Dirty Deeds…Done Dirt Cheap?

Summary

  • Timeshare deeds often contain wording indicating “$10”
  • This amount satisfies a contract law provision and is typically not indicative of sales price
  • The two concepts should not be confused

We receive quite a few questions and comments from members regarding our reporting of “$10.00” transactions. Since some resorts have a significant number of $10.00 transactions, many people conclude it is because most deeds say “…in consideration of Ten ($10.00) Dollars and other good and valuable consideration…” It is true; some resorts have quite a few $10 sales:

Vacation Village at Parkway Timeshare Resale Chart

Are these $10 data points taken right off the face of the deed? Are timeshare title/transfer companies honest about reporting the actual sale amount? Can this data be believed?

Are these dirty deeds, or are the sales just done dirt cheap?

Neckties, contracts…      
Done dirt cheap               
Dirty deeds                      
-AC/DC

Legally, contracts require “consideration” which means that something of value was provided in exchange. In the case of a deeded transfer the phrase “…in consideration of Ten ($10.00) Dollars and other good and valuable consideration…” is often used on the document as it sufficiently satisfies this contract requirement. Many timeshare deeds (and other real estate deeds) use this simple consistent language to convey legal transfer.

So does the phrase consideration of Ten ($10.00) Dollars represent the actual sales price? Absolutely not! It’s not something we report and it should not be confused with “…the other good and valuable consideration…”

Typically the transfer of real estate by deed involves a fee charged by the recording office in each county. For example in Florida, the fee is called a “Florida documentary stamp tax.” This tax is levied on the “other goods and valuable consideration.” Other goods and valuable consideration can be a car, a boat, an antique…but it is usually money. Regardless, the fee is paid and the amount is typically displayed on the deed.

What else is considered “consideration?” The discharge of a debt constitutes consideration and requires the payment of doc stamps on the associated transfer. For simplicity, suppose someone purchased a timeshare interest from the developer for $10,000. They paid 10% down and had a mortgage of $9000 on the balance. Let’s say 2 years later they still owe $8500 but have stopped paying the maintenance fee and the loan. If the developer decides to foreclose on the property, the timeshare would be transferred back to the developer with an $8500 stamp tax. This is important to us because at first glance this looks like an $8500 timeshare resale. When we dig deeper we know it isn’t, and its inclusion in our data would deeply distort the typical price. This is the reason these types of transactions are excluded.

Using Florida as an example, there is no difference in the amount of the tax if the timeshare sold for $1 or $100. Because there is no way to differentiate, (unless we know otherwise) all sales from $100 to $0 are reported as $10. We report the sale as $10 based not on what the deed says but on the tax. The actual sale was probably somewhere from $100 to $0 (or less if purchase incentives were used). In our view there this is not a significant material difference in sales price (+/- $99) for an asset where closing costs and resort transfer fees would typically outweigh the actual sales price.

Regardless, the impact on the overall data is insignificant as less than 8% of all reported resorts even report $10 deed sales. They are only a small percentage of the total in almost all cases – in other words, not enough to affect our calculations of median price in any meaningful way. Where $10 deeds are statistically significant is in cases like Vacation Village where the 62% of all deeds (2300) are in fact $10 deed transactions. It is important to note this is in line with empirical data on the resort.

In general, it is the resorts with a lower ranking and a lower Saleability Score™ that have a large number of $10 deeds. Dirty deeds? Nope. Most likely just sold dirt cheap.

The information presented is not legal advice, is not to be acted on as such.

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