Timeshare Exit Companies and Escrow Fees
By: Adam Burns – TKO Timeshare Solutions
Why? The short answer is they cannot afford to do so. Their business model will not allow them to escrow your money until the job is done. Basically, this is because your fee is the only source of revenue for these companies, and they need to use your money to pay their overhead.
One of the main reasons exit companies are unable to escrow your fee is because their marketing costs are so high. Marketing, advertising, in particular, is expensive. The prices rise and fall with supply and demand. There were not as many companies in the exit business vying for customers 5+ years ago as there are now. It is also a very low cost of entry business. This means competitors can easily enter the market and drive up ad prices. Their biggest expense is advertising. No one needs any special certificates, training, or other certification to get started.
With marketing being the biggest upfront expense, at least from the beginning, that bill has to be paid regardless and there is no exit company that would be able to cover all of their money-back guarantees if they were forced to shut down tomorrow.
Television, radio, and Internet advertising are not cheap. For example, let’s assume it cost $500 to get someone interested enough to reach out to the exit company and become a lead. The cost of generating 10 prospects would be $5000 and assuming a closing rate of 40% (very generous), would result in gross revenue of $16,000 if they charge a flat fee of $4000 each. Their marketing costs alone would be 33% or roughly $5300. This is not taking into effect other sources of overhead, like rent, insurance, office equipment, owner’s salary, payroll and, sales commissions (which could be in excess of 15%).
In a recent lawsuit filed by a timeshare company against a large exit company, it was disclosed that the exit company had over 300 employees. At a bare minimum payroll alone would be well over $1.5 million. The same article also said that out of the 18+ thousand inquiries they receive per month they sign up about 1300. Assuming their fee is around $4000 that would be $5.2 million in revenue.
However, if you use the 5.2 million-dollar monthly revenue figure, marketing costs are around 33% of total sales and overhead is an additional 20%. Without figuring in any additional expenses, the exit company has already spent half of your flat fee. Without signing up additional customers every single month there is no way they could continue operating. This is why they are not in a position to escrow your flat fee.
It is going to be very difficult to find more than a handful of exit companies who escrow your fee. However, there is no way to protect your money without it. The economics of their business does not provide for a way to hold your fee until the job is done. The supply and demand of the timeshare market dictates the future. Demand is at an all-time low. The only way to truly exit a timeshare is if the timeshare company takes it back or it is sold.
At the end of the day, it certainly is easy to walk through the timeshare door and enter the market, but it is extremely difficult to get out. The market will probably change in the future but who knows when that will come. Change is slow, and most do not have the luxury of waiting.
Let’s start the journey together of getting you out of your timeshare, legally, quickly, and permanently. Schedule a no-cost consultation today!