How Time-Share Exit Scams Work — and How to Avoid Them

Steve Baker, a former Federal Trade Commission (FTC) official who publishes the Baker Fraud Report, says that scammers take advantage of time-share owners not knowing that resorts often let owners of time-shares give them back if they’ve been paid off, allowing them to avoid future maintenance fees.

“What some of these exit companies do is get you to pay them several thousand dollars and transfer the time-share to the company,” Baker says. “Then the exit company simply calls the resort and says, ‘I’ve got this time-share, can you let me out?’ ” The resort company agrees, and “you just paid somebody a lot of money for something you could have done yourself.”

Alternatively, the scammers will collect a fee for getting someone out of a time-share contract, and then just keep the money and not do anything. In some instances, Baker says, they even convince time-share owners to stop paying their mortgages and maintenance fees and divert the payments to them instead in exchange for the scammers’ false promise to file a suit against the resort to end the time-share.

Time-share owners who follow such advice run the risk of having the resort foreclose on their mortgage, as well as having their credit damaged and facing possible tax consequences, according to Baker.

In other instances, scammers pose as brokers. The time-share owner “is approached out of the blue — usually because of a public records or deed search — with the promise that the company has a buyer willing to pay $30,000 for a time-share that cost only $25,000,” Connor says. The scammer then explains that in order for the deal to move forward, all the owner has to do is wire a deposit for tax stamps or some other fee to secure the closing.

But that’s usually just the start. The company keeps fabricating more phony fees, as long as the time-share owner keeps paying them, according to Connor. Eventually, the owner will have paid much more than he or she was going to make from the sale. And in the end, the target of the scam is still stuck with the time-share. 

The New York Times investigated drug cartels’ involvement in this type of time-share scam. Scammers posed as sales representatives offering to buy owners’ time-shares in Mexico, Jamaica and California. But first, sellers are asked to pay up-front fees. One older couple, who thought they were selling their California time-share to a Mexican businessman, had $900,000 stolen. They were told they had to pay government fees and fines and were threatened with extradition if they failed to wire the money to Mexican banks.

How authorities are fighting back

The FTC and attorneys general in numerous states are starting to crack down on time-share exit scams, filing civil lawsuits against companies and the individuals connected with them in an effort to force them to stop abusive practices and pay restitution to people they’ve scammed. The U.S. Department of the Treasury’s Office of Foreign Assets Control is working with the Mexican government to stop scams by sanctioning individuals and companies connected to time-share scams.

In November 2022, for example, the FTC and the Wisconsin attorney general filed suit against a group of companies accused of using scare tactics and high-pressure sales pitches to coerce consumers — mostly older adults — into paying more than $90 million for time-share exit services that the companies didn’t deliver. The complaint alleges that the defendants used direct mail campaigns to lure time-share owners to high-pressure sales presentations at hotels and restaurants, where they were told that they had to act immediately to avoid being stuck with their time-shares forever and saddling their children and grandchildren with maintenance fees.

In another case, in 2021, Washington state filed a lawsuit against a time-share exit company that allegedly collected fees ranging from $3,000 to tens of thousands of dollars from clients, many of whom were still waiting for an exit from their time-share years after signing contracts. While denying the accusations, the company agreed to pay a $2.61 million settlement to provide restitution. 

The FBI is also vigorously pursuing such cases; it recently posted this PSA.

How to avoid fraud if you’re trying to exit a time-share

Look for red flags. You should be extremely wary of anyone who approaches you about exiting a time-share or claims that they have a buyer for you — especially if they ask for an up-front fee, according to BBB. Another red flag is an invitation to an in-person group presentation or seminar on time-share exits that offers a free meal. You’re likely to be subjected to high-pressure sales tactics, says Connor. There is no such thing as a free lunch, he notes.

Understand the alternatives. Instead of using a time-share exit company, look into less expensive and less risky ways to get out of a time-share agreement. One of them is to contact the resort developer yourself and seeing if the developer will take back the time-share. Many developers now have programs for that purpose, says Jason Gamel, president and CEO of the American Resort Development Association, a trade group for the time-share industry. He recommends going to responsibleexit.com, a website that provides information on exit programs offered by the major time-share resort companies.

If you want to sell your time-share, Gamel suggests looking for a real estate broker who works on commission. You can also advertise a time-share for sale online by yourself, using a platform such as Craigslist or eBay, where you won’t have to pay a fee to a broker.

More resources

If you think you’ve been the victim of a time-share resale scam, file a report with the FBI’s Internet Crime Complaint Center (IC3) at ic3.gov. The FBI suggests including this information in your report: including this information in your report:

• The estimated total amount of money you lost to the scammer(s)
• T​he details of any wire transfers you might’ve sent them
• ​Bank account numbers
• Names of businesses and individuals involved in the scam
• Information about how you spoke with the scammers (such as phone numbers or email addresses)

The FBI also offers more information about these scams here.

The Resort Owners’ Coalition, a program of the industry group American Resort Development Association, has an online resource center for time-share resales with step-by-step advice for consumers. You can also call the coalition’s consumer support line at 855-939-1515.