By Sean Pendergast
By Sean Pendergast
By Jeff Balke
By Richard Connelly
By Jeff Balke
By Casey Michel
By Craig Hlavaty
By Jeff Balke
Long-time realtor and land developer Wayne Stroman of Conroe is a good guy. Well, not just a good guy, a great guy. Ask anyone back home.
"Everybody likes Wayne," says "Stew" Darsey, president of the Greater Conroe/Lake Conroe Area Chamber of Commerce. "I don't know why anybody wouldn't like Wayne."
Stroman owns Stroman Realty, a fixture in Montgomery County for more than 20 years. Stroman is also a mainstay and prominent figure on a laundry list of industry organizations, having served on the board of directors of the Houston Association of Realtors, the Texas Association of Realtors and the National Association of Realtors.
"Wayne's the kind of developer who's always looking toward the future," says Montgomery County Commissioner Craig Doyal. "As far as I know, he's an outstanding fellow."
Stroman is politically active, giving time and money to the Texas Realtors Political Action Committee. He also serves on the International Committee of the Houston Livestock Show and Rodeo and is a power-boat enthusiast.
Stroman's duties do compel him to travel from Conroe all across the country from time to time for conventions and seminars, but for all his success, say employees, he still spends as much time as possible in the office overseeing the day-to-day tasks of his growing operation.
"I've never heard a disparaging or derogatory word about him," says Conroe Mayor Tommy Metcalf. "But other than the fact that he runs a local real estate company up here, the truth is I really don't know much about him."
Actually, there is far more to Stroman than just a simple local realtor. From behind the brick walls of Stroman Realty headquarters along Highway 105 and within eyeshot of Lake Conroe, he conducts one of the largest timeshare resale businesses in the world. Critics contend it could also be one of the biggest scams.
Stroman charges customers seeking to get out from under their timeshares an up-front fee of $599 to list a property. Illinois, Arizona, Florida and California have tried to bar the company from operating within their boundaries, in part to protect consumers from the fees, and more than a dozen other states have joined them in support.
The Houston Better Business Bureau has a four-foot-tall stack of complaints against Stroman Realty, bursting with files going back as far as 20 years and as recently as a week ago. No matter when the complaint was filed, the grievance is the same: Stroman took my money up-front to allegedly market and sell my timeshare, but then didn't seem to do a damn thing.
In truth, admits Dan Parsons, president of the BBB, Stroman may well be operating within the bounds of Texas law, taking more liberties ethically than anything else.
When contacted by the Houston Press, Stroman at first said he would respond to questions in writing. The Press e-mailed Stroman a list of questions, and after receiving no reply, sent him a follow-up e-mail a week later again requesting comments. Two days later, Stroman e-mailed the Presssaying he did not receive the list of questions and was in Mexico, but was checking his e-mail "almost daily." E-mail records from the Press show that the original list of questions was successfully sent. That same day, the Press again e-mailed Stroman questions but did not get a response. In a final attempt to contact Stroman, the Press visited his three-story office building in Conroe, but his assistant said Stroman was not available and did not know when he would return.
Looking through numerous stacks of complaints, it appears that Stroman's licensed real estate salespeople tell owners of a timeshare an admittedly bad investment with a brutal resale market what they want to hear: We can unload your albatross of a property for top dollar. And fast.
Stroman is operating in a gray area. With apparently no one to stop him, he is mining a fortune $599 at a time.
The idea for timeshares started up in Europe during the mid-1960s.
Essentially, a timeshare is a property, usually a condo or an apartment in a resort town such as Orlando, Las Vegas or Cancún, that people own in conjunction with others. Each person has the right to use the place during specified times typically one or two weeks of the year. French resort-developer Paul Doumier is credited with formulating not only the concept but also the industry's first advertising campaign, "No need to rent the room; buy the hotel, it's cheaper."
By the late 1960s, timeshares were popping up in Hawaii, and by the 1980s, they had completely canvassed the American vacation landscape. Today, they are a favorite of baby boomers and yuppies alike, who save money by buying a timeshare instead of a vacation home that they can only use a few weeks of the year. Disney, Marriott and Hilton are among the industry leaders. In 2006, timeshare sales climbed to $10 billion, with more than 4.4 million Americans owning one, according to the American Resort Development Association, a trade group in Washington, D.C. representing developers. And there is no slowing down. ARDA, which was established in 1969 and has nearly 1,000 corporate members, estimates 25,000 new timeshare units will have been built between 2006 and the end of 2007.
According to ARDA, the sale of new timeshares is monitored by 39 states, including Texas; however, the resale market is far less regulated, and groups such as ARDA say they do not keep resale statistics. However, they do have a set of resale ethics guidelines that they expect dues-paying members, like Stroman, to follow.
"Basically what our code is asking for is transparency," says ARDA President and CEO Howard Nusbaum. "We want to make sure the consumer understands what they are paying for and what the promises are."
Included in the ethics code and member guidelines are requirements that resale salespeople shall not knowingly convey false or misleading information to an owner about the property's resale market value. Also, before taking an up-front fee, companies are supposed to provide owners a written statement explaining the purpose of the fee.
Nusbaum says the reason for these guidelines is that "verbal communication can be a lot fuzzier than a written one."
To be sure, the timeshare resale industry is one of the more confusing out there. Yes, owners are buying real property, but it does not behave and appreciate in value like normal real estate, so while it may look like a duck and talk like a duck, after you buy it and bring it home, it doesn't walk like a duck.
"Timeshares are not supposed to be looked at as an investment," says Bill Rogers, founder of the Timeshare User's Group, a consortium of timeshare owners who have banded together and created a forum for swapping information. "In fact, about ten years ago ARDA said they cannot sell these as real estate investments any more, but rather as something you use, like a car. You didn't buy your car as an investment and you're not going to get your money back when you sell it."
Rogers and others in the industry, including Stroman, say the average timeshare loses up to 50 percent of its value once the owner drives it off the lot.
The main reason a new timeshare costs markedly more than a used one is the marketing costs a developer spends to sell it in the first place, Rogers says. Developers wine and dine prospective buyers, luring them in with rock-bottom room rates at their fancy hotels. All you need to do, they say, is take a tour of the timeshare and sit through what often turns out to be a very lengthy and pressure-packed sales presentation. This can account for about 50 percent of the selling price.
Many people do not take this into consideration when they buy a timeshare, so they are shocked at how little they can recoup when they try to sell it.
"On the buy side," says Rogers, "people take advantage of the market and can save themselves a lot of money. On the sales side, you have to price it halfway decent, but halfway decent is very, very low. And unfortunately, most people start by trying to get most of their money back and it's not going to happen, so it's a matter of time, of how long is it going to take them to get realistic and lower the price to where people will be interested."
But what if it is the licensed real estate salesperson who sets the price or allows an unknowledgeable owner to set his own price, as well as his expectations, too high?
"A legitimate broker should be able to tell you about what you can get for your resale," Rogers says. "But some companies," he says, "do the old give-you-an unbelievable-price straightaway just to get you to commit to their up-front fee, and then six months down the road they'll say, 'Well, you've got this listed for way too much and we need to cut it in half.' But by then, they've already got your money. It's a rip-off."
It's also a scenario that sounds all too familiar to many Stroman customers.
Rick Shepherd of Trophy Club, a small town 30 miles outside Dallas, is pissed. He says he gave $499 to Stroman to sell his timeshare and all he got in return was a bad attitude and lies.
"It's not so much the money," he says. "It's the principle. I don't like getting screwed, plain and simple. I was duped, and I feel like a dumbshit."
Shepherd is a vice-president for a marketing firm in Dallas. He travels constantly for business, frequently staying at Hilton hotels. And in hindsight, it was the many Hilton HHonors points he earned on those business trips that got him into the whole timeshare mess to begin with.
In 2000, Hilton offered Shepherd the chance to stay at its Grand Vacations Club in Orlando, Florida, for a mere $39 a night. It was a great deal; the only catch: Shepherd had to take a tour of the new timeshare units for sale.
"My two sons were of an age when we were taking a lot of vacations together," says Shepherd, "and around then I was rolling in money because the stock market was doing so well."
"It was a lot of fun and we used the snot out of it for the first two or three years," Shepherd says.
After the initial honeymoon was over, Shepherd's oldest son left home to attend Texas Christian University, and family spring-break trips were no longer an option. So the property at SeaWorld sat unused, while Shepherd continued to pay the $850 a year for maintenance fees.
It was then that Shepherd remembered Stroman Realty. Hell, it was hard to forget. Almost every other month for the past several years, ever since Shepherd bought the timeshare, he had received a Stroman advertisement flyer in the mail. For the longest time he had just tossed them in the garbage, but this time, when one arrived at his home in December 2002, he decided to give them a call.
A salesperson answered the 1-800 number and, after listening to Shepherd describe his timeshare, told Shepherd that Stroman required what was then a $499 up-front fee to list the property on its Web site and advertise, but that Stroman recommended setting the selling price at $27,900 almost $6,000 more than Shepherd originally paid. For Shepherd, this was the answer to his problem. Sell the damn thing and turn a tidy profit. It sounded too good to be true.
"They came up with the $27,900 figure," says Shepherd. "They said it was a suitable listing price and that they had sold comparable units for around that. There was absolutely no mention of depreciation or that the market rates were apparently much lower. Plus, they made it sound like they'd be able to sell it in a matter of just a few months."
Upon request, Shepherd gave the salesperson his Visa card number and waited for the paperwork.
What Shepherd didn't know was that while he was waiting for the documentation outlining the purpose of the fee, as mandated by ARDA, the Stroman salesperson had already charged Shepherd's credit card before he had the chance to look over and sign the contract. Financial papers show that Stroman charged Shepherd's card the very day he called them, December 11, as opposed to waiting until Shepherd signed the contract, 19 days later.
When asked about this technicality, ARDA President Howard Nusbaum says, "I certainly wouldn't want my credit card charged before I'd seen the paperwork and disclosures and signed them."
Meanwhile, a month passed by and Shepherd had not heard from Stroman. In the big picture, this is a small amount of time; there are many people who filed complaints with the BBB who did not hear back from Stroman for years after signing up. But Shepherd, a salesman himself, was not going away quietly.
He left four unreturned phone calls in January 2003. A salesperson finally called him back on January 27 and told him that his property was listed too high and he should lower the price to $24,000. Later that same day, says Shepherd, a Stroman manager called him and said that $24,000 was indeed a good price to list at, but that properties similar to Shepherd's were selling for around $15,400. Over the next ten months, Stroman recommended, and Shepherd obliged, that the timeshare price be reduced further, eventually down to $20,000. During that time, Shepherd received several offers on his property for $10,500 and $13,000.
"They would call me up all excited and say they've got great news, someone was willing to pay something like $10,000 for it," says Shepherd. "And I'd say, 'What the shit? Are you smoking dope? At first, you guys told me I could get $27,900.'"
Finally, almost a year to the day from when Shepherd first called Stroman, he spoke with customer service manager Paul Deaton. Shepherd wanted a refund.
"When I asked for my money back," says Shepherd, "they just told me to shove it. And when I told them I was going to call the AG, Paul Deaton was kind of an asshole. He told me, 'Hey, you ain't getting your money back, so get over it. If you want to call the AG, if you want to call the BBB, if you want to call the fucking pope, go knock yourself out.' So I said okay."
The Press left a message at Stroman Realty for Paul Deaton. Billy Stevenson, a Stroman Realty manager, returned the call, saying he was responding on Deaton's behalf. Stevenson disputes Shepherd's claim that Deaton was rude over the phone.
"Paul is an ordained minister, a retired chaplain in the military and a super nice guy," says Stevenson. "That's why he's our customer service manager. He's worked for us a long time and I have never known him to be rude or angry with anybody."
In December 2003 and January 2004, Shepherd filed complaints with the Houston BBB and the Texas Attorney General's office. And soon, like most customers who had filed complaints before him and the ones who have filed after him, Shepherd found himself on the receiving end of a series of letters sent to him from Stroman's attorney.
The first letter Shepherd received, which is much like the letter many others received who also complained to the BBB, requested three items: a copy of a driver's license, a copy of the original timeshare purchase documents and proof of the original purchase price. Then, several weeks later, Shepherd received another letter saying that he originally listed the property at too expensive a price. The letter included statistics supposedly set forth by ARDA saying that the average resale price is roughly half of the cost of a new unit, and that it takes on average 22 months to sell a timeshare once it has been priced properly. However, ARDA spokeswoman Lou Ann Burney says that ARDA does not track or publish resale data.
Shepherd and Parsons think the letters are part of Stroman's plan.
"The fact that you have a lawyer answering complaints, I mean, these are not lawyerly complaints; it's customer service," says Parsons. "I think the lawyer is designed as an intimidation factor...I think he's part of the business plan."
Says Shepherd, "My 'A-ha' moment was a combination of the way they handled customer service, the ridiculously low offers from what they originally said I could get and the way they handled the BBB complaint. It gave me the impression that this was not an isolated incident and that managing complaints is an ongoing part of their business, trying to get some poor person to throw up their hands and say, 'Screw this,' and walk away."
Parsons says that Shepherd's story is much the same as everyone else's who's complained to him about Stroman.
"They're offering a panacea, a solution, a glimmer of hope, if you will," says Parsons. "They'll say they'll get you out of your problem timeshare at your desired price and everything will be great and you will no longer be the victim of timeshares. It paints a very rosy picture."
Consumer complaints typically fall into three categories: greed, desperation and vanity.
"I think this company has touched a little of all three," says Parsons, "which is kind of unique. Stroman's a promoter who's very organized and has been doing this a long time."
Shepherd was finally able, in the fall of 2003, to sell his timeshare for the handsome sum of $22,000. He sold it privately to his father-in-law.
"We had dozens of offers on (Shepherd's) property over the years," Stevenson says, "so I don't know what he's upset about. I mean, since Shepherd registered his property with us in 2002, we have sold right at $2 million worth of property at his very resort."
Shepherd says that if he had to do it all over again, he would've researched the BBB and found a company with a better record.
"If they had been straight with me right from the start and said the property has depreciated and is only worth so-and-so," he says, "number one, they wouldn't have gotten my money, which is against their motivation, and number two, if they told people up-front what the real deal is, they'd be out of business. I mean, who would give them $499 to get them to dump your property for half of what you paid? Dealing with Stroman was like a sore on my ass that wouldn't heal."
Wayne Stroman graduated from the University of Houston in 1979 with a Bachelor of Business Administration degree in marketing. That same year, he received his Texas real estate salesman's license, and then in 1980 received his broker's license.
After graduating from college, according to newspaper accounts, Stroman began his career representing customers looking to buy fixer-uppers in west and southwest Houston. And since Stroman had worked construction during high school and college, it seemed only natural that he also offer his refurbishing services on the properties he'd sold.
Stroman moved his business to Montgomery County in 1983 and began selling plots of land to builders. At the same time, he began building his listing inventory by sending direct mail to the owners of golf course and waterfront properties. Soon, Stroman told the Houston Chronicle, "builders were coming to me to buy lots."
In and around Conroe, Stroman was a night owl and somewhat of a party boy. Up until a few years ago, according to long-time friend Bob Vieau, Stroman owned a 38-foot Cigarette Top Gun powerboat, much like the one glamorized by the hit 1980s TV show Miami Vice. Stroman is a corporate member of the Texas Offshore Performance Powerboat Squadron, of which Vieau is also a member. Together, they and other TOPPS members would hang out at Pappas on the Lake at Lake Conroe, have a few beers and a good laugh. Stroman was arrested in May 2003 on the misdemeanor charge of boating while intoxicated, according to Montgomery County court records. The charge was later dismissed.
"He's been the perennial bachelor around here for many years," Vieau says. "It wouldn't be atypical to hear Wayne's boat run across the lake at 2 or 3 in the morning from Pappas to home. Wayne used to party pretty hard..."
Stroman married several years ago, and since then Vieau says he has not seen as much of Stroman.
"They split up," says Vieau, "but I still haven't seen him around much. He sold his performance boat, and now he's got a cruiser that he keeps on Lake Travis that he spends the night on sometimes."
While Stroman was building his local real estate company, he began to fix his eye on timeshares. Today, his Web site boasts that he is the "World's Largest Timeshare Resales Broker with the World's Largest Selection of Timeshares for Sale." The site also says that Stroman has resold properties in 47 states and 29 countries.
Manager Billy Stevenson says 120 realtors and support personnel work at Stroman Realty. The Texas Real Estate Commission lists Stroman as having 79 licensed salespeople. In addition, court records show Stroman owns his own direct-mail and advertising company, Ad-Net Inc., located across the parking lot from Stroman headquarters in Conroe.
"We receive at this office literally tens of thousands of e-mails every day, about 1,000 phone calls a day, and we talk to close to 200,000 to 300,000 people a year, both buyers and sellers," says Stevenson.
On an Internet chat board, someone claiming to have worked at Stroman for six months broke down operations at the Stroman sales office, producing numbers very similar to Stevenson's and other sources.
According to the chat-room post:
"Stroman Realty receives over 1000 incoming calls a day. The Calls are generated by a massive marketing program targeting the nearly five million existing Timeshare owners prompting them to sell. Around 70 to 100 $499.00 listing fees are collected every day from credit cards, by the Realtors in the boiler room, after reading a carefully crafted scripted sales pitch. This works out to, Around....70 new listings per day, $34,930.00 per day Around....420 new listings per week, $209,400.00 per week Around....1,680 new listings per month, $837,600.00 per month Around....20,160 new listings per year. $10,051,200.00 per year."In 1994, the Houston BBB terminated Stroman's membership.
"Stroman's so far away from being eligible to be a member it's just ridiculous," says Parsons. "It's two things really, the complaints and his business model. Even if today he went back and refunded everybody, we wouldn't accept him because he is still doing a business practice that causes an underlying root problem."
In 1994, Stroman's attorney wrote a cease-and-desist letter to the BBB demanding the BBB stop publishing its "deleterious" reports about Stroman. In it, the attorney wrote that complaints against Stroman Realty constituted less than 1 percent of transactions for any given period of time.
"I swear that when Moses came down from the Mount there was like this 11th commandment that chipped off the tablets and companies, when they're in trouble, say, 'well, this only represents X percent of our business,'" says Parsons. "Number one, for every complaint we get, there are 20 we do not see. Beyond that, let's say it is just a fraction of their business. It's still a fraction of a very serious nature."
Parsons says the BBB ignored the demand letter.
It is not just the BBB in Houston that has noted complaints against Stroman. In its 2005 column "Scambusters," the Fort Wayne, Indiana, News-Sentinel reported that Stroman and two other timeshare companies had the Better Business Bureau of Northeastern Indiana's lowest rating. That same year, the Orlando Sentinel told the story of a retired couple who called Stroman requesting literature on selling a timeshare and were charged the $499 even though the couple never actually hired Stroman. The couple received a refund only after the Sentinel called Stroman demanding an explanation.
Within the industry itself, Stroman has a mixed reputation.
"Wayne used to go to great lengths to show the results he had and the work he was doing to get timeshares resold," says Carl G. Berry, former president of ARDA. "At the same time, he had a huge backlog because he had this big marketing program saying, 'List with me, list with me,' but he wasn't selling enough. He was the most high-profile guy in the business and said he was doing it right."
Tom Yeary founded The Timeshare Store in Florida, which specializes in the resale of Disney timeshares. He says that he personally knows of at least one former employee who felt "so bad about what he was telling the people that he actually started having trouble sleeping at night and had to quit his job at Stroman."
Fifteen years ago, many resale outfits were calling up-front fees "appraisals." But as time wore on and some fraudulent resellers got nailed, "companies dropped the appraisal crap and started up with advertising fees," says Yeary. "It's the same game."
The Timeshare Store does not charge its customers an up-front fee.
"Up-front fees are just terrible," Yeary says. "I have a problem with any company that will lie to people and tell them their property is worth more than it is just to get the up-front fee, or agree to list it at a price that's higher than they know it's really worth. (It's) the lying, scheming and taking money from people by omission that I care about, because I think it gives a bad name to the business. I don't know of any reason an ethical broker should charge an up-front fee."
Marc Thomas operates the Internet-based company WorldwideTimeshareResale.com out of Montgomery, Texas. He says he doesn't get many complaints and runs his business quite differently than Stroman. For one thing, he only charges sellers $9.95 up-front to advertise and list their timeshares on his Web site.
"When you charge an up-front fee," he says, "the customers are constantly calling wanting to know why it hasn't sold, and that's stressful, to say the least. I couldn't deal with that stress. (After all), it's not easy to sell timeshares. It takes longer than it takes to sell a house."
Thomas says he's been in the resale business for 14 years and gets between 2,000 and 4,000 visitors to his Web site each week. Another difference between Stroman and him is that Thomas does not believe in soliciting for business.
"I don't do mail," he says. "I don't like to violate people's mailboxes with a bunch of litter. It's not necessary to bug people by mail to buy or sell. When they're ready they'll look online."
Thomas was a Stroman employee for six years. He is reluctant to talk about his days working there, saying it was "a good paying job and the people were great." When asked whether there was an emphasis at Stroman on signing people up and collecting up-front fees, he says, "Yeah, I would say there is."
Over the past 20 years, several timeshare scams operating around Houston have been successfully prosecuted. One of the more notable was in 1995 when agents shut down the real estate marketing firm American Land Liquidators. The courts decided that the company and its employees had fleeced more than $9 million from 27,000 property owners over the course of nearly three years by misrepresenting to sellers the number of buyers available and the likelihood of sales.
So far, the Texas Attorney General has not filed in court against Stroman Realty. Attorney General spokeswoman Lauri Saathoff says her office has received numerous complaints concerning Stroman, but would not confirm whether there is or has ever been an investigation into the company.
However, other states including Illinois, Arizona, Florida and California have attempted to protect their residents and stop Stroman from soliciting and charging up-front fees without proper state licensing.
Illinois and Arizona have both issued Stroman cease-and-desist orders to prevent the company from operating in their states. Stroman has sued both states to try to continue his business. In Illinois, the case was dismissed from federal court until the state licensing agency has a chance to do its job. In the Arizona case, Stroman's lawsuit was dismissed and Stroman is now appealing in the U.S. Court of Appeals for the 5th Circuit.
In 1998, Stroman sued Florida and California state officials in the U.S. District Court in the Southern District of Texas to lift cease-and-desist orders both states had issued against Stroman. Florida and California officials claimed they were attempting to get Stroman to comply with their licensing, fee, disclosure and advertising rules when the company deals with consumers who are their residents. They argued that they are required to regulate the timeshare resales to protect their residents, specifically from abusive business practices and fraudulent brokers. In Florida, up-front fees are illegal, and California strictly regulates their use.
In his 2005 opinion, U.S. District Judge Lynn Hughes sided with Stroman.
On the topic of up-front fees, "Stroman's clients are not being duped," Hughes wrote. Sellers who pay the up-front fee "are told," wrote Hughes, that the fee is nonrefundable and that no guarantee is given as to how fast and for how much the timeshare will sell.
It is true that Stroman customers sign paperwork stating as much; however, the court did not address any discrepancies between what salespeople may tell customers over the phone and the time at which their credit cards are apparently charged, versus what they actually sign.
"That is what I call judiciary in a bubble," says Parsons. "Yes, the customers have some burden as well, and I'm sorry, but these consumers didn't do their homework or they wouldn't have gone to Stroman...but these (judges) are people who don't deal in this arena and have never been victims. They're sitting there, pro-business, and with a lack of empathy."
During the case, some interesting facts came to light.
Up-front fees account for 94 percent of Stroman Realty's income in its timeshare business, according to Hughes's opinion. In 1997, the company collected more than 18,000 fees and sold 680 timeshares, or 3.7 percent. Stroman spent about $3.5 million, or roughly 37 percent of its income that year, on advertising and on its computer system that lists properties on its Web site.
One of the chief complaints customers have had over the years is that they feel their up-front advertising fee has not gone toward the promotion of their property as promised. Stroman says it spends millions of dollars advertising in publications such as USA Today, the New York Times and the Washington Post. Consumers, however, complain they have been duped because the ads are for the promotion of Stroman Realty's listing service, not the individual timeshare properties.
The court broke down Stroman's advertising expenditures, saying of the approximately $3.5 million it spent on advertising, $3 million went toward promotion, while more than $450,000 went toward maintaining Stroman's computer system, which houses the online database of all timeshare listings.
Stroman manager Billy Stevenson justifies Stroman's promotion tactics, saying, "If I advertise a great Colorado ski week and someone wants to buy on the beach in Florida, they're not going to call. Generic advertising gets you the broadest reach of potential customers."
Hughes also ruled that Stroman Realty does not need to be licensed in other states because it is already licensed in Texas, reasoning that licensing requirements across the country are comparable. In addition, by being licensed in Texas, Stroman is subject to Texas laws and enforcement. Florida and California are appealing the decision, and a total of 14 other states (Alaska, Arizona, Illinois, Iowa, Kansas, Kentucky, Massachusetts, Nevada, Oklahoma, South Carolina, Utah, Vermont, Virginia and Wisconsin) plus Puerto Rico have jumped onboard, filing amicus briefs. In essence, though, Hughes said that the states and consumers have a Texas forum for claims under Texas law.
In addition to the up-front fee, Stroman also charges a ten percent commission or $950, whichever is greater, on timeshare resales. By comparison, Thomas charges ten percent or $750, though he says the fee is negotiable, and Yeary says his Timeshare Store charges owners of Disney properties ten percent, but charges customers selling timeshares at other locations a minimum of $1,500 and no commission.
Hughes in his opinion justified the use of up-front fees, writing that they "are no more intrinsically unfair than high commissions," and that both systems are "designed in the hope that it covers both their costs and a profit." He further wrote that if customers shy away from companies charging up-front fees, they "will shift to high-commission brokers."
It didn't take Rick Shepherd long to decide there was no point in suing Stroman.
"I've tried to figure out what damages I can hit them for," he says, "but $500? It's not worth the hassle."
Other former Stroman customers feel the same way, realizing a lawyer will cost more than what they're trying to recover. The point is not lost on attorneys, either.
"Effectively, the way to pursue something like this is either through class action or a public enforcement action," says Houston-based consumer attorney Rich Tomlinson.
Realistically, though, Tomlinson says he doesn't see a lot of hope for consumers. A class action in Texas is a long shot, he says, because the way state law is written makes it difficult to certify a class. That means, he says, that public enforcement agencies such as the Attorney General or the Texas Real Estate Commission need to step up.
"The consumer is getting screwed left and right," says Tomlinson. "The AG has limited resources...and with only a handful of attorneys, they can't come anywhere close to meeting the demand for their services."
Attorney General spokesman Tom Kelly says the AG "pursues cases based on patterns, trends, egregious behavior toward the consumer and massive fraud," and is interested in hearing from anyone who has a complaint against Stroman.
As for the Texas Real Estate Commission, the body charged with enforcing real estate regulations, Della Lindquist of the Commission's enforcement division says her office has received complaints about Stroman and in response, issued in August 2006 a letter to the company providing three suggestions on how to "further avoid these customer misunderstandings." TREC has not taken any disciplinary action against Stroman in the past ten years, according to the commission's Web site.
The letter lists three changes that "must take place in order to bring the operation into compliance." Among them, salespeople must fully comply with the state license act, which requires that real estate licensees advise the timeshare owner as to their professional opinion of the property's market value before the up-front fee is collected.
Unlike Shepherd's complaint, TREC has fielded concerns from consumers who say they were misled by Stroman salespeople because they did not offer their expertise on how to appropriately price their timeshare. One customer, for example, says a salesman essentially let him pick a price $1,000 more than what he originally paid and did not mention the well-known industry reality of depreciation. Ultimately, the owner had to reduce the timeshare price to make it salable and eventually received a refund.
The letter says that "If TREC receives a complaint alleging that a Stroman agent misrepresented the value of a timeshare, the agent and Stroman will be expected to explain the basis for the advice the seller received."
"They made it sound like I could get a lot of money for my timeshare," says Crall. "They told me I could get more than I paid for it and made no mention of any depreciation."
Stroman charged the up-front fee on Crall's credit card immediately, instead of waiting until she signed the contract, as stipulated by ARDA for its members. However, one day after agreeing over the phone to list with Stroman, Crall read the BBB report on the company and decided she did not want to hire them. She says it took her two months to get a refund.
The lack of disciplinary action is "sort of expected with TREC," says Tomlinson. "I mean, it's asking for a lot to ask anybody to regulate their own profession very well."
It appears that Stroman Realty has found a safe haven in Texas to operate. It is protected by a ruling from a sympathetic federal judge as well as a compassionate real estate commission that makes helpful suggestions instead of sanctioning a company with a documented history of consumer complaints.
Again, Parsons says this may be a case of Stroman's company breaching ethical rules rather than breaking the law.
"It's gray, kind of like the fog as the Titanic rolled along," Parsons says. "The iceberg is sitting in front of you, and there's no rule that you can't travel through the fog, but I think the lifeguard should be asking questions here because the poor passengers are sitting waiting to be sunk, and they've been sunk several times before."
Howard Nusbaum, president of ARDA, is also concerned. "We do have an ethics code and we've censured members and removed members," he says. "If they're doing something, we'd want to know it."
But perhaps Nusbaum is just like most everyone else, from ill-informed consumers to prominent leaders in Conroe, all of whom simply don't know much about Wayne Stroman and his business. Nothing, that is, except he seems like a great guy.
Illustrations by Doug Boehm Illustrations by Doug Boehm Illustrations by Doug Boehm
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