David and Cindy MacMillan never imagined their nightmarish experience with a $17,000 Las Vegas time-share would lead to an entrepreneurial jackpot.
After attending a 90-minute sales presentation, the Rancho Palos Verdes couple bought the condominium in 1999 thinking it would be perfect for family vacations, but instead it became a huge headache.
The resort unit was not available when they could use it, fees kept rising and when they wanted to get rid of it several years later, they struggled to find buyers.
“The time-share industry tells you it’s so easy (to sell it),” said Cindy MacMillan. “We didn’t use it, and we thought, ‘Why are we paying for something we aren’t using?’”
Ultimately, they ended up getting rid of their condo by paying a company to take over the title, and in the process decided to start a company helping owners unload unwanted time-shares.
The result was Timeshare Relief Inc. The company is based on a simple concept: For a fee that amounts to about $3,000 for a typical time-share, the company takes a property off an owner’s hands, including legal title. The business has proved a hit in a time when the time-share industry has gone through a similar boom and bust as the larger real estate market.
The company was among the Business Journal’s Fastest Growing Private companies this year, reaching No. 33 on the list after making No. 30 last year. Between 2007 and 2009, Timeshare Relief doubled its revenue to $45.8 million; the 160-employee corporation is poised to hit the $100 million mark next year, David MacMillan said.
However, with the fast growth have come problems. The company was accused of not following consumer protection laws in Vermont in its marketing presentations and sales agreements. Moreover, its practice of charging up-front fees has irked industry critics.
“I don’t think anybody should ever have to pay money to sell their time-share interest,” said Howard Nusbaum, president of the American Resort Development Association, a resort developer’s trade group based in Washington, D.C. “To me, their business model is preying on some of the weaknesses that are out there … in the secondary market. I believe the rescue business model is not sustainable.”
Can’t give it away
Ideally, a time-share owner who wants to get rid of a unit that might cost $10,000 or more should be able to sell it on the open market. However, the MacMillans said they knew lots of people were having trouble selling when they held their first marketing event at the Long Beach Marriott about six years ago.
Like the MacMillans, the owners couldn’t sell, cancel or give away their time-share stake. Some had even listed their condos on eBay for $1 and couldn’t find takers – since taking legal title also means assuming annual maintenance fees that can top $1,000.
“People had the same story we had; they experienced the same thing we had,” said Cindy MacMillan, who resigned her job as a school psychologist to focus on the business.
The couple decided to work with title transfer companies to unload unwanted condos. The companies, for a fee, assume time-share titles and then dispose of them in bulk. Some are transferred to travel companies who use them as part of vacation packages. Others are transferred to companies for corporate use. One such company transferred the MacMillans’ condo.
However, the title transfer business has a checkered history. Some companies have been accused of fraud or not carrying through on that pledge, leaving owners in arrears on mounting maintenance fees. In a recent case brought by the Florida attorney general and Federal Trade Commission, time-share marketing companies were accused of misleading clients. In one case, they allegedly moved unwanted time-share deeds into newly created corporations that were dissolved, damaging the customers’ credit. In other cases, they allegedly took the money and disappeared.
The MacMillans said they researched title transfer companies and decided to partner with six they decided were trustworthy, though the couple will not name them nor discuss the details of their financial relationship.
In addition, Timeshare Relief deals with another thorny issue that has plagued the title transfer process: who is responsible for any maintenance fees until the title transfer is completed. The company assumes responsibility for all such fees, as well as any transfer fees, as part of its service.
One of the couple’s first big expenses, which was put on a credit card, was to purchase a list of 30,000 time-share owners who they pursued with direct mail to get some of their first customers.
“It was very scary. It was a leap of faith, and we’re very lucky it worked out because I don’t know where we’d be if it hadn’t,” said David MacMillan, who retired early from his research and development job with Honeywell International Inc., a Morristown, N.J.-based manufacturing company.
Marketing continues to be a big expense. Timeshare Relief has scores of sales agents traveling across the nation hosting presentations, making pitches and finding customers.
It also spent $14 million last year to unload the time-shares of its customers, including paying customer time-share fees and paying its title transfer partners, in some cases, to assume legal ownership of the time-shares.
Growing pains
Marilyn White, 66, an Inglewood resident, had lost money with Timeshare Relief competitors when she previously tried to sell her time-share in Hilton Head, S.C. The fees kept coming.
“They understood the human side of being trapped in a time-share, and that was just, oh, man, you can’t put a price on that,” White said. “I figured, they are showing me, step by step, what they’re doing for me. When that thing was finished, I never felt more relief in my entire life.”
Timeshare Relief has not escaped all of the legal troubles that have plagued the industry.
Last summer, the company settled with the Vermont attorney general and agreed to pay a $50,000 fee and up to $84,000 to 28 customers who were not notified of their right to cancel their transaction within 10 business days.
In court documents, Assistant Attorney General Elliot Burg argued the company’s direct mail and elements in their marketing presentations were fraudulent, and the company lacked certain paperwork required under Vermont law. The problems were said to have occurred between 2007 and 2010. Burg did not return requests for comment.
The company has hired a former Illinois deputy attorney general and added another employee whose function is to travel to all 50 states and ensure Timeshare Relief policies and practices are compliant with all state and federal laws.
However, the problems have opened up Timeshare Relief to the same criticisms that time-share sellers have received: that their clients have been subjected to high-pressure sales tactics to sign contracts, in this case to unload their time-shares.
“That’s how they’re taking time-shares from people and getting $4,000 for doing it,” said Ed Hastry, president of the National Timeshare Owners Association, a non-profit advocacy group.
The MacMillans bristle at such criticism and say their problems stemmed from their desire to grow fast amid competition from fraudulent competitors.
David MacMillan said the Vermont problem was both an oversight on Timeshare Relief’s part, as well as election year theater. It was easier to settle than fight, he added.
“Every time you grow quickly, you’re always going to have compliance issues,” he said. “Look at Microsoft.”
Timeshare Relief Inc.
FOUNDED: 2004
HEADQUARTERS: Torrance
CORE BUSINESS: Transferring time-share ownerships.
EMPLOYEES: 160
GOALS: $100 million revenue next year.
THE NUMBERS: Revenue grew 87 percent over two years to $48.5 million in 2009.
