Critics question realtor Wayne Stroman's timeshare resale business

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.

"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.