Why Many Timeshare Closing
Companies are giving the
Timeshare Resale Industry a Bad Name
By James P. Tarpey, Esq.
Resort Closings, Inc. Owner and Legal Counsel
If you've been on the web you may have seen the advertisement "Complete Timeshare Closings Services $225.00" or $250.00 or some other "cut rate" price. Well, the real truth of the matter is that there is nothing "Complete" about this service. Anyone who has been through a "real" real estate closing is aware that the closing company does a title search on the property and issues Title Insurance to ensure that the buyer is purchasing property that is free and clear of any liens. That is a "Complete" closing.
The "problem" with your average timeshare closing company is that they are advertising and instructing people that they are providing a "Complete" real estate closing without a title search or title insurance. This is not "Complete" if you compare it to the tradition of real estate closings.
When purchasing any real estate you should realize what title insurance affords you so you also know what you are not getting when you opt not to purchase it. Title Insurance is an insurance policy issued by a title company after searching the title, representing the state of that title and insuring the accuracy of its search against claims of title defects. In short, it means that they will tell you about any liens on the property that their title search has uncovered and will insure against any liens they did not find. When you purchase title insurance you really aren't paying for the insurance policy but rather you are purchasing the preliminary title report. The preliminary title report is issued after the title search is complete and before the policy is issued. The report lists the liens that were found against that property. After reviewing this report and seeing the liens against the property the buyer can decide if they want to proceed with the purchase. A lien is "a claim, encumbrance, or charge on property for payment of some debt, obligation or duty."1 The most common liens are outstanding mortgages but may include delinquent taxes, legal judgments etc.
Thousands of timeshares are now being transferred every month from one owner to another without a title search ever being conducted. I wonder how many people have bought a timeshare on the resale market, contacted one of the many timeshare closings companies, paid for what they thought was a "Complete Closings" and currently own a timeshare with outstanding taxes, the seller's unpaid mortgage or some other type of lien and have no idea this lien exists?
So, is Title Insurance Necessary on Every Closing?
Although getting title insurance is the safest way to purchase real estate, there are circumstances where Title Insurance may not be necessary. I have been doing Timeshare Closings for the past 8 years. Roughly, about 25% of the closings I have performed have been for $2,500.00 or less. If you are buying a timeshare for $2,500.00 or less and the previous owner has owned this timeshare for at least 5 years you are probably safe to purchase this property without title insurance IF you use a reputable closing company that will thoroughly research the use and account status of this timeshare. In addition, you must use a closing company that will confirm that the property taxes have been paid on that timeshare. When you see a company advertising a "Complete Closing" for $250 (or less), I would not recommend you use that service. What you will be getting is a company who will collect the buyer's money and record a deed into the buyer's name. They do not even perform the most basic account and usage research regarding that timeshare and they certainly will not find out if the taxes are current on that property.
A basic account and usage research should include contacting the resort and insuring; 1) the seller's own the timeshare, 2) the size and usage of that timeshare, 3) the maintenance fees have been paid, 4) has any of the usage been banked with an exchange company, 5) is there a mortgage on the property, 6) have the taxes been paid and 6) what are the proper steps to transfer ownership. If you are buying a timeshare for $2,500.00 or less you may want to consider this level of closing service which you can get for approximately $400.00. But be careful many companies claim to do an "Estoppel Request" or an "Account Research" but they do not research whether the taxes have been paid. This is one of the most common liens I find when I research properties and you should never buy a timeshare without determining whether the taxes have been paid.
Best of luck and enjoy your vacation.