Analyzing Journal Articles Essay

Although the appraisal of timeshare interests
presents unique valuation issues, the topic has
seldom been covered in the publications of the
appraisal profession.1
This article discusses the
following critical questions that arise in every
timeshare valuation assignment:
What is the nature of the timeshare property interest being appraised?
What guidance for appraising timeshares
is there in the standards of practice and
published professional literature of the
appraisal profession?
Do state laws require appraisals of timeshare
interests to only be performed by state
licensed real estate appraisers?
How does the definition of market value
or fair market value affect the timeshare
appraisal process and govern the selection
of the appropriate valuation method/
technique?
How does the purpose of the assignment and
the use to which the appraisal report will
be put affect the process for selection of
comparable sales?
What is the marketplace of buyers and sellers in which the particular timeshare interest being appraised would sell?
Is there a difference between the market
value of a timeshare interest being offered
by the developer of a timeshare property
and the market value of a timeshare interest being offered by current timeshare
Timeshares, Market Value,
and the Real Estate
Appraisal Process
by Richard J. Roddewig, MAI, and Charles T. Brigden, MAI
Abstract
This article explores five key issues in timeshare appraising that may be of greater significance than in other types of
residential or resort appraisals. First and foremost is identifying the nature of the timeshare interest being appraised
and determining whether that type of interest requires an appraisal license in the state where the timeshare resort is
located. The second issue is understanding the two-tiered marketplacethe primary marketplace involving sales by
resort developers and the secondary marketplace involving resales by those who previously bought directly from the
resort. Third, the appraiser has to understand how the central components of the definition of market value affect
the comparable sale prices that should be considered given the purpose of the assignment. Fourth, appraisers must
understand how to find reliable sources of sales data and properly utilize and adjust listings when closed sale prices
are not readily available. Fifth, appraisers should be cognizant of central issues associated with the appraisal of charitable donations of timeshare interests, a frequently used technique for the disposition of difficult-to-sell timeshares.
1. See, for example, Kathleen Conroy, Valuing the Timeshare Property (Chicago: American Institute of Real Estate Appraisers, 1981); Mark S.
Thompson and Eggert Dagbjartsson, Market Discounting of Partial Ownership Interests, The Appraisal Journal (October 1994): 535541;
Alan J. Ziobrowski and Brigitte J. Ziobrowski, Resort Timeshares as an Investment, The Appraisal Journal (October 1997): 371380; Edgar
B. Madsen, Timeshare Tax Assessment: Price Versus Market Value, The Appraisal Journal (January 1999): 16; and Atupele Powanga and
Luka Powanga, An Economic Analysis of a Timeshare Ownership, Journal of Retail and Leisure Property 7, no. 1 (January 2008): 6983.
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owners in the resale market involving timeshares at the same property?
How does the opportunity to trade weeks or
accumulate points in a timeshare resort network affect value and the valuation process?
How reliable are the various online sources
reporting sale prices for timeshare interests?
Is it appropriate to consider online listings
of timeshare interests for sale, and if so,
what are the data sources for the necessary
adjustments for the difference between list
price and sale price?
What are some of the special points to be
considered when appraising the charitable
donation of a timeshare interest?
The Timeshare Industry:
A Brief History
Over the past hundred years, the real estate
industry in the United States, in cooperation
with the legal profession, has devised a variety of
new ownership concepts in addition to fee simple title to meet the changing demands of the
marketplace for residential property. In the
1920s, cooperative apartment housing began to
be developed in New York City and in the ensuing decades the co-op concept spread slowly to a
few other cities, including Chicago and Miami.
For a variety of reasons, however, the co-op form
of ownership had only limited appeal in those
other markets. The condominium form of ownership, after the enactment of enabling legislation across the United States in the 1960s,
quickly surpassed the co-op as the preferred way
for someone living in a multiunit downtown
building to own a legal interest in their apartment. The high-rise condominium concept was
quickly extended to townhouse complexes and
later modified to apply to planned developments
and gated communities in which single-family
homes on individual lots are owned separately in
fee but the common areas surrounding the homes
and recreational and social amenities for the
homeowners are owned in common by an association of homeowners.
Another trend has been a steady rise in the
number of Americans owning second homes. In
1950, the US Census Bureau reported that only
2.3% of all housing units were in seasonal use,2
but by the turn of the twenty-first century,
about 6.0% of all homeowners and 8.0% of
those aged 65 to 74 owned a second home.3
Many
second-home purchasers only use their second
homes on weekends or during part of the year. In
the 1970s, the growing interest in owning a home
or condominium at a tourism destinationfor
use on only a few days or during a few weeks per
yearcombined with an oversupply of unsold
condominium projects in major vacation markets
led to the establishment of a solid marketplace for
the interval ownership, or timeshare, concept.
A 1981 publication of the American Institute
of Real Estate Appraisers summarized the early
history of the timeshare concept as follows:
The application of the timesharing concept to real estate
first appeared in resort areas of Europe during the
1960s. The concept was subsequently transplanted in
the beginning of the 1970s to the United States where
timesharing was initiated at several resort properties. By
1975, the timesharing of real estate was being offered
at some 70 properties within the country. At this writing,
the number of U.S. timeshare properties approximates
300 with a corresponding sales volume for 1980 estimated at $1 billion. Although timeshare projects exist
from Maine to Hawaii, to date the largest concentrations
of properties exist in New Hampshire, South Carolina,
Florida, Texas, Colorado, Utah and Hawaii.4
During those early years, timesharing was an
unregulated industry and marketing abuses by
some marred its reputation among consumers and
caused concern among reputable developers as to
the image of the developing industry. As a result, a
group of timeshare pioneers worked to establish
a legislative framework to protect consumers while
allowing legitimate developers to prosper. The
result was the creation of the American Land
Development Association, which in 1989 became
the American Resort Development Association
(ARDA). Members approved the Model Timeshare Act in 1983, establishing a foundation of
2. US Census Bureau, Historical Census of Housing Tables: Vacation Homes, http://bit.ly/2EQJbmr.
3. Peter Francese, The Coming Boom in Second-Home Ownership, AdAge (October 1, 2001), http://bit.ly/2HW6IEF.
4. Conroy, Valuing the Timeshare Property, 1.
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credibility from which ARDA has been able to
work with legislators and regulators on issues that
affect both developers and consumers. In the
1980s, ARDA established the Code of Ethics of
the American Resort Development Association,
which serves as an industry statement on ethical
sales practices. Every ARDA member must agree
to abide by this code as a condition of membership.
Marriott marked the entrance of major hospitality brands into the timeshare industry in 1984.
In response to consumer demand, fractional
interests and private residence clubs were introduced in the 1990s. As of 2017, there were over
1,500 timeshare resorts in the United States.5
Globally, there are more than 7,000 timeshare
resorts in 100 countries.
According to a study conducted by Ernst &
Young on behalf of the ARDA, the US timeshare industry in 2018 increased for the ninth
straight year, growing by nearly 7% from $9.6 billion in 2017 to $10.2 billion in 2018. (Exhibit 1)
The study reports that timeshare sales volume
over the 20142018 period increased by more
than 26%an average of 6% annually according
to the study.6
Types of Timeshare Interests and
the Major Industry Players
In 1974, RCI7
entered the industry as the first
exchange company; in 2018 it was purchased by
the Wyndham Worldwide hotel affiliation. In
1976, Interval International, another exchange
company, was founded in Miami; it was later purchased by Marriott Vacation Group in 2018.
Timeshare exchanges added a level of flexibility to timeshare vacations in terms of both
time and location. Another timeshare product
enhancement came in the form of the floating-time alternative, where owners were no
longer locked into a specific week and unit.
Next came the points program approach,
which added even more flexibility. This evolution in the timeshare industry has resulted in
the following five types of currently marketed
timeshare interests:
1. Deeded interests in specific weeks at specific
timeshare resorts
2. Deeded interests in floating weeks at specific
resorts or combination of resorts
3. Deeded interests in specific weeks or floating weeks at specific resorts or combination
of resorts that are accompanied by points
in specific vacation clubs
4. Deeded or nondeeded points-only interests
that can be utilized at various resorts in a
proprietary network or at resorts affiliated
with a specific vacation club system
5. for a specific week or series of weeks at resorts or
network of resorts
The Appraisal Profession and
Timeshare Valuation Methods
The first mention of timeshares in The Appraisal
of Real Estate is found in the eighth edition,
published in 1983. It included the following
discussion:
In recent years, a new real estate partial interest has
been marketed extensively, with reasonable success.
It is called timesharing, or interval ownership, and is
a variation of the condominium. Timesharing is the
sale of limited ownership interests in residential apartments or hotel rooms. The ownership is described
as limited because a purchaser receives a deed conveying title to the unit for a specific part of a year. For
Exhibit 1 US Timeshare Five-Year
Sales Trend, 20142018*
Sales ($ billions)
Year
2014 2014 2015 2015 2016 2016 2017 2017 2018 2018
7.9
8.7
9.2 9.6
10.2
*6% compounded annual growth rate
Source: ARDA/Ernst & Young
5. ARDA, Timeshare Industry in U.S. Sees Eighth Straight Year of Growth (June 12, 2018), http://bit.ly/2IgGjQH.
6. ARDA, Timeshare Industry in U.S. Sees Ninth Straight Year of Growth (June 4, 2019), http://bit.ly/2Id5aF0.
7. RCI, which originally stood for Resort Condominiums International, was founded as a timeshare membership exchange in Indianapolis
and opened offices in Mexico and the United Kingdom in its first few years of existence; http://bit.ly/2WmfyEo.
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example, a person might purchase the first two weeks
in July or the last two weeks in December.
Certain timeshare projects are marketed on the basis
of the right to use a specific unit for a particular time
interval. This form of timeshare equates to a long-term
lease on, for example, Unit 3-A for the last two weeks
in December for a period of 20 years. The purchaser
does not have an equity interest in the property, but,
in effect, has a leasehold interest for a specified
time. Other characteristics are similar to interval ownership timeshares…
Timeshare owners receive a title in fee that covers exclusive use of a specific apartment for the agreed-upon
interval, along with rights to use public spaces and common areas. The title is recordable and the interest is
mortgageable.8
The 1983 edition of The Appraisal of Real Estate
said only the following about the appropriate
method for the valuation of timeshare interests:
The valuation of such partial interests is accomplished
through sales comparison. Because the practice of timesharing is relatively new, an appraiser may not find comparable sales in certain areas. However, comparables
are abundant in resort and vacation areas. An appraiser
must give appropriate weight to (1) the time required
for sellout; (2) seasonal variations that affect sales; (3)
true costs, both direct and indirect, necessary to create
a facility that will command the price envisioned; and,
most important, (4) the element of competition.9
The obvious focus of that paragraph is the valuation of timeshare interests that are being offered
by the developer of a timeshare property. Note
the phrases time required for sellout and costs
necessary to create a facility are clearly references to the development process.
Two years prior to that first discussion of
timeshare interests in the eighth edition of The
Appraisal of Real Estate, the American Institute of
Real Estate Appraisers, the predecessor organization to the current Appraisal Institute, published
a booklet entitled Valuing the Timeshare Property.
10
Like the above-quoted language, the discussion
in that publication focused entirely on the developer market and offered no meaningful methodology for determining the value of a timeshare
interest in the resale market. Instead, and because
it was written during the early years of US timeshare development, it presented a method for
calculating or supporting a retail price for a timeshare interest from the perspective of a developer
and did not include a discussion of how to analyze resales of timeshare interests.
The Appraisal of Real Estate, fourteenth edition,
includes the same basic definition of a timeshare
interest as the eighth edition, but it adds the following language to reflect the industrys development of additional variations on the non-fee
timeshare concept:
The three types of non-fee timesharing are leasehold
interest, vacation license, and club membership. The
leasehold interest type of timesharing is essentially a
prepaid lease arrangement. A vacation license involves
the transfer of a license from the developer to the purchaser, giving the latter the right to use a given type of
unit for specified time periods over the life of the vacation license contract. In the club membership form of
ownership, timeshare patrons purchase memberships
for a specified number of years in a club that owns,
leases, or operates the timeshare property. The purchaser receives the right to use a particular type of unit
for a specified period during each year of membership.11
Surprisingly, the fourteenth edition of The
Appraisal of Real Estate does not include the language from the eighth edition related to the use of
the sales comparison approach. In fact, the fourteenth edition of The Appraisal of Real Estate says
nothing about the appropriate methods for determining the value of a timeshare interest. The
only statement related to valuation methodology
is as follows: There are two forms of timesharing,
and it is imperative that the appraiser distinguish
between them when appraising timeshare projects or analyzing timeshare comparables. 12
8. American Institute of Real Estate Appraisers, The Appraisal of Real Estate, 8th ed. (Chicago: AIREA, 1983), 543.
9. The Appraisal of Real Estate, 8th ed., 544.
10. Conroy, Valuing the Timeshare Property.
11. The Appraisal of Real Estate, 14th ed. (Chicago: Appraisal Institute, 2013), 86.
12. The Appraisal of Real Estate, 14th ed., 85.
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In addition to the above, the Appraisal Institutes literature on valuation of timeshares
includes three articles in The Appraisal Journal in
the 1990s. However, they do not offer meaningful
guidance on the proper methodology for determining the market value of a timeshare interest
after it is sold from a developer to a consumer.13
Timeshare Appraising and
State Licensing Requirements
Are timeshare interests real or personal property? The answer to that question is important
for those involved in the appraisal of timeshares. If the timeshare interest is real rather
than personal property, then the appraiser must
check laws and regulations in the state in which
the timeshare resort is located to determine
if an appraisal license is required to value a timeshare interest.
The laws and regulations related to the timeshare industry as well as laws and regulations
related to licensing of appraisers may contain relevant provisions. As noted, some timeshares are
deeded interests and some are nondeeded interests. However, the laws and regulations related to
the timeshare industry in some states do not
clearly explain whether a timeshare interest is to
be treated as a real or personal property interest
and do not clearly specify whether the appraisal of
a timeshare interest requires a real estate appraisal
license or not. As a result, an inquiry to state
licensing agencies may be necessary before undertaking a timeshare appraisal. The licensing agencies will confirm whether a license would be
required to appraise both deeded and right-to-use
or points-based timeshare interests.
Timeshares and the Definition
of Market Value
Central to every appraisal assignment to determine timeshare market value14 or fair market
value15 are the following requirements:
identification of the competitive market or
marketplace in which the real property interest would typically be marketed and sold;
determination of the most probable price
that would be obtained in that particular
competitive marketplace;
use of transaction prices between only well
informed or well advised 16 buyers and sellers who have reasonable knowledge of relevant facts; 17
use of transaction prices in which neither
party is under undue duress or compulsion to buy or sell; 18 and
utilization of prices that are not affected by
special financing or sales concessions.
In timeshare valuation assignments, all of these
requirements can play out in a fashion quite different from what is encountered by a typical valuation assignment of a hotel or condominium
interest in a resort location.
Identification of the Marketplace and
the Competitive Timeshare Market Segment
Generally accepted appraisal principles require a
real estate appraiser to identify the particular market in which the appraised property will sell. The
fourteenth edition of The Appraisal of Real Estate
defines a real estate market as a group of individuals
or firms that are in contact with one another for
13. See the previously cited 1997 article by Ziobrowski and Ziobrowski, Resort Timeshares as an Investment, and the 1999 article by Madsen,
Timeshare Tax Assessment, both of which eschew analysis of resale transactions of timeshare interests. Although the 1994 article by
Thompson and Dagbjartsson,Market Discounting of Partial Ownership Interests, does not specifically address timeshares, it highlights the
role of liquidity and the need for an active market; it states, For interests for which there have been numerous recent arms-length sales,
trading prices represent fair market values. When only limited trading occurs, care must be taken.
14. The Appraisal of Real Estate, fourteenth edition, states that the most widely accepted definition of market value is as follows: The most
probable price, as of a specified date, in cash, or in terms equivalent to cash, or in other precisely revealed terms, for which the specified
property rights should sell after reasonable exposure in a competitive market under all conditions requisite to a fair sale, with the buyer and
seller acting prudently, knowledgeably, and for self-interest, and assuming that neither is under undue duress. (page 58)
15. As explained later in this article, the term fair market value is used in the Treasury regulations applied by the Internal Revenue Service and
the Department of Justice in determining the value of charitable donations.
16. These words are used in the definition of market value utilized by federally regulated financial institutions making mortgage loans; see
12 CFR 34.42. The Uniform Appraisal Standards for Federal Land Acquisitions (UASFLA) applies the term reasonably knowledgeable to
buyers and sellers; see 4.2.1 UASFLA.
17. See 12 CFR 34.42 UASFLA.
18. See 12 CFR 34.42 UASFLA.
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the purpose of conducting real estate transactions;
it defines a submarket as a division of a total market that reflects the preferences of a particular set
of buyers and sellers. The text then says the following about delineation of a market and segmentation into submarkets for the same product:
Real estate markets are divided into categories based on
property types and their appeal to different market participants. The markets for various categories of real
estate are further divided into submarkets, which correspond to the preferences of buyers and sellers.
* * *
A market segment is delineated by identifying the market participants likely to be interested in the subject
real estate and the type of real estate product or service
it provides. Product disaggregation includes both the
subject property and competitive and complementary
properties. Thus, market analysis combines market segmentation and product disaggregation.19
The Appraisal of Real Estate, fourteenth edition,
emphasizes that an important step in the delineation of the market is an investigation of available substitute propertiesi.e., equally desirable
properties competing with the subject in its market area, which may be local, regional, national,
or international. (page 165)
There is a two-tiered market in the timeshare
industry: the original (primary) marketplace consisting of sales by resort developers/owners to
individual buyers, and the resale (secondary)
marketplace consisting of resales by individuals
who have purchased from the resort developers
(or in the secondary marketplace) to other individuals.20 The market participants and the process by which timeshare properties are sold are
quite different in each of those submarkets, as
discussed in more detail below.
The Treasury Regulations definition of fair
market valuewhich is important in appraisals of
charitable donations of timeshare interestsrecognizes that there are various market tiers (and
prices) for the same type of real property. Those
regulations recognize that the price (and therefore the value) obtained by someone in the ordinary course of a real estate business can be
different than the price/value obtained by someone not in the real property business.21
The Resort Owner (Primary) Marketplace. Most
major timeshare resorts have highly organized
marketing operations consisting of sales staff and
sophisticated marketing presentations targeted
to first-time buyers (often those renting a unit)
and previous buyers of timeshare interests at the
same or an affiliated resort. As an example, consider Diamond Resorts International, which
owns 99 timeshare resorts worldwide. A 2016
New York Times article22 reported that the majority of its sales are made either to first-time buyers
who attend one of its sales presentations at one of
its resorts or to existing owners of timeshare
interests, typically when they visit a resort either
by utilizing their own week or points, or by renting the week from the owner of the timeshare
interest or from the resort itself.23 According to
the New York Times article, in November of 2015
Diamond said that over the last 12 months it
had conducted about 221,000 tours at its 53 sales
offices around the world and that the company
says that 15.1 percent of tours result in sales.
Diamond Resorts International also stated that
60 percent of the companys sales came from
existing customers.
The Individual Owner Resale (Secondary) Marketplace. The timeshare primary marketplace
exists separate and apart from the marketplace
involving owners of timeshare interests seeking
to sell or dispose of their existing interests. While
some such timeshare owners may use the services
19. The Appraisal of Real Estate, 14th ed., 164.
20. It is possible to also identify at least two other strata within the secondary market: resales back to the resorts by individuals and resales
by recipients of timeshare donations. The motivations of sellers (and buyers) in each of those submarkets may be quite different from the
motivations of sellers and buyers in the primary market (resort developers) and the secondary market of individuals selling to individuals.
Another possible strata involves bulk purchases by timeshare holding companies that then rent out timeshares in a secondary rental market
not connected with the resort owner/resort management companies. In some cases, these bulk purchasers are affiliated with the resort/
owner management companies.
21. See 26 CFR 1.170A-1(b).
22. Gretchen Morgenson, The Timeshare Hard Sell Comes Roaring Back, New York Times, January 22, 2016, available at https://nyti.ms/2QP3sO2.
23. Most major timeshare resorts will offer an owners timeshare week(s) for rent to the general public and retain a portion of the rental fee in
exchange for providing that service.
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of the resort itself in an attempt to resell their
units,24 most individual owners of timeshare
interests do not resell their interests through the
resorts developers/operators. Instead, they sell
directly on the internet through sites such as the
Timeshare Users Group, Craigslist, or eBay, or
through timeshare resale brokers or websites that
charge either a brokerage or advertising/sales
commission fee and have highly organized marketing operations. Sometimes the brokerage
entities are affiliated with the particular resort at
which the timeshare is located.
The prices paid in this secondary market of
individual owner resales are significantly lower
than prices paid in the primary resort developer
marketplace, as discussed in detail below.
The Most Probable Price in the
Relevant Competitive Market
Because market value is the most probable
price that the property will bring in its distinctive
competitive submarket of buyers and sellers, the purpose of the assignmentand the use and user of
the appraisal reportis critical to the selection
of the sales transactions and comparables to be
considered and analyzed.
If the appraisal is for a potential seller/buyer
in the individual-to-individual timeshare resale
submarket, the appropriate sales to analyze as
potential comparables should not be the sales
between a timeshare resort owner/developer/
management company and those attending
sales presentations. Instead, only after-market
sales (resales) of the timeshare interests should
be considered.
Individuals wishing to resell their timeshare
interests after purchase from the resort owner
compete with other individuals who have also
previously purchased from the resort owner
that is the competitive marketplace for . An article on the
Money Talks News website said the following
about the two-tiered marketplace for timeshares:
Getting in? Easy. Getting out? Not so much.
The simple fact is that recovering even a fraction of your
money when selling a time-share can be nearly impossible. The reasons for this include an inactive secondary
market, high monthly maintenance fees, and a supply
that eclipses demand.
But when you boil it down, the real reason its hard to
sell a time-share is because most lose a huge chunk of
their value the instant theyre purchased.25
The Timeshare Users Group (TUG) is one of the
most important sources of information about
resales of timeshare interests. TUG has stated
the following about the difference between prices
in the primary resort owner marketplace and in
the secondary resale market:
With few exceptions, owners of timeshares purchased
from a developer can expect to take a beating on resale.
Although its not what you want to hear, most timeshares sell on the resale market for only 0% to 15% of
the price you likely initially paid to the developer when
you purchased. Shocked? Please believe it!
The key is to bury forever any thoughts that because
you paid (lets say) $12,000 for your week, someone
else will be willing to pay the same amount. They
might, if you were putting on the same glitzy sales
presentation that some high-pressure salesperson did
when you bought, including giving free incentives for
attending the presentation. But you dont have that
luxury. So do your homework and set the price at the
right level. It will sell.26
A New York Times article on the timeshare industry observed the following about the timeshare
secondary market:
Owners of timeshares in desirable resorts with unusual
attributes, like a private beach, can often sell their ownership interests on the secondary market. But in areas
24. See Resort Owners Coalition discussion at http://bit.ly/2KvcVZy.
25. Stacy Johnson, Ask Stacy: How Can I Get Out of My Timeshare without Being Robbed? Money Talks News (September 2, 2016),
http://bit.ly/2We54SB.
26. Timeshare Users Group (TUG), How to Sell Your Timeshare, http://bit.ly/2Z9fBAc.
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glutted with condos for sale or rent, selling a timeshare
can be almost impossible. In these cases, timeshare
ownership can become an almost perpetual liability. …
A recent search on eBay, for example, showed more
than 700 timeshare listings for sale. Many, from Pennsylvania to Hawaii to Florida, can be purchased for $1.27
Commentary in Money Talks News puts it as
follows:
Time-shares are a product thats often foisted on the
gullible with high-pressure sales tactics. And when its
time to sell, theres often no way to do it, especially
when theres a loan involved. Like a new car, timeshares depreciate radically the moment theyre purchased. But at least a car dealer will buy back the car at
some price. Buy a time-share at retail from a developer,
and odds are good youll be left twisting in the wind.28
However, some timeshare companies will offer to
buy back previously sold timeshare interests from
owners wishing to avoid the ongoing maintenance
or financing expenses associated with previously
purchased timeshare interests. As the New York
Times has reported, however, the prices paid in
the repurchase can be significantly lower than
the original purchase price and in some cases, the
timeshare interest must be relinquished with an
additional payment for maintenance costs.
This inventory-recapture model is industrywide and
allows companies to acquire units far more cheaply
than it costs to build properties or buy resorts. In a company presentation last November, Diamond said it typically pays $1,500 to the homeowners association to
take back a timeshare week. Then it sells the space for
an average of $27,434, it said.
Last year, the company introduced a relinquishment
option for members of its European resorts. If they
agree to pay two years of maintenance costs, they can
escape their obligations.29
The New York Times also reported that Diamonds
average timeshare transaction price in 2015 was
$21,700, up from $12,510 in 2012. However,
our research found that the average price was
only $422 in 1,876 individual-to-individual
secondary-market resales between January 2010
and August 2016 at three Diamond Resorts affiliated timeshare properties30 in Osceola County,
Florida, near Disney World. At three Diamond
Resortsaffiliated timeshare properties31 in Orange
County, also near Disney World, the average price
was $3,039 in 285 transactions that occurred
between October of 2008 and October of 2015.
Well-Informed, Well-Advised, and
Reasonably Knowledgeable Buyers
and the Timeshare Marketplace
A number of articles in The Appraisal Journal have
discussed the history and evolution of the definition of market value over the past five decades.
Those articles include helpful explanations of the
meaning of well informed and well advised buyers and sellers who are acting prudently and
knowledgeably. Three articles in particular help
explain the amount of knowledge that the typical knowledgeable buyer is assumed to have
under the definition of market value.
Harold Albritton in 1980 pointed out that the
definition of market value accepted by appraisers in
the 1950 edition of the Appraisal Terminology and
Handbook, published by the American Institute of
Real Estate Appraisers, stated that the purchaser
only had to have knowledge of all uses to which
it (the property) is adapted and for which it is
capable of being used. Knowledge of all information in the marketplace was not necessaryonly
knowledge of all uses for the property.32
Richard Marchitelli and Peter F. Korpacz in
1992 traced the history of the development of
the concept of market value in the appraisal
literature.33 They note the 1935 definition of
market value was the amount expressed in terms
27. Gretchen Morgenson, The Timeshare Hard Sell Comes Roaring Back, New York Times, January 22, 2016, https://nyti.ms/2QP3sO2.
28. Johnson, How Can I Get Out of My Timeshare? Money Talks News, http://bit.ly/2We54SB.
29. Morgenson, The Timeshare Hard Sell, New York Times.
30. The three resorts are Barefoot in the Keys, Polynesian Isles, and Mystic Dunes.
31. The three resorts are Grand Villas, Grand Beach Resort, and Cypress Pointe.
32. Harold D. Albritton, A Critique of the Prevailing Definition of Market Value, The Appraisal Journal (April 1980): 199205, 200.
33. Richard Marchitelli and Peter F. Korpacz, Market Value: The Elusive Standard, The Appraisal Journal (July 1992): 313322.
Timeshares, Market Value, and the Real Estate Appraisal Process
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of money which a purchaser would be justified in
paying for a property. 34 (Emphasis added) By
1975, however, the Institutes definition had
incorporated the concepts of typically motivated buyers and sellers, well informed or well
advised buyers and sellers, and buyers and sellers
acting prudently, (and) knowledgeably. 35 However, the 1975 definition created enormous controversy by introducing the postulate that market
value was also the highest price in terms of
money which a property will bring. When the
savings and loan industry collapsed in the early
1980s, lawmakers in Congress blamed it in part
on inflated appraisals based on estimates of the
highest price for which a property should sell. In
response, the appraisal profession by 1981 and
federal regulators by 1989 had restated the definition of market value as the most probable
price for which the appraised property will sell
in its particular competitive market.36
Determining the most probable price requires
a look at actual past market behavior. Probability
is based on analysis of actual prior buy/sell decisions by actual market participants in the particular market in which the property would sell.
The need to look to actual past actions of actual
buyers in the particular market in which the
property would sell was addressed in the 1984
award-winning Appraisal Journal article by Jared
Shlaes.37 Among Shlaess more significant and
relevant explanations of the meaning of market
value are the following:
An appraisers job is to make reasonable predictions
about the price obtainable for a specific property or properties, based on patterns of behavior observed in the market, the source of information on which all such
predictions are based This knowledge allows us to talk
about value in terms not of justice or ultimate truth but of
observable market behavior, making only one assumption: that the future will continue to follow the patterns
encountered in the past, an assumption for which humans
appear to be hard wired. (page 508, emphasis added)
Only sufficient knowledgenot full or complete
knowledgeto make a transactional decision a rational decision is expected of the typical buyer: They
(transactions) must be made by people whose behavior
is not aberrant, who are competent to do business and
have sufficient information to behave rationally in the
market. (page 509, emphasis added)
The fool in the market teaches us nothing about value,
only about foolishness. To be useful as market evidence
the price must reflect an exchange between two reasonably capable and informed beings. Strictly speaking, prudence is not required, at least not if the imprudent are
setting the prices Access to relevant information,
though, is essential. (page 513, emphasis added)
USPAP Advisory Opinion 22 (AO-22), related
to the Scope of Work Rule in the Uniform Standards of Professional Appraisal Practice, says the
following about the importance of understanding
the reasonable competition for the property
interest being appraised:
The knowledge referred to in a market value definition is knowledge about the property appraised, about
the market for that property, and about alternatives
available in the marketplace that the appraiser concludes
are reasonable competition for the property appraised.
An appraiser is expected to be at least as knowledgeable as the typical market participant is about the market for the type of property to be appraised. By
completing research and verification steps while performing the assignment, the appraiser is expected to
become as knowledgeable about the subject property
and its comparables as the typical market participants.38
34. American Institute of Real Estate Appraisers, Appraisal Terminology (Chicago: American Institute of Real Estate Appraisers, 1935), 55. This
early definition was used partly in response to the lack of a market for many kinds of properties during the Great Depression. Appraisers
often had to create hypothetical situations of a market in the absence of actual market transactions.
35. American Institute of Real Estate Appraisers and Society of Real Estate Appraisers, Appraisal Terminology (Chicago: American Institute of
Real Estate Appraisers and Society of Real Estate Appraisers, 1975), 137.
36. The Appraisal of Real Estate, 8th ed.
37. Jared Shlaes, The Market in Market Value, The Appraisal Journal (October 1984): 494518. Shlaes received the Robert H. Armstrong
Award for the years most outstanding contribution to The Appraisal Journal for this article.
38. Appraisal Standards Board, Advisory Opinion 22 in USPAP Advisory Opinions, 20182019 ed. (Washington, DC: Appraisal Foundation,
2018), Lines 121127.
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104 The Appraisal Journal Spring 2019 www.appraisalinstitute.org
As discussed above, there is a well-established
secondary marketplace of timeshare interests
bought and sold by individuals who previously
purchased from the resort owners, and those
prices are significantly lower than the prices paid
in the primary marketplace of purchasers from
resort owners. This gives rise to questions about
the buyers in the primary market. Are those who
buy in the primary market paying higher prices
because they do not have reasonable knowledge
of the relevant fact that they could purchase the
same timeshare interests in the secondary market
at a fraction of the price they pay the resort
owner? Why dont visitors to timeshare resorts
shop the secondary market rather than pay the
higher prices? Are those who buy directly from
resort developers and management companies
well informed and well advised if they pay the
higher prices? Are they acting prudently and
knowledgeably and in their best interest?
Many, if not most, first-time timeshare buyers
visiting a resort and attending a sales presentation
session sponsored by the resort developer or management company may not know that there is a
secondary marketplace in which they might be
able to buy a timeshare interest in a similar unit
for a similar week or weeks but at a fraction of the
price being asked by the resort developer. Or, if
they do know about the secondary market, they
may not want to take the time to explore that
market to obtain a lower price, or they may be
concerned about potential scams associated with
the resale market. These may be two answers to
the questions raised about the higher prices paid
by those who buy directly from the resort itself.
The answer to why primary marketplace buyers
pay more is not as simple as that, however,
because those who buy timeshares from resorts or
developers in the primary market may obtain a
number of perquisites and privileges that cannot
be transferred to future buyers and are not available from sellers in the resale market. This may
be the most important reason why buyers pay the
higher prices in the primary market rather than
explore the lower-priced secondary market.
For example, buyers from resort developers/
management companies in the primary marketplace are typically offered concession and financing packages that may include cash or resort
credits, packages of points in a vacation club system, or other inducements such as discounts on
meals or entertainment that are not available to
purchasers in the secondary market. The opportunity to put down a relatively small down payment to the resort owner and pay the balance
over time is a significant inducement to sales
that is not available in the secondary market.
Also, many of the larger timeshare resort systems
put a restriction on the resale of the points
obtained; purchase agreements increasingly state
that the points awarded to a buyer in the primary
market cannot be resold in the secondary market. Those who buy directly from the resort also
may receive additional items such as free membership in one of the exchange programs for a
year or more, or receive benefits at other hotels
or resorts within that system. TUG describes the
various inducements to purchasing from the
resort developers/management companies;39 its
guide, Timesharing 101A TUG Introduction
to Timesharing, states as follows:
Sometimes, developers include incentives with their
sales that you wont get in a resale. Bonus weeks (extra
exchange weeks) are provided for a set number of years
by some developers. Marriott sometimes credits purchasers with Marriott points that are good for hotel
stays. Fairfield has paid for lifetime RCI membership for
purchasers. In addition, some developers try to penalize buyers of resale units by not allowing them full
access to timeshare program features. For example,
Marriott does not allow purchasers of resale units to
participate in their program in which timeshare owners
can trade their weeks for Marriott Rewards points
(except for purchases from approved resellers).40
In addition, buyers in the primary market staying at the resort and/or attending a marketing
presentation get to inspect the property and
the particular unit in which they will have an
interest. Although buyers in the secondary
market may have already visited the particular
resort in which they are purchasing a unit, few
would take the time to revisit the resort and
39. All of these perquisites associated with sales in the primary timeshare marketplace may be items of personal property rather than real
property and are typically nontransferable, so they are not technically part of the valuation of a timeshare interest in the resale market.
Discussion of that issue is beyond the scope of this article.
40. Stephen J. Nelson, Timesharing 101An Introduction to Timeshares, Timeshare Users Group, http://bit.ly/2WillpF.
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inspect the particular unit in a secondary-market
transaction given the low resale market prices.
As can be seen, there may be good reasons
why buyers in the primary timeshare market are
willing to pay substantially higher prices than
buyers in the secondary market. So, the prices
paid in the primary marketplace cannot be
ignored when the appraisal assignment involves
the upfront valuation of a timeshare interest
being purchased directly from the resort developer or management company. The most probable price, and therefore the market value of the
interest sold in that competitive primary market
segment should be based on the prices obtained
in that submarket. But as explained below, it is
not correct to utilize primary market sale prices
when appraising timeshare interests marketed in
the resale secondary market.
Website Sources of Market Information
for Well-Informed Buyers and Sellers
in the Secondary Market
There are many internet resources with information about prices paid by well-informed buyers
and sellers in the secondary market.41 Four of the
most significant sources for prices paid in the are as follows:
Timeshare Users Group (TUG)
eBay and Craigslist
MyResortNetwork.com
RedWeek.com
These are widely recognized sources of information. The New York Times as well as the Wall
Street Journal and many other media sources have
mentioned these sources in articles about the differences between the timeshare resale market
and the resort owner market. For example, a
2008 New York Times story referenced the TUG
and eBay resale sites stating as follows:
Resales can be found on eBay and at the Timeshare
Users Group (www.tug2.net). The groups online forums
offer discussions on all aspects of timesharing, and its
reviews and ratings for more than 4,000 properties can
help you find one with good trading potential.42
Timeshare Users Group (TUG). The Timeshare
Users Group (TUG) is among the most important sources of information about prices paid by
well-informed and well-advised buyers and sellers of timeshares. The TUG homepage reports
that it was started more than twenty years ago
and has more than 50,000 registered users. 43
The TUG newsletter has 50,000 email subscribers. The membership fee is $15 per year.
TUG also has its own listing service. As of
September 2018, the TUG website had 1,897
current for sale ads for timeshares and it claimed
$22,791,992 in completed for sale ads. There
were also 95 ads by parties looking to buy timeshares and/or timeshare points, including interest
in buying points in many of the largest points programs. According to a representative of the Timeshare Users Group, since 2011 TUG has averaged
about 2,000 online for sale ads involving timeshare resales by individuals. TUG reports that at
least 50% of those offerings resulted in confirmed
completed resales to another private party.44
The TUG website includes many testimonials
from its members, such as the ones below.45
These users statements indicate the knowledge
and information that TUG can provide to both
buyers and sellers in the resale market.
TUG provided the most reliable info about the ins and
outs of timeshare ownership and the timeshare industry.
Youve saved us from making a horrible mistake with a
timeshare we were considering. Ive been telling others
who are interested in timeshare about your group, and
will continue to do so. Youre providing a much needed
service. Thank you!
Thanks for your organization and all the work you do! I
was finally able to unload my timeshare which had
become a complete drain on my resources. Your articles
helped a lot!!!
41. Of course, the most accurate source of information would be actual sales collected from among the sale prices published by county
recorder of deeds offices. That is possible to obtain online in some, but not all, counties in which there are timeshare resorts, as explained
later in this article.
42. Steve Bailey, Trading Places, New York Times, June 20, 2008, https://nyti.ms/2HWZkZq.
43. TUG information available at http://bit.ly/2K0fLGQ.
44. Source: Email correspondence dated October 19, 2016, with TUG administrator stating, TUG averages about 1,000 confirmed completed
resales a year since 2011 (i.e., those members that actually inform us they have successfully sold their timeshare).
45. TUG, Timeshare Owner Comments and Testimonials, https://tug2.net/comments.html.
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106 The Appraisal Journal Spring 2019 www.appraisalinstitute.org
eBay and Craigslist Timeshare Listings and Auctions. eBay has had an active resale market
involving timeshares. eBay indicates a timeshare
sale ad currently costs $70 to post and potentially
reaches 70 million eBay site users. As of September 2018, it reported the average auction time for
a timeshare sale was seven days. At that time
there were 759 timeshare listings on eBay, of
which 674 were being offered for sale via an auction process. The eBay timeshare listings contain
detailed information about the timeshare interest and the resort.
The Craigslist website consists of classified ads
throughout the world. According to the website,
more than 60 million people in the United States
alone use Craigslist each month.46 Users can buy
and sell timeshares through the website by
searching locally as well as by the location of
the timeshare. For example, a recent search for
the word timeshare under Vacation Rentals
in Orlando showed 134 results. The same search
under For Sale resulted in 13 current listings
ranging between $1.00 and $29,500. While current listings are shown, the website does not
track completed transactions.
MyResortNetwork.com. MyResortNetwork.com
is another important site for well-informed and
well-advised buyers and sellers of resale interests
in timeshare resorts. MyResortNetwork.com
characterizes itself as a timeshare owner network and it is a listing source for renting, selling
or buying timeshare interests. It states that it
actively markets the timeshares through websites, mailings, and advertisements and provides
the contact information for those interested in
listed timeshares.
MyResortNetwork.com does not charge a commission on sales and the advertising fee is quite
low$19.95 to $24.95 for a six-month for rent
listing and $34.95 for a six-month for sale ad.
The website states that it has an average of
600,000 visits a month with over two million
page views a month. The website includes a list
of timeshare owners on the website who have
been contacted within the past fourteen days.47
Another important feature of MyResortNetwork
.com is that it includes information on closed
sales resulting from ads on its website. It shows
the final listing price before the owner or broker
listing the ad sold the timeshare interest.48
Exhibit 2 shows the number of listings and
reported sales on the MyResortNetwork website,
as of October 17, 2018, for some of the most popular timeshare resort locations.
RedWeek.com. The RedWeek.com website
claims to have more visitors than any other
timeshare website and an audience of over
2.6 million travelers and timeshare owners. 49
Like MyResortNetwork.com, RedWeek.com is
primarily a do-it-yourself timeshare marketplace where owners advertise their timeshares
for rent and resale, and individuals contact them
directly to arrange a transaction. Much of its
activity seems to be in facilitating exchanges of
timeshare weeks.
RedWeek.com typically charges neither a fee
nor a commission for its services. Instead, users of
the website register and pay a feecurrently
$59.99 for a do-it-yourself listing, or $125 for a
posting in which the company helps with pricing
and verifying information. Unlike MyResortNetwork.com, RedWeek also offers what it calls fullservice resale, which consists of handling the
entire process: creating your posting; fielding
inquiries; and ensuring a smooth, legal transfer. It
46. http://www.craigslist.org/about/factsheet (accessed 2018, website subsequently revised).
47. https://www.myresortnetwork.com/about.htm.
48. MyResortNetwork.com offers Market Value Resort Information Reports by specific resort for $14.95 to help you price your unit right,
https://www.myresortnetwork.com/timeshare-appraisal/.
49. http://www.redweek..
Exhibit 2 MyResortNetwork.com
Timeshare Listings and Sales*
Location
Number
of Resorts
Current
MRN
Listings
MRN
Reported
Sold
Orlando 129 6,418 3,678
Las Vegas 38 1,656 1,397
Hawaii 129 672 5,371
South Carolina 136 340 1,960
*October 17, 2018
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charges a brokerage commission for full-service; if
the property sells, RedWeek receives a commission of $399 or 3% of the resale price. According
to the RedWeek website:
RedWeek.com is the largest online marketplace for
timeshares for sale, and has an A+ rating from the
Better Business Bureau. Owners post their timeshares
for sale here, and connect directly with travelers looking to buy. No middleman, and no tours. Ever.
[emphasis in original]
Consistent with this statement, the Better Business Bureau reports that RedWeek.com has been
BBB accredited since 2006. TUG users generally
agree that RedWeek.com is a reputable advertising
website. A review of listings of properties for sale
on the RedWeek.com site indicates they are generally at more realistic levels when compared to
actual prices paid in completed resale transactions.
Electronic Sales Data Available
from Public Records
In many local timeshare markets, detailed informationincluding names of grantor/grantee,
consideration paid, date of sale, and deed numberis available to the public either online or
through electronic downloading of the data. In
some counties, additional information (such as
the timeshare legal description, unit number,
week involved), is available Examples of counties where it is possible to download such data for
free or by purchase include the following:50
Florida: Broward County, Lake County,
Orange County, Osceola County,
Volusia County
Missouri: Taney County
Nevada: Clark County
New York: New York County (Manhattan)
South Carolina: Beaufort County,
Horry County
Tennessee: Sevier County
Virginia: James City County, York County
Wisconsin: Sauk County
The data can be readily sorted to differentiate
sales between buyers and sellers in the secondary market and primary market sales involving
the resort owner/developer/vacation club. For
example, the Manhattan database available on
ACRIS51 indicates sales data between individuals, including the names of buyer and seller,
price paid, date of sale, block and lot number,
deed type (i.e., timeshare deed, quitclaim, etc.),
and deed document number. By clicking on a
timeshare deed number in the ACRIS database,
the week and unit number also can be viewed.
Pitfalls in Use of Sales Comparison
Approach in Timeshare Appraisals
The appraisal of timeshares presents special circumstances as well as challenges in the application of the sales comparison approach. The
following are major pitfalls appraisers may
encounter in application of the sales comparison
approach in timeshare appraisals.
1. Difficulty in determining terms of sale and
incentives/perquisites included in sale prices
in the primary market.
2. Difficulty in making proper adjustments for
the difference between list price and sale
price in appraising timeshares in the secondary marketplace.
3. Difficulty in making proper adjustments for
the differences in prices paid for particular
weeks in various seasons of the year.52
4. Difficulty in determining the reliability of
listings and alleged sale prices shown on
websites when appraising timeshares in the
secondary marketplace.
50. Our research indicates that the three largest timeshare resort markets in the country in terms of numbers of timeshare resorts are Orange
County, Florida, encompassing Disney World and the Orlando metro area; Horry County, South Carolina, containing Myrtle Beach; and
Clark County, Nevada, in which Las Vegas is located. Orange County contains at least twenty-three timeshare resorts. The Horry County
area contains at least twenty-five timeshare resorts, and Clark County contains at least nineteen timeshare resorts.
51. The Automated City Register Information System (ACRIS) is the name of the free online search vehicle for recorded property interests,
including sales transactions, for boroughs of New York City. The site makes it possible to search property records from 1966 to the present.
52. Adjustments for differences in unit location, view, or design may be considered if the subject timeshare interest is tied to a particular unit
description. More typically, however, timeshare interests are largely traded irrespective of such differences, and the primary determinant of
price levels within a given timeshare resort property appears to be week or season dependent.
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108 The Appraisal Journal Spring 2019 www.appraisalinstitute.org
Determining Terms of Sales and Incentives
The Appraisal of Real Estate, fourteenth edition,
emphasizes the importance of making transactional adjustments to sale prices for real property
rights conveyed, financing terms, and conditions
of sale.53 As discussed earlier, in the primary market sales from resort developers/management
companies may include cash or resort credits,
packages of points in a vacation club system,
free membership for a number of years in an
exchange network, or other inducements such as
discounts on meals or entertainment or even
financing on a portion of the purchase price.
Obtaining information about the specific inducements that accompanied a particular sale may be
difficult to acquire from the resort itself and may
require contacting the individual timeshare purchaser in order to make proper adjustments.
Adjusting for Differences
between List Prices and Sale Prices
in the Secondary Market
The sales data available from the reliable sources
of secondary market data typically are only list
prices rather than sale prices. While The
Appraisal of Real Estate clearly states that list
prices can be used in the sales comparison process54 and that whenever possible, an appraiser
should gather information about properties
offered for sale, it warns that listings usually
reflect the upper limit of value 55 and also warns
that offers provide less reliable data than signed
contracts and completed sales. 56
Although listings can be used, the generally
accepted principles of the appraisal profession
clearly emphasize a preference for use of closed
sales when data for closed sales is available.57 When
listings are used, they must be properly adjusted
typically downward in active markets not affected
by recessionsto account for the difference
between asking prices and closed sale prices in the
marketplace in which the appraised property will
be sold. This is particularly important when there
is evidence of unrealistically high price-setting
activity in the secondary marketplace.
In some cases, analysis of listings is important to
understanding whether a market is trending up or
down, but they are typically not used as a substitute
for actual closed sales transactions. For example,
Fannie Maes Selling Guide states that at a minimum three closed comparables must be reported
in the sales comparison approach and, if listings
are used, they can only be used as supporting data,
if appropriate.58 The HUD FHA Reporting
Requirements for Appraisals in Declining Markets59 requires appraisers to adjust active listings
to reflect list to sales price ratios for the market.
Also, the standard Market Conditions Addendum form requires the appraiser to actually calculate the median comparable list price in the
market and compare it to the median comparable
sale price in order to arrive at a calculation of the
median sale price as a % of list price.60
Also of note in regard to use of listings is the
definition of market value used by federally
insured financial institutions when making mortgage loans. That market value definition includes
the statement that implicit in this definition is
the consummation of a sale as of a specified date
and the passing of title from seller to buyer. 61
This language implies that any listings used must
be adjusted through a market analysis of the
actual relationship between asking prices and
closed sale prices.
53. For a general discussion of this issue without any specific reference to timeshare sales, see, The Appraisal of Real Estate, 14th ed., 405412.
54. [I]n the sales comparison approach, the appraiser develops an opinion of value by analyzing closed sales, listings, or pending sales of
properties that are similar to the subject property. The Appraisal of Real Estate, 14th ed., 377.
55. The Appraisal of Real Estate, 14th ed., 118.
56. The Appraisal of Real Estate, 14th ed., 367.
57. Data from completed transactions is considered a very reliable value indicator. The Appraisal of Real Estate, 14th ed., 382.
58. Fannie Mae, Minimum Number of Comparable Sales, Selling Guide: Fannie Mae Single Family (Washington, DC: Fannie Mae, May 1,
2019), 579; to view the most recent Selling Guide go to http://bit.ly/2tUk9j7.
59. See HUD, Chap. 4, Property Valuations and Appraisals, Section 4155.2 4.9.c, Specific Requirements for Reporting Comparable Listings,
http://bit.ly/2Kxv49g.
60. Fannie Mae Form 100MC, Market Conditions Addendum to the Appraisal Report, http://bit.ly/Form1004MC.
61. Subpart C: Appraisalsdefinitions, 12 CFR 34.42(g), http://bit.ly/2Mw1AeD.
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Adjusting for Differences
between Weeks and Seasons
As mentioned earlier, some deeded interests are
in terms of specific weeks or in a limited set of
floating weeks. When appraising those specific
interests, or considering sales of other weeks to
use as comparables, care must be taken to adjust
properly for the week or group of weeks involved
in either the appraisal or the sale being analyzed.
Prices and values for weeks can vary one season
to another and even from one week to another
within the same season; for example, the week
between Christmas and New Years Day or the
weeks involving the Presidents Day, Memorial
Day, Independence Day, or Labor Day holidays
command higher prices.
Avoiding Listings and Alleged Sale Prices
from Unreliable Websites
The large pool of owners looking to resell their
timeshares has fostered the development of
numerous internet-based enterprises that offer to
help owners market their interests. The Federal
Trade Commission (FTC) has issued a warning to
users of timeshare listing websites. It cautions
potential sellers that many timeshare resale websites are considered scams that require someone
to pay a large upfront fee to sell a timeshare. The
solicitationeither by phone or on the website
itselfclaims the website has a strong track
record of sales and buyers waiting to purchase.
Too frequently, the FTC cautions, the website
may be a scam, the claimed listing or sale prices
are not achievable, the number of active buyers
they claim to be looking to purchase timeshares is
a hoax, and, as a result, the reseller may pay hundreds or even thousands of dollars in upfront or
monthly listing fees with no realistic chance of
making an actual sale.62 The FTC concludes its
warning with the following advice:
If you want an idea of the value of a timeshare that
youre interested in buying or selling, consider using a
timeshare appraisal service. The appraiser should be
licensed in the state where the service is located. Check
with the state to see if the license is current.
The principle problem with the use of these
sites is that the information provided is usually
listings, not transacted sale prices. Little or no
effort is made to adjust these listing prices to
indicators of actual sale prices, or to support such
adjustments using market-derived listing-to-saleprice ratios. A more fundamental problem is that
many of these website sources are based on
upfront fee-oriented business models. They may
encourage owners to list their timeshares at unrealistically high prices, over extended periods of
time, with little or no prospect that the timeshares will ever actually be sold.
Before relying on the data from those websites,
appraisers should review the websites marketing
premises and TUG information reporting any
problems experienced by actual customers.
Information from the Better Business Bureau or
state authorities should be checked to determine
whether these website businesses have used
questionable practices to generate fee revenues
from timeshare owners who had little hope of
selling their timeshares at the listed prices. Some
information about a few of these websites, as
reported by TUG members or the Better Business Bureau (BBB), is summarized below.63
SellMyTimeShareNow.com. The website SellMyTimeShareNow.com is operated by Sell My
Timeshare Now, LLC, based in Exeter, New
Hampshire. The company has stated that
SellMyTimeShareNow.com is the leading provider of
timeshare resale and rental services in the vacation
ownership industry. With over 4 million visits to its family of sites in 2013 (and over 3.3 million in the first three
quarters of 2014) SellMyTimeshareNow.com is the
worlds most active online marketplace for the purchase
and rental of timeshare interests. A subsidiary of Vacation Innovations, SellMyTimeshareNow, LLC, has been
helping to solve the shared ownership needs of owners
and non-owners alike since 2003.64
The SellMyTimeShareNow.com website includes
offerings of timeshares for sale and for rent by
individual timeshare owners. Its primary source of
62. FTC, Timeshares and Vacation Plans, http://bit.ly/2I2z1Bn. The FTC also offers cautions for potential timeshare buyers.
63. TUG BBS, Timeshare Users Group Online Discussion Forum, https://tugbbs.com/forums/index.php.
64. SellMyTimeshareNow.com Continues to Dominate the Secondary Market for Those Looking to Rent, Buy, or Sell Timeshare, Marketwired,
December 16, 2014, https://yhoo.it/2ZgutwV.
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110 The Appraisal Journal Spring 2019 www.appraisalinstitute.org
revenue appears to be the upfront fees collected by
individuals placing listings. According to posts in
the TUG users group forum, there appears to be
little motivation for the company to assist owners
in setting realistic listing prices. Individuals in the
TUG forum have commented as follows:65
Ads on their site run forever and do not have an expiration datethus they are able to boast a very large
number of ads.
One difference is SMTN charges $600$1,000 for the
ad which they are encouraged to pass on to the buyer
with pricing of the unit. They do a little hard sell about
how they show up first in searches, how eBay prices are
mostly scams and timeshares are worth closer to
3040% (even for off season no names) of what they
originally paid vs the pennies on the dollar approach. If
a unit has been sitting for 1 year or more and is still
available and the owner is still reachable, they are usually disillusioned and willing to deal.
REPUTABLE brokers take their commission out of the
proceeds of the sale/rentalnot up front.
[I]f you pay them upfront, why should they care if they
sell it or not?
[B]e aware that upfront fee companies often promise
they can sell your timeshare for FAR more than what
its actually going for on the resale marketjust to get
your business.
Most timeshares (except the very top resorts during
prime season) sell for 010% of original retail.
As for Sell My Timeshare Now, they are just a very
expensive listing service. If you want to list your TS
for much, much less, then use TUG, RedWeek,
MyResortNetwork, Craigslist, and/or E-Bay.
SellMyTimeShareNow.com also generates revenues from fees charged to individuals who buy or
rent in response to one of their ads. One TUG
user commented on the costs, stating:
The listing price was $5,500. This is what they quoted
me for closing:
Broker Fee: $1,500
Admin Fee: $195
RTU Fee: $429
With T/S transfer fee, all told closing was well over
$2,500.00 And to think they charge the seller an
upfront fee as well.66
Sell My Timeshare Now, LLC, has been subject
to direct complaints to the Better Business
Bureau (BBB):
According to BBB files this company has a pattern
of complaints that centers around the companys
advertising claims. Complainants allege they are guaranteed a time frame in which their timeshare will sell.
Many consumers allege the company makes a promise
that their timeshare will sell quickly. The company
responds to the complaints and reiterates the company
policy which reads the company does not guarantee
when a timeshare will sell.67
It is important to remember that this and other
sites with similar business models typically do not
offer listing prices that are grounded in the actual
transaction market.
BuyaTimeshare.com. BuyaTimeshare.com, based
in Tampa, Florida, describes itself as an internet
advertising and marketing company for timeshare owners who seek to sell or rent timeshare
by owner. 68 BuyaTimeshare.com has a business
65. TUG BBS, http://tugbbs.com/forums/.
66. TUG BBS, http://tugbbs.com/forums/.
67. Better Business Bureau (BBB), https://www.bbb.org/.
68. See About Buyatimeshares.com at http://bit.ly/2IkIyCy.
Timeshares, Market Value, and the Real Estate Appraisal Process
www.appraisalinstitute.org Spring 2019 The Appraisal Journal 111
model similar to SellMyTimeShareNow.com
and does not advise owners on realistic price
setting. BuyaTimeshare.coms terms of service
state that its goal is to create a marketplace that
efficiently serves the needs of both Sellers and
Buyers. It also states,
We do not warrant or guarantee any part of an actual
or potential transaction between a Seller and a Buyer,
including the quality, safety or legality of the timeshare
advertised, the truth or accuracy of the advertisement.
…
We are NOT a licensed real estate broker.We do
not provide Sellers or Buyers with any brokerage
services, including, but not limited to: appraising or
providing professional guidance regarding the value
of a timeshare;69
User complaints are similar in scope and nature
to those made about SellMyTimeShareNow.com.
Although the website touts its relationships with
the Better Business Bureau, the BBB reports that
the company is not accredited by it:
BBB files indicate that this business has a pattern of complaints concerning misrepresentation during the sales
presentation, specifically that the consumers timeshare
will sell within a certain time frame and misrepresenting
the type of services that are being provided.
On December 1, 2012, BBB contacted Buyatimeshare.
com requesting information as to why the business
believes the customers are filing the complaints, and
what actions the business has taken to help eliminate
the causes of complaints.70
TimesharesOnly.com. TimesharesOnly.com is
operated by Timeshares Only, LLC, located in
Orlando, Florida. It entered the resale marketplace in 1994 and describes itself as the largest
retail timeshare marketplace. Its business
model touts the integration of a timeshare
sales program with interim services to rent units
to generate income for the owner until they are
sold. The site encourages potential sellers and
buyers to become members of affiliates to realize additional benefits of the programs.
Commentary on the TUG website indicates
that TimesharesOnly.com is another upfront feebased program, with additional revenues generated by commissions sought from buyers who
express an interest in one of their listings. Timesharesonly.com is careful to note that the timeshares it lists only advertisements. 71
Timeshares Only, LLC, indicates an A+ rating
by the Better Business Bureau and a long affiliation by the owner with the ARDA as its former
chairman. However, the Central Florida Better
Business Bureau indicates that this business is
not BBB accredited; the site also notes eighteen
complaints from consumers over the past three
years, mostly related to advertising/sales issues or
problems with services.
TimesharesOnly.com is an upfront fee-oriented
operation. As a marketplace for advertising of
timeshares, it appears to make little effort to
assist potential sellers in setting a realistic, market-based asking prices in their listings. Many
listings remain on the site for many years without selling, suggesting the asking prices are not
representative of a market value.
Donation of Secondary-Market
Timeshares and the Role
of the Real Estate Appraiser
There are various ways in which real estate
appraisers may become involved in timeshare
appraisal assignments.72 Potential timeshare purchasers may ask appraisers to assist in determining an appropriate listing price. Owners of
timeshare interests who are interested in disposition may ask an appraiser to check on the credentials and claims about activity in the
secondary market of timeshare real estate agents
69. See Terms of Services at https://www.buyatimeshare.com/terms.asp.
70. BBB, http://bit.ly/2Ws532j; the BBB website indicates the company also does business under the website sellatimeshare.com.
71. The website reports that it is illegal in Florida for brokers to take upfront fees for listings and is careful to note that it is not acting as a
broker for the timeshare listings. See FAQ: Selling or Renting Your Timeshare, https://www.timesharesonly.com/faq.
72. LIA Administrators and Insurance Services and its legal counsel advise that timeshare interest valuations have posed legal liability and
disciplinary risk for appraisers. They further caution that actions by the Internal Revenue Service relating to penalty assessments or criminal
referrals may be outside the coverage provided by professional liability insurance policies.
Peer-Reviewed Article
112 The Appraisal Journal Spring 2019 www.appraisalinstitute.org
or websites. However, one of the most likely
assignments involves appraisal of timeshare
interests for charitable donations.
Many timeshare owners simply give away their
timeshare interests. A 2015 U.S. News and World
Report article commented on the donation
options as follows:
Give it away. RedWeek and TUG also provide the
option to list a timeshare youre willing to give away for
nothing. If you can find a taker, youll at least save
yourself the annual maintenance fees. You may find a
family member or friend who would like to use it. Dont
count on giving it to a charity. Most charities will not
accept timeshares.73
Despite the warning in the U.S. News and World
Report article that most charities will not accept
timeshares, there have been thousands of donations of timeshare interests in the United States.
A number of charities have set up programs to
accept donations of timeshares and thousands of
timeshare interests have been donated to charities in the past two decades.74
Appraisal assignments and qualified appraisal
reports by qualified appraisers involving the
fair market value of timeshare interests donated
to qualifying charitable organization are subject
to special Internal Revenue Service rules that
must be followed. Although this article does not
cover the detailed rules for complying with IRS
requirements for charitable donation appraisals,
previous articles in The Appraisal Journal 75 as well
as another Appraisal Institute publication76 cover
the topic in detail. However, when considering
the two-tiered timeshare marketplace, a number
of specific points need to be emphasized.
The first is that Internal Revenue Service regulations use the term fair market value rather than
the more usual term market value used in financing
appraisals. The Uniform Standards of Professional
Appraisal Practice (USPAP) require an appraiser
to use the definition appropriate to the purpose of
the assignment and the use of the appraisal report.
USPAP Advisory Opinion 22 (AO-22) states the
following about the requirement to use the appropriate definition of market value:
Importance of Identifying the Source of a Market
Value Definition. Definitions of market value from different sources contain different conditions. Those differences can directly affect the scope of work that is
necessary to develop credible assignment results. Each
definition is unique, with authority only in a specific
jurisdiction or to a specific client group. Therefore, identification of the source for the definition of value to be
applied in an assignment is essential.
The source must be consistent with the jurisdiction having authority over the transaction in which the appraisal
is to be used. For example, using a definition of market
value other than the definition specified in regulations
published pursuant to Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989
(FIRREA) may invalidate that appraisal for use in a federally related transaction. Likewise, if an appraisal is prepared for use in litigation, using a definition of value
other than the definition specified by the court having
jurisdiction over the matter being litigated may disqualify that appraisal for use in that court.77
73. Teresa Mears, How to Get Rid of Your Unwanted Timeshare, US News and World Report (June 25, 2015), available at http://bit.ly/31pGL7Q.
74. A 2009 online article identified a number of charities that at that time accepted charitable donations of timeshare interests. See RCI VIP,
Charities Accepting Timeshare Donations, http://bit.ly/RCIVIPdonations. One charity mentioned is Donate for a Cause, a highly publicized
charity involved in accepting donations of timeshare interests. During the past decade, Donate for a Cause was the subject of many news
stories advising timeshare owners about the advantages of donating unwanted timeshare interests. See, for example, David Cherry, Got an
Unwanted Timeshare? Help Is Available, AZFamily.com (CBS television Phoenix, AZ affiliate), posted December 10, 2012, available at
http://bit.ly/2Zkmija; and Deborah McNaughton, Cant Afford Your Timeshare? How to Dump It, Orange County Register, December 2,
2012, available at http://bit.ly/2HV2PiW. Donate for a Cause also was the subject of litigation by the US Department of Justice alleging an
abusive tax scheme that included deliberate overvaluation of the appraised values of 5,523 donated timeshare interests. See United States of
America v. Tarpey, D. Mont., September 28, 2016, where the US district court issued a final judgment and permanent injunction against Donate
for a Cause, prohibiting it from organizing or promoting any additional charitable donations; judgment available at http://bit.ly/2JXDtTS.
75. See, for example, Benjamin A. Blair, What Appraisers Need to Know about the Final IRS Regulations on Substantiation of Noncash
Charitable Deductions, The Appraisal Journal (Fall 2018): 254264.
76. See, for example, Richard J. Roddewig, Appraising Conservation and Historic Preservation Easements (Chicago: Appraisal Institute, 2011).
77. Appraisal Standards Board, Advisory Opinion 22 in USPAP Advisory Opinions, 20182019 ed., Lines 92101.
Timeshares, Market Value, and the Real Estate Appraisal Process
www.appraisalinstitute.org Spring 2019 The Appraisal Journal 113
While in most respects, fair market value and market value have essentially the same meaning, in
the Treasury regulations there is a significant
addition to the definition of fair market value that
has an important implication in timeshare valuation assignments involving charitable donations.
The main definition of fair market value set forth
in the Treasury regulations states as follows:
The price at which the property would change hands
between a willing buyer and a willing seller, neither
being under any compulsion to buy or to sell and both
having reasonable knowledge of relevant facts.
However, the regulations then go on to add the
following gloss on the definition:
If the contribution is made in property of a type
which the taxpayer sells in the course of his business,
the fair market value is the price which the taxpayer
would have received if he had sold the contributed
property in the usual market in which he customarily
sells, at the time and place of the contribution and,
in the case of a contribution of goods in quality, in
the quantity contributed.78
That section is very important to understanding the fundamental point that the same real
estate product can sell in two entirely different
marketplaces of buyers and sellers. It specifically
recognizes that there can be a business marketplacein the case of timeshares, the primary market consisting of sales by resort owners in their
ordinary course of businessthat is different from
other markets in which the same product may
sellin the case of individual timeshares, the secondary resale market involving those who previously bought in the primary marketplace.
While IRS estate tax regulations do not
necessarily govern charitable gift donations,
the following language in Estate Tax Regulation
20.2031-1(b) helps in understanding how there
can be various markets in which the same property interest can sell and the importance of using
sales from the appropriate market; it states, …nor
is the fair market value of an item of property to be
determined by the sale price of the item in a market other than that in which such item is most
commonly sold to the public, taking into account
the location of the item wherever appropriate.
Note that the Estate Tax Regulation cited
requires use of sale prices only in the market in
which such item is commonly sold to the public.
(emphasis added) When the appraisal assignment involves charitable donation of a timeshare interest by a participant in the secondary
timeshare market, the item being sold is a
timeshare interest held by an individual in the
secondary marketnot a timeshare interest sold
in the ordinary course of the primary timeshare
resort business industry.
Therefore, when appraising a charitable donation of a timeshare interest, it is important to use
sale prices from the appropriate market sector.
If the donor is the developer or management
company entity, prices paid in the primary market may be appropriate to use, assuming the
property interest donated would have all of the
associated perquisites that typically accompany
timeshare sales at that location and there is a current, active marketing program for that product
at the particular timeshare resort. When appraising for someone who has already purchased a
timeshare interest and who would be a reseller
in the secondary market, only sale prices paid in
that secondary market should be utilized.
Conclusion
The valuation of a timeshare interest raises special questions not found in the typical real estate
appraisal assignment. Special care must be taken
to understand the timeshare interest being
appraised and the particular marketplace in
which that interest would sell.
The timeshare market is two tieredthere is a
primary marketplace of higher-priced timeshare
interests sold directly to consumers by timeshare
resort developers or their management companies, and there is a secondary marketplace of significantly lower-priced timeshare transactions
between individuals. The appraiser must take
great care to match the sale prices used with the
78. 26 CFR 1.170A-1 (c)(2).
Peer-Reviewed Article
114 The Appraisal Journal Spring 2019 www.appraisalinstitute.org
intended use and user of the appraisal report.
Adjusting sale prices in the primary market to
account for the terms and conditions of sale, nonreal estate perquisites, and financing concessions
can be difficult when appraising interests that will
be sold in the primary marketplace. Adjusting for
the difference between list price and sale price
also can be problematical when appraising timeshare interests sold in the secondary marketplace.
Finally, when appraising timeshare interests for
possible charitable donation, Internal Revenue
Service regulations and definitions must be carefully followed, and when appraising for an individual rather than the resort developer, care must
be taken to use only sales from the secondary marketplace to support the appraisal.
About the Authors
Richard J. Roddewig, MAI, CRE, FRICS, is a managing director with JLL Valuation & Advisory Services LLC, a division
of Jones Lang LaSalle. Roddewig works nationally on complex real estate valuation assignments with a special focus on
expert appraisal testimony in litigation. He has authored, coauthored, or contributed to sixteen books, including a number
of books published by the Appraisal Institute, and has authored or coauthored more than sixty-five articles in professional
journals. He has an undergraduate degree in history and government from the University of Notre Dame and both a master of arts degree and a juris doctor degree from the University of Chicago. Contact: Richard. [email protected]
Charles T. Brigden, MAI, CRE, FRICS, is an executive vice president with JLL Valuation & Advisory Services LLC. He is
a licensed real estate appraiser in many states. Brigden holds the MAI designation from the Appraisal Institute, and he
currently chairs the Midwest Chapter of The Counselors of Real Estate. His appraisal practice focuses on the valuation
of properties actually or potentially affected by environmental contamination, conservation and preservation easements,
historic structures, and special-purpose properties. His published articles include A Pipeline Spill Revisited: How Long
Do Impacts on Home Prices Last? with Richard J. Roddewig and Anne S. Baxendale, published in The Appraisal
Journal (Winter 2018). Brigden has a bachelor of science degree in architecture and a master of science in real estate
from the University of Wisconsin. Contact: [email protected]
Additional Resources
Suggested by the Y. T. and Louise Lee Lum Library
Appraisal Institute
Lum Library External Resources Knowledge Base [Login Required]
Information FilesResidential properties, timeshare properties
American Resort Development Association
ARDA International Foundation Research Library
http://www.arda.org/researchlibrary/
Industry Information
http://www.arda.org/news-information/industryinformation/overview.aspx
Publications and Resources
http://www.arda.org/publications-resources/default.aspx
Internal Revenue Service
Determining the Value of Donated Property (Publication 561)
https://www.irs.gov/publications/p561
Timeshare Consumer Association

Reproduced with permission of copyright owner. Further reproduction
prohibited without permission.

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