Maximize Timeshare Ownership
The ultimate resource to understand, maximize and leverage timeshare ownership to travel in luxury accommodations on a reasonable budget.
The ultimate resource to understand, maximize and leverage timeshare ownership to travel in luxury accommodations on a reasonable budget.
Reader Question: What restrictions are there for resale purchasers when buying a Hyatt Residence Club timeshare on the resale market?
Navigating a timeshare purchase on the resale market can be tricky. Prices are not very transparent and there are plenty of timeshare sellers but there are definitely some that you should stay away from due to potential scams or lower quality expertise that may leave you with a purchase or bills that you didn't expect.
I keep promising a full timeshare resale guide and it is in the works but time has been difficult to obtain for the past few weeks but it will be here soon.
If you have read this blog before, you know that I recently purchased a second Hyatt Residence Club timeshare week.
I purchased a resale week since I predominately use my Hyatt Residence Club points for transferring to Interval International. I went through the various ins and outs of my purchase but a reader sent me a question inquiring about the potential restrictions on resale purchases.
If you have been to a timeshare presentation before, the salespeople tend to avoid any questions concerning resale and attempt to change the topic when these items come up. The price discrepancy between buying from the developer and buying resale is massive with potential savings of greater than 90% off developer pricing when buying resale.
Timeshare developers know this so they do a couple of things to persuade people to avoid purchasing resale.
When you purchase a resale timeshare, there could be past due maintenance fees, a loan associated with the week or pending special assessments. If you do know adequately inquire with the timeshare developer or main timeshare program, you could get stuck purchasing a week with a hefty amount of debt. This is why you NEED to obtain an estoppel certificate. You can read about it here.
The other major item that timeshare developers due to resale owners is create additional restrictions on the use of the timeshare. Vistana (Starwood brands) has some of the worst timeshare resale restrictions. If you purchase resale on the vast majority of their timeshare properties, you CANNOT trade internally with other Vistana timeshares. There are a few timeshares properties that DO come with this ability but this is a significant restriction that you need to be aware of before purchasing a Vistana timeshare on the resale market. Here is an overview of that program which details some of these items.
Hyatt Resale Restrictions
To finally get to the point of this post, I wanted to explain the resale restrictions that the Hyatt Residence Club implements to encourage you to purchase directly from the developer. For owners who purchase directly from the Hyatt Residence Club, you can exchange your week into World of Hyatt points where you can use those World of Hyatt points at various hotel properties throughout the world. Here are some details on how that aspect of the program works.
If you purchase resale, YOU DO NOT GET THAT ABILITY. The Hyatt Residence Club blocks resale owners from participating in that program and you cannot exchange your Hyatt Residence Club week or points into World of Hyatt points. You can only use your points to exchange internally to other Hyatt Residence Club properties or exchange through Interval International.
Additional Resale Restrictions on the Hyatt Residence Club
The inability to exchange into World of Hyatt points was the single restriction that the Hyatt Residence Club implemented for resale purchase for a long time. Resale owners still had the ability to exchange into other Hyatt properties at the same rates as developer sold weeks and had the same reservation Windows as developer sold weeks. Essentially, the only difference between a resale owner and a developer owner was the inability to exchange into World of Hyatt points. All other aspects of the program worked exactly the same.
The New Hyatt Portfolio Program
As you may know, Hyatt has recently rolled out a new program called the Hyatt Portfolio program. The program is different in that instead of owning a week which has a set amount of points allocated to that week, you purchase points. The more points you purchase equates into various different levels of ownership which provides better reservation windows or points banking capabilities. The details of the new program are here.
The issue with the new program is that the points, while being able to be resold, are subject to a right of first refusal (like the legacy weeks). However, I have been told but I have not confirmed this, that the points are subject to a set repurchase amount by Hyatt. In that case, Hyatt would be able to repurchase these points at a set price (likely a tremendous discount to the original purchase price) which would prevent the ability for a secondary market to develop since Hyatt would likely just scoop up the cheap points and resell them for top dollars.
In a long winded answer, the only restriction on purchasing a legacy Hyatt Residence Club timeshare week on the resale market is the inability to exchange into World of Hyatt points. Thats it! Everything else is exactly the same.
In my opinion, saving thousands of dollars makes this restriction completely bearable and in all honesty, the exchange rate for converting into World of Hyatt points is generally poor where even if I could exchange my weeks into World of Hyatt points, I WOULD NEVER DO SO.
The issue with many timeshares is that the rules change and evolve so there is always the risk that new restrictions can be implemented on resale purchases. All timeshares track this item so they will always know where you purchased it and how much you paid.
Existing timeshare owners are the easiest demographic to market the purchase of additional timeshare weeks or points so the big timeshare companies generally do not want to impose harsh restrictions on resale owners but they do want to impose some meaningful restrictions which can allow them to market owners the ability to purchase additional weeks directly from the developer and remarkably remove these "restriction".
There have been plenty of timeshare presentations where I have been given the opportunity to remove my resale designation IF I purchase another week directly from the developer. I have not been persuaded to do so as the inability to convert to World of Hyatt points is not significant enough for me to want to spend tens of thousands of more dollars for a developer week.
What do you think of this restriction? Would this prevent you from buying a timeshare on the resale market?
In my previous post, I explained what specific timeshares that I own and disclosed that I recently completed a resale purchase of a second timeshare at Hyatt Beach House in Key West, Florida.
I now own two weeks at the Hyatt Beach House. It seems strange to say that considering that I have never been to the Hyatt Beach House, have no tremendous desire to go, and did not actually target the Hyatt Beach House to purchase.
As explained in my previous post on my personal timeshare strategy, I bought a second timeshare because we travel a lot and I get tremendous value out of my original Hyatt timeshare week.
Since Hyatt's legacy program (they have switched to an all points systems called the Hyatt Portfolio program) is a hybrid system where you can use your week or exchange into points, I found that using points to exchange through Interval International can provide enormous value. As a result, I did want another Hyatt week but my only worry was the amount of points associated with that week and the amount of annual maintenance fees. With the legacy program being phased out, I wanted to get another legacy week before they became scarce.
The new Hyatt Portfolio Program has some perks but the offered price is extremely expensive. Since it is now a points system, resales point purchases will likely be very rare to find, especially at discounted prices. With this is mind, I do think that it is a great time to purchase a legacy Hyatt week.
Out of coincidence, I ended up with another Hyatt Beach House week. So far, my strategy has panned out and have some great trips already planned for 2019 and even 2020 with a bunch of requests pending.
While I am working on a complete guide to purchase a resale timeshare (I know that it is way overdue), I thought that I would provide you with the time table of what transpired with my purchase of my Hyatt week. As discussed, I ended up purchasing this unit through Sumday Vacations who used Greatway Services for their closings.
8/17/17: Payment was received
8/24/17: Title information received
8/31/17: Documents were signed
9/18/17: Closing documents for GreatWay sent
9/25/17: Closing documents for GreatWay signed
10/12/17: Received Power of Attorney for GreatWay
10/19/17: Right of First Refusal sent to Hyatt
11/9/17: Right of First Refusal decision from Hyatt, (ROFR did not apply)
11/22/17 Deed was sent to the County for Recording
12/20/17: Received recorded deed
12/22/17: Deed sent to Hyatt for the transfer of ownership.
Mid January: Access to Hyatt Residence Club website with the ability to make reservations.
As you can see from the times listed above, it took over 4 months for the purchase and transfer to go through. This was a long time. I have purchased resale timeshares before and this was longer than normal. However, in Sumday Vacation's defense, part of this delay was due to me.
During the purchase transaction, Hurricane Irma came through Florida and almost had a direct hit on Key West, directly where my new potential timeshare was located. Obviously, I was concerned with going through the purchase if (i) the resort was not going to actually be there and (ii) if the resort got extremely damaged which would result in either a special assessment (one time charge for extraordinary damage) or a significant increase in maintenance fees.
I was prepared to go through with the purchase ONLY if the previous owner would be responsible for any special assessments that were issued while they still owned the timeshare. I inquired about this issue and it took some various communications with the parties to determine how this would be handled.
Essentially, it was agreed that any assessments before January 1, 2018 would be the previous owners responsibility and anything thereafter would be mine.
I was definitely concerned about this but did reach out to the Hyatt Residence Club directly and the resort. While the resort did close for a month or so, the damage was fairly minimal and they did not anticipate any major renovations. With that confirmation, I went forward with the purchase understanding the potential risks.
The time table for this particular timeshare resale purchase was longer than normal but I would expect that a typical timeshare resale purchase should take about 60 days. For Hyatt purchases, they have the Right of First Refusal which takes approximately 30 days and the other documents and processes should only take a few weeks.
How long have your timeshare purchases taken?
As I mentioned in this recent post, I just purchased a second Hyatt timeshare at the Hyatt Beach House. In that post, I went through some details on what I own and why I made those choices.
As I mentioned in that post, the Hyatt timeshare that I purchased ended up being the second one that I tried to purchase since Hyatt exercised its right of first refusal.
What is a Right of First Refusal?
For those of you who don't know, a right of first refusal gives the timeshare company the right to purchase your timeshare before you can sell it to a third party. There are various reasons on why most timeshare include a right of first refusal but the one most generally used by salesmen are that it keeps resale prices up since anything that will potentially be sold for a significant discount will not pass the right of first refusal and the timeshare company will purchase it back.
There is some "truth" to that statement but I think that the general reason that most timeshares have the right of first refusal is so that the timeshare companies can essentially control the resale market. I can dig into this more in other posts but for this post, I wanted to explain what I learned during my process.
My Attempted Purchase
My strategy is to always make a low ball offer for any timeshare. You may lose some but you can end up purchasing one for a tremendous discount from "retail" pricing.
The first Hyatt timeshare that I attempted to purchase was listed on Discount Timeshares. I found a low priced week that equated into 2000 Hyatt Residence Club points and contacted them to make an offer.
I ended up making a low ball offer of $50.00 for this particular timeshare and after some back and forth, the seller agreed on this price. The going rate for a similar week on eBay was somewhere around $2,000-$4,000 so I thought I got a great deal.
In a separate post, I will put together a complete guide to purchasing a timeshare on the resale market. As part of the process, the seller or its broker, must submit paperwork to Hyatt which details the terms and conditions of the purchase and the price for the week.
Hyatt Resale / Transfer Procedures:
Once Hyatt receives this paperwork, they have 30 days (15 for the Grand Aspen and Kaanapali) to inform you of their decision.
Here are the specific transfer instruction provided by Hyatt:
If you decide to sell your interval on your own or through a resale company, please follow these three easy steps:
For this particular purchase, while the purchase price was $50.00, I was obligated to pay for the transfer fee and the closing costs. The total out of pocket cost for me was about $1,200. When Discount Timeshares submitted paperwork to Hyatt, they indicated that the purchase price was $50.00. This was accurate but as described below could have been structured in a more favorable way to benefit both the buyer and seller.
After around 30 days, I was informed that Hyatt DID exercise their right of first refusal and Hyatt succeeded in buying this timeshare out from under me for a purchase price of $50. Hyatt will likely now include this week in their new Portfolio Program.
The seller of the timeshare probably did not care either way as he or she was successful in selling the timeshare and getting out of the annual obligation to pay for the maintenance fees.
For me though, it was disappointing as $50.00 or $1,200 (when including the fees) for this week was a very good price. Once this occurred, I began my search for an alternative week.
As I mentioned in my other post, upon trying to make additional offers for similar timeshares, the representative from Discount Timeshares refused to remit my low offer to a seller despite being obligated to remit ALL offers.
Since Discount Timeshares receives a commission for their sales based on the purchase price, I believe that they refused to do so in an effort to increase their own commissions despite it not being in the best interest of the seller who can make their own decision on whether the offered price was satisfactory or whether they should hold out for better offers.
As a result of this experience with Discount Timeshares, I would NOT recommend them for future purchases.
What I Learned in this Process:
For Hyatt resales, my understanding is that they have some formula or metrics in which they determine what weeks / resorts to repurchase. They will not disclose these items.
For me, when I attempted to purchase an alternative Hyatt week (which I succeeded), my strategy was to attempt to increase the submitted purchase price as high as possible while still having a low purchase price.
For my second attempt, my offer of $2,000 was significantly higher than the original $50.00 attempted purchase but unlike my first offer, I had the seller be responsible for the transfer fee ($650) and the closing costs ($500). Additionally, as part of the offer, I indicated that I would pay for maintenance fees that had not been paid for the current year ($1250) and would be responsible for one additional year of maintenance fees ($1250).
Therefore, when they submitted the purchase price for this week, they indicated that the purchase price was approximately $4500 instead of the $2000 that I paid since I indicated that I would pay the current year and future year maintenance fees.
The reason to structure this in this manner was if Hyatt exercised their right of first refusal for this week, they would have to pay the seller $4500 as this was technically my offer even though it was somewhat disguised through transfer fees, closing costs, reimbursement of maintenance fees (past and future).
Therefore, to compare my first attempted purchase to the second attempted purchase, my original offer price was $50 versus about $850 - definitely higher but not transparent as offering a set amount and having the buyer be responsible for various fees.
From this experience, if you need to submit a purchase price where a timeshare company has a right of first refusal, I would try to have the purchase price be as high as possible by having the seller be responsible for all the various ancillary fees (transfer fees, closing costs, recording fees, existing maintenance fees, etc.).
By presenting the purchase price as high of possible by including the fees and by indicating the obligation to pay maintenance fees in advance, you can present a legitimate purchase price to the timeshare company at a price point where there is less risk to them exercising the right of first refusal.
In most resale transactions, the timeshare company probably does not have to pay itself any transfer fee and probably has little to no expenses for closing costs. If the buyer is responsible for these fees, they cannot include it in the purchase price.
The obligation to reimburse the seller or the obligation to submit the maintenance fees for the current or future years will be the buyers responsibility in almost all cases but you can include them in the purchase price submission so that the timeshare company would be obligated to remit them to the seller if they exercised their right of first refusal.
By structuring a purchase price in this fashion, there is less risk of the timeshare company from exercising their right of first refusal and this structure can even benefit the seller as if the timeshare company actually exercises their right of first refusal, they would receive more funds than if the right of first refusal was not exercised.
Overall, I think that this can be a win-win strategy for a buyer and seller and decreases the odds of the timeshare company from exercising their right of first refusal.
What do you think of this strategy? Have you lost any timeshare purchases to a right of first refusal? Leave your comments below!