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Closing Costs Westar has been able to contract with outside licensed companies to provide escrow services, title insurance and to arrange for the recording of your deed with the County Recorder's Office. These costs total approximately $500 and vary slightly depending on the county in which the timeshare is located. SOME THINGS A BUYER SHOULD DO (OR HAVE DONE) IN ORDER TO AVOID BEING RIPPED OFF WHEN PURCHASING A TIMESHARE In internet sales the buyer generally has never met the seller and neither knows the reputation of the other. The seller has the obligation of delivering a recordable deed to the buyer but the seller will rarely deliver this deed until the buyer has paid the purchase price. In this way the seller is assured all of the benefits of its bargain and sale. From the standpoint of the buyer, when the seller asks for the money before parting with the deed, the buyer is put in the position of having to `trust' the seller with the purchase price and have no assurance by a third party that the seller will actually do that which the seller has promised to do, i.e. deliver a recordable deed to the property. More significantly, even if the seller does in fact deliver the recordable deed, there are many other steps that the prudent buyer will follow in order to make sure that the buyer has received the full benefit of the purchase. The purpose of this memorandum is to remind the buyer of some of the steps that will help assure satisfaction with the purchase. It should be recognized that in the majority of cases the purchase of a timeshare interest is the purchase of a piece of real estate and all of the same questions that are raised in a purchase of a home are applicable in a the purchase of a timeshare interest even though the dollar value of the purchase may be much less. Delivery of the Deed As noted above, the seller normally will require that the buyer has delivered the full purchase price before the seller will send a recordable deed. It is important to remember that the seller can be fully protected and the buyer can absolutely avoid the risk of delivering the purchase price and not receiving a deed in return if the parties use some type of escrow or third party to act as a stakeholder. Escrow companies provide this and other services which offer protections to the buyer. Recording the Deed After receipt of the deed, the buyer should take the appropriate steps to have the deed recorded in the county where the timeshare interest is located. This is essential for the following reasons: a. Ownership Recognition by the Timeshare resort: Most timeshare resorts will not recognize a new owner until they are provided with a conformed copy of the recorded deed; and b. Avoiding Loss by Subsequent Voluntary or Involuntary Actions of the Seller: Until the deed is recorded, the seller has the ability (although not the legal right if the buyer has paid for the timeshare) to prepare and sign another deed transferring the same timeshare property to another person. While this conduct would be fraudulent, in most cases where the person recording the deed acted in good faith, the first person to record a deed to a piece of property (from the existing recorded owner) gets the title. Perhaps equally significant is the fact if there is a judgment or tax lien later filed against the seller it will be a lien on the timeshare interest even if the buyer has paid for it if the deed to the buyer has not been recorded. Recording of the deed is also an absolute requirement if the buyer elects to purchase title insurance. If the buyer elects to do so, the buyer can record the deed without the assistance of any third party by calling the Recorder's office in the County where the timeshare is located and determining the amount of fees that will be charged by the County Recorder for the recording of the deed. Generally this is less than $20. It is also a good idea for the buyer to ask the County Recorder to provide an immediate conformed copy as the original deed often takes several weeks to be returned to the buyer (Make sure the buyer's address appears on the deed). There probably will be an extra charge for the conformed copy. The contact with the County recorder and the recording of the deed can be done with the help of a title company or escrow company and there is normally a charge of about $25 (in addition to the recording fees) for this service. Real Estate Taxes In a few jurisdictions, e.g. California, real estate taxes are assessed and collected directly from the owner of the individual timeshare interest. If the taxes are not paid, the taxes become lien against the timeshare and if they remain unpaid for five years the timeshare property can be sold at tax sale. It is therefore very important that every buyer make sure that there are no delinquent taxes owed on the timeshare property at the time of its purchase. This review can be made directly by the purchaser by making contact with the Tax Collector of the jurisdiction in which the timeshare interest is located. As an alternative, escrow and title companies will sometimes provide a tax search of the property for a fee ranging up to $50. It is obviously important that this review be made before the purchasers funds are delivered to the seller as it is normally the obligation of the seller to deliver the property free and clear of all liens. The cost of paying such delinquent taxes will normally be a deduction from that which would be paid to the seller. Maintenance Dues In addition to the purchase price, each owner of a timeshare interest is required to make annual payments of fees to the Owners Association to pay for the maintenance of property and the services provided to its owners. If the fees are not paid in a timely manner the net effect will often be that the Owners Association will often file a lien against the property and will prohibit any use of the property by the owner or the buyer until the delinquent dues are paid. In such cases a buyer could have paid in full and still not be able to get the benefit of use of property until the delinquent taxes were paid. The buyer can directly verify the status of the payment of the maintenance fees relating to a particular timeshare interest by checking with the Owner's Association or its management company prior to the seller receiving the buyers funds. If there are delinquent maintenance fees it is normally the responsibility of the seller to pay them and the funds to pay them will normally be deducted from the seller's proceeds. As an alternative to direct verification with the Owner's Association, the buyer may elect to retain the services of an outside escrow company to determine the status of the account and to arrange to make payment from the sellers funds The escrow company will normally charge up to $50 for this service. Transfer of Ownership on Association Records and Transfer Fees In order to be provided with all of the benefits of ownership, including but not limited to use of the resort, the new buyer must make sure that the buyer is recognized by the Owners Association as the true owner of the property. This involves the Association removing the former selling owner and adding the new buyer as the owner. To accomplish this the Association normally requires that it be provided with a certified copy or a conformed copy of the recorded deed and that it receive payment of a Transfer Fee. Association Transfer Fees are charged by many Owners Associations to reimburse them for the one time cost of changing their records to reflect the buyer as the new owner of the property. These fees are normally paid by the buyer and they generally range from $50 to $100 per transaction. Association Transfer Fees should not be confused with the normal Maintenance Fees which are an ongoing obligation of the owner of the property. Arrangements for the Association to reflect the buyer as the new owner can be made directly by the buyer or through an escrow company which will normally charge up to $50 (plus the Association Transfer Fee) to make sure that this is accomplished in a timely manner. Title Reports and Insurance Even though ownership is properly transferred on the Association records and even though it has been verified that there are no delinquent taxes and no delinquent maintenance fees associated with the timeshare interest, the buyer, in recording the deed from the seller, gets only that interest which the seller has in the property at the time that the deed is recorded. As noted above, if the seller acted fraudulently and conveyed the same property by a deed that was recorded prior to the new buyer recording the deed, the new buyer would receive nothing (except a law suit against the seller). If the seller has a recorded mortgage against the timeshare property, that mortgage will continue to be a lien on the property when the buyer acquires the property unless the seller causes it to be paid and removed. If the seller has a tax lien, judgment lien or other involuntary lien against the timeshare property, they will remain as liens against the property and can be foreclosed even after the buyer acquires the property if they are not paid and/or removed. If the seller of the property financed the seller's original acquisition of the property and has paid the mortgage in full it is not uncommon for the seller and its lender to have forgotten or neglected to remove the original financing lien from the property. While the costs of removing such lien are nominal if all parties are available and in accord, it is not uncommon for small lenders to have `gone out of business' making it difficult to get the necessary signatures. To leave the lien in place can make the property unmarketable if the buyer ever elects to resell the property. For all of the foregoing reasons, it is important that the buyer of any parcel of real estate be assured that title is free and clear of liens at the time of acquisition. For the truly sophisticated buyer it is possible for the buyer to visit the office of the County Recorder and personally check the records. This is a time consuming and laborious task requiring an understanding of how the recording system works. Most often the buyer seeks the aid of a title company to do this work. Title companies can provide a report indicating what their investigation of the records revealed. Such a report, standing alone, provides no guarantees and it is merely good faith statement of what the title company believes to be the status of title. If the title report is incorrect there is normally no recovery against the title company. As an alternative, the title company will provide title insurance which has the effect of insuring the status of title as it is reflected in the Policy of Title Insurance. When the recording of the deed is conducted by a title company providing title insurance, the buyer can be assured that the deed will not be recorded unless title is clear. The cost of a title report WITHOUT insurance is normally less than $100. The cost of title insurance varies with the amount and location of the transaction but in most timeshare sales the cost ranges between $125 and $300. Summary As can be seen above, the costs incurred to assure the buyer of the benefit of the internet bargain can be significant and some people feel that the costs for protection are disproportionate to the basic purchase price of the product. Whether this an appropriate conclusion must be decided by each individual purchaser. Copyright © 1999 Westar Vacation Sales, Inc. All rights
reserved.
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