 --> 00:27:25.960 trapped forever? Thankfully, no. This is probably 00:27:25.960 --> 00:27:27.960 the most important legal concept for consumers 00:27:27.960 --> 00:27:30.779 to understand, the cooling off period. How does 00:27:30.779 --> 00:27:32.900 it work? In the U .S., the Federal Trade Commission 00:27:32.900 --> 00:27:35.779 mandates a cooling off period, and states have 00:27:35.779 --> 00:27:38.920 their own specific laws. In Florida, which is 00:27:38.920 --> 00:27:41.740 the hub of the industry, you have 10 days. 10 00:27:41.740 --> 00:27:44.299 calendar days from when I sign. Yes. You can 00:27:44.299 --> 00:27:46.319 cancel the contract for any reason or no reason 00:27:46.319 --> 00:27:48.559 at all within those 10 days and get a full refund. 00:27:48.740 --> 00:27:50.819 You usually have to do it in writing, certified 00:27:50.819 --> 00:27:53.440 mail, to prove you did it. But the salespeople 00:27:53.440 --> 00:27:56.079 know. this right, do they try to stop you? They 00:27:56.079 --> 00:27:59.200 do. A common trick, which is completely illegal 00:27:59.200 --> 00:28:02.279 but still happens, is the waiver. They might 00:28:02.279 --> 00:28:05.119 say, if you sign this waiver giving up your cancellation 00:28:05.119 --> 00:28:07.740 rights, we will knock another thousand dollars 00:28:07.740 --> 00:28:10.539 off the price. Is that legal? Can you sign away 00:28:10.539 --> 00:28:12.759 your rights like that? No. The source material 00:28:12.759 --> 00:28:15.200 is very clear on this. These waivers are not 00:28:15.200 --> 00:28:17.700 legally enforceable in the U .S. or Mexico. You 00:28:17.700 --> 00:28:20.420 cannot sign away your statutory right to a cooling 00:28:20.420 --> 00:28:22.740 off period. But they hope you don't know that. 00:28:22.839 --> 00:28:24.960 And what about Mexico? A lot of Americans buy 00:28:24.960 --> 00:28:27.740 there on vacation. Mexico actually has fairly 00:28:27.740 --> 00:28:30.900 robust regulations now, specifically a law called 00:28:30.900 --> 00:28:35.819 NOM 029 SCFI 2010. Kitchy name. Very kitschy. 00:28:35.859 --> 00:28:38.519 But it established important standards. It prohibits 00:28:38.519 --> 00:28:40.700 offering gifts without clearly specifying the 00:28:40.700 --> 00:28:42.680 real purpose. So they can't say come for a free 00:28:42.680 --> 00:28:44.839 breakfast without admitting it's a sales pitch. 00:28:45.019 --> 00:28:47.720 That's a big one. It is. It also protects privacy 00:28:47.720 --> 00:28:50.160 rights. And crucially, it sets penalties for 00:28:50.160 --> 00:28:53.539 noncompliance that can range from $50 up to $200 00:28:53.539 --> 00:28:56.460 ,000. So there is some teeth to the law, at least 00:28:56.460 --> 00:28:58.920 in theory. There is. But enforcement is always 00:28:58.920 --> 00:29:01.160 the challenge, especially across borders. So 00:29:01.160 --> 00:29:03.539 we've covered the history, the types, the sales, 00:29:03.720 --> 00:29:07.099 the scams, and the law. What does this all mean? 00:29:07.220 --> 00:29:10.259 How do we synthesize this whole complicated mess? 00:29:10.579 --> 00:29:12.779 It's a paradox. That's really the best way to 00:29:12.779 --> 00:29:16.400 describe it. On one hand, the product, the actual 00:29:16.400 --> 00:29:20.119 room, the kitchen, the resort pool is often great 00:29:20.119 --> 00:29:23.019 people have good vacations they do families love 00:29:23.019 --> 00:29:25.460 the vacations they take and it forces you to 00:29:25.460 --> 00:29:27.559 take a vacation every year which some people 00:29:27.559 --> 00:29:30.359 need right the forced relaxation argument exactly 00:29:30.359 --> 00:29:33.200 but the financial vehicle the timeshare contract 00:29:33.200 --> 00:29:36.759 itself is often terrible it is a depreciating 00:29:36.759 --> 00:29:39.900 asset with perpetual liabilities and a very very 00:29:39.900 --> 00:29:42.819 difficult exit the math lesson is key here it's 00:29:42.819 --> 00:29:45.069 not just the purchase price It's the liability 00:29:45.069 --> 00:29:46.869 of the maintenance fees for the rest of your 00:29:46.869 --> 00:29:49.109 life. That's the takeaway. You aren't just buying 00:29:49.109 --> 00:29:50.950 a vacation. You are buying a bill that comes 00:29:50.950 --> 00:29:53.190 every January for the rest of your life and for 00:29:53.190 --> 00:29:54.789 your children's lives if you leave it to them. 00:29:54.970 --> 00:29:58.490 So here is a final thought to chew on. We started 00:29:58.490 --> 00:30:00.349 with the story of the four families in Europe 00:30:00.349 --> 00:30:03.210 sharing a cottage based on trust. The original 00:30:03.210 --> 00:30:06.710 sharing economy before the term existed. Right. 00:30:06.769 --> 00:30:09.170 And now we live in the era of Airbnb and Vrbo, 00:30:09.250 --> 00:30:11.730 which is the modern digital version of... that 00:30:11.730 --> 00:30:14.650 exact concept. So where does the timeshare fit 00:30:14.650 --> 00:30:17.869 now? That is the provocative question, isn't 00:30:17.869 --> 00:30:20.609 it? The industry evolved from a model of trust 00:30:20.609 --> 00:30:23.750 to a model of complete mistrust, rigid contracts. 00:30:24.359 --> 00:30:27.420 strict regulations, aggressive sales and layers 00:30:27.420 --> 00:30:29.579 of consumer protection because nobody trusts 00:30:29.579 --> 00:30:32.720 anybody in the transaction. Yeah. So in a world 00:30:32.720 --> 00:30:34.859 where you can rent a villa in Tuscany on your 00:30:34.859 --> 00:30:37.460 phone in 30 seconds with no long term commitment, 00:30:37.759 --> 00:30:41.380 have timeshares become a legacy relic? Or does 00:30:41.380 --> 00:30:43.660 the guarantee of a standardized, high quality 00:30:43.660 --> 00:30:46.700 room from a brand like Marriott still hold value 00:30:46.700 --> 00:30:49.119 in a world of uncertain vacation rentals where 00:30:49.119 --> 00:30:51.119 the pictures might not match reality? It's the 00:30:51.119 --> 00:30:53.680 certainty versus flexibility debate. It is. And 00:30:53.680 --> 00:30:55.740 the price of that certainty is a lifetime of 00:30:55.740 --> 00:30:58.220 maintenance fees. Well, there you have it. If 00:30:58.220 --> 00:31:00.079 you were ever offered a free weekend in a luxury 00:31:00.079 --> 00:31:03.460 resort, just remember, read the fine print, check 00:31:03.460 --> 00:31:06.180 the resale market, and maybe, just maybe, keep 00:31:06.180 --> 00:31:08.339 your hands in your pockets. Thanks for listening 00:31:08.339 --> 00:31:09.700 to The Deep Dive. See you next time.