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Resort Time Share Owners Take a 'Bath' at Auction

February 24, 1985|DON G. CAMPBELL | Times Staff Writer

There's the story of the stock market novice who was called daily by his broker to "buy! buy! buy!" a particularly volatile issue.

The customer did, dutifully, as long as the price of the stock continued to rise.

Until, at length, the price started slipping, at which point the panicky speculator ordered his broker to "sell it all, right now!"

To which the broker smoothly responded: "Of course, if you wish. To whom?"

It was impossible not to recall this story on a recent sunny Sunday afternoon at the Los Angeles Convention Center where an estimated 300 to 400 bidders attended an unusual (perhaps first-ever) auction to bid on a commodity for which, until then, there had been virtually no market--oceans of would-be sellers, but a drought of visible buyers.

The commodity: slices of time in 97 vacation resorts sprawling all the way from London and Dublin on the east to Maui on the west.

It's an intangible, and almost unsalable, commodity that has been a major, unspoken, bugaboo of the otherwise booming resort time-share real estate market since its inception. Developers, anxious to sell weekly "units" in exotic vacation spots around the world, put heavy emphasis on the buyer's equity in the resort and his ability to "sell out, anytime you want."

To whom?

"It's always been pretty much hit-or-miss," according to Mario Collura of MDR Telecom, an international computerized time-share listing service based at Marina del Rey, sponsors of the auction. "The owner of a time share wanting to get rid of it really has very few options--maybe a local realtor will handle it but, more likely, he ends up advertising it himself or, occasionally, selling it back to the developer."

No matter, then, that at Collura's novel auction about 90% of the 75 units sold traded hands at prices 50%, or less than the seller had originally paid for it--a discount that Collura had anticipated, and had warned his sellers to expect.

And, while the average price of new time-share condos currently on the market and being offered by developers is about $7,000 per unit a week, Collura said, 75% of those changing hands at the recent auction sold for less than $4,000.

Ironically, that was also the average price prevailing--a minor distortion accounted for by a handful of prime properties (primarily in Hawaii) which, although selling at a sharp discount from their original offering price, nevertheless sold above the $4,000 average.

The prices, the Marina del Rey broker said, ranged from a low of $1,300 for a one-week "right-to-use" condominium on the beach at Cancun, Mexico, to a high of $16,550 ($5,516-a-week) for a three-week, prime-time condo in The Whaler resort at Lahaina on Hawaii's Maui. Hawaii, Mexico and Lake Tahoe attracted the most active bidding, Collura said.

Even though every seller at the auction was financially a loser in getting out from under the time share at a price sharply under the original purchase price, there was little bitterness. It was, instead, a sense of relief--as reflected by Dorothy Brantley of Walnut Creek after she and her husband, Lewis, sold their two one-week time shares in the Tahoe Waterfront Club at less than half their cost in 1981.

"We're just glad to be out of it," Dorothy Brantley said, gratefully. "It's a lovely place, well located, and well run, but we simply became disillusioned when it became apparent that it was a very poor investment. And we think that Mr. Collura is a fine gentlemen who's doing a valuable thing in providing a marketplace for these properties. It didn't work out for us, but we, at least, got something out of it."

Realtor-reluctance to get involved--even in the selling of conventional real estate in resort areas--is seen in the fact that most such listings command a premium commission, anywhere from 10% to 25% of the selling price for such property, Collura said. This is in contrast with the 6% or 7% levied on the average residential home sale, he added, because of the specialized audience to whom resort real estate appeals, and the equally specialized marketing involved.

And then double the complexity of that in trying to sell something as ethereal, and as unfamiliar to the average real estate broker, as a couple of weeks of exclusive use of one lone resort unit in a cluster of similar resorts located perhaps a full continent away from the potential buyer's home. And where the money involved, by real estate commission standards, is minuscule.

It's a tribute to the marketing zeal of time-share resort developers, and to the boundless optimism of American vacationers, that in spite of the near-impossibility of reselling time- share property, sales, nevertheless, have mushroomed six-fold world-wide in just eight short years--from an estimated 100,000 units in 1976 to about 600,000 at the end of last year.

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