Four Things To Know Before Buying A Timeshare
There are many different kinds of timeshares, and prices vary wildly. Know what you are getting, and how much annual maintenance or membership fees will cost. Whether a timeshare or vacation club makes economic sense depends on your individual goals and needs.
Make Sure You Know What Kind of Timeshare You Are Purchasing.There are two general categories; deeded ownership and a “right to use.” With deeded ownership, the property is collectively owned by several timeshare owners. Each owns real property that they may rent, sell, exchange, or pass on to heirs. Right to Use timeshares are considered personal property, much like owning a piece of furniture, and no deed is issued. Typically, under a Right to Use contract, the ability to transfer, sell or relinquish the timeshare is more restrictive than a deeded timeshare ownership. Timeshare ownership can be either for the rest of your life, the number of years specified in the contract, or until sold if allowed by the contract.
There are different ways your time is allocated. In a Fixed-Week model, you have the right to a unit during a specific week of the year. If the timeshare is deeded, you may, for example, own a 1/52 interest in the vacation unit corresponding to the one week per year the consumer is entitled to use the unit. In a Float-Week timeshare, you can use the unit during a particular season of the year, reserving the time in advance. With Fractional Ownership, you purchase a large share of vacation ownership time, usually up to 26 weeks. Many developers and resorts have now adopted a Point-Based model, sometimes called a “Vacation Club.” Point systems are Right to Use arrangements in which you purchase points, rather than real or personal property, that can be exchanged for the right to use a vacation unit. The number of points needed varies depending on the length of stay, location, and popularity of the resort. Generally, Vacation Club members get a set amount of points each year and can also purchase additional points.
Do Not Go To A Timeshare Presentation Just To Get The Free Stuff.If you have ever walked through a Las Vegas casino, you likely have been invited to a timeshare sales pitch in exchange for free tickets to something. Avoid these presentations at all costs. The giveaways are just not worth getting talked into making a large purchase you were not intending to make. These sales meetings are notorious for high-pressure sales tactics. One agent after another will apply hard-sell techniques with potential buyers to get to yes.
If you do go and are interested in buying a timeshare, never let a sales agent rush you through the paperwork and signatures. Don’t rely on verbal explanations from the sales team; they don’t count. Ask to see exactly where in the rules or contract terms anything and everything promised to you appears. Many times agents will falsely claim “discounts” offered are “today only” pricing to try to rush through the important information you need to make a decision. Such techniques, depending on severity, could violate a state’s consumer protection laws, but it happens all the time. It’s a psychological game, and the sales agents are skilled at what they do, and they work on commission.
Fortunately, federal law provides a “cooling-off” period for certain consumer sales. Where the sale occurs in a place other than the seller’s place of business (e.g., a presentation hall or conference room), the buyer has a short period of time in which to cancel the contract in full. Many times, the timeshare or club membership contract itself will contain a cancellation period. Once a remorseful buyer decides to rescind a contract, it is imperative to act fast and follow the requirements for cancellation of the contract to the letter.
If you are in the market for a timeshare, avoid the presentation. Instead, check any of the reputable timeshare resale sites before committing to purchase one from a resort or developer. Owners who no longer have need for their timeshares may be willing to transfer title for the cost of the transfer taxes just to be relieved from paying the maintenance fees. Either way, it is important to thoroughly understand the true costs, and the rights and duties of the product before spending any money. Make sure to get an attorney's careful review of any contract you are considering signing.
Understand The True Costs Of A Timeshare Or Vacation Club.Timeshares are unlikely to appreciate in value. Often, a timeshare’s value depreciates right after purchase because of the costs the developers spend on marketing campaigns. Developers and Resorts build into the cost of timeshares and vacation clubs the costs of getting you into the sales presentation, which includes those free tickets they offered you. As much as 55% of the price of timeshares sold directly by the resort developer is the cost of getting potential buyers to attend the sales pitch. Timeshares make poor investments, and any promise that a timeshare will appreciate is not only overblown but is illegal under some states’ consumer protection laws.
Timeshare owners and vacation club members are typically responsible for yearly maintenance or membership fees. Deeded owners pay fees for such things as property tax and maintenance fees and are obligated to pay the fees even if they do not use their yearly allotted vacation time. The maintenance or membership fees can increase yearly, and in some cases, can outstrip the rate of inflation. Many timeshare owners are desperate to get out of their timeshares as the rising maintenance fees become burdensome over time. Read the language in the contract regarding how the annual fees are determined carefully so you can effectively evaluate the relative value of any timeshare offering.
There are vacation club members who claim to make money off the points-based memberships by selling their points in the years they do not use the points. Likewise, some happy timeshare owners are able to rent out their units for their time allotments. Just make sure you understand whether and how you can rent a timeshare or sell points you own before you make a purchase.
Timeshares Can Be Difficult To Resell.Because deeded timeshares are real property, ostensibly, they can be resold. But the chances of making a profit are slim to none. Some timeshare owners report not being able to give away their timeshares. Right to use memberships may be even trickier to get out of. In some cases, the contract does not provide for, or outright prohibits, transfer of ownership to another party. The contract term may only end with the death of the owner. Some timeshare companies will allow owners to relinquish their timeshare back to the company. Whether the company will pay anything to the timeshare owner for relinquishing is unlikely, and even if it did, is not likely to be close to the purchase price. Often, with conditions such as paying off any loans and being current on all fees, the company may allow relinquishment.
The number of owners desperate to get from under a timeshare has created a market for timeshare exit and resale companies that claim to be able to cancel timeshare contracts or sell units. Unfortunately, some of these companies are scam operations and will demand upfront fees, only to disappear into the ether. Legitimate resale companies do exist, but timeshare owners should consult the contract language of their timeshare before going this route. Owners should also inquire with the timeshare company if any relinquishment arrangements can be made before resorting to a timeshare exit company.