What to Know About Timeshares Before Making a Purchase
A Luxurious Opportunity or a Poor Investment?
What is a timeshare? You may have run across the term when planning a vacation, entering to win a trip somewhere, or even while already on vacation, but what exactly does it mean?
A timeshare is a jointly shared use of a vacation property, where each party has the right to use it for a specified period. If that’s something that’s of interest to you, we’ll tell you more about what owning a timeshare entails and other important information you should know.
Types of Timeshares
There are four types of timeshares: fixed week, floating, right-to-use, or points club. Each scenario has its pros and cons depending on the property, location and ease of booking desirable time slots.
Fixed Week
In a fixed week timeshare, you own the rights to a property for a set week every year. It’s the most restrictive type of timeshare, but may be worth it if attending an event that falls on the same day or week every year, or if it’s in a highly desired location.
Floating
Floating timeshares allow you to choose the week you want to use the property within a given season. However, since you are competing against other shareholders, it can sometimes be difficult to get the exact dates you want.
Right-to-Use
With a right-to-use timeshare, you can lease a property for a certain amount of time and set number of years. However, after your lease is up, all the rights go back to the property owner.
Points Club
Many resorts use points club timeshares and sell them to frequent guests. In this type of timeshare, you accumulate points from the property and other qualifying purchases and can use your points for stays at various locations owned by the company. Points club timeshares can also get pretty competitive especially during high season.
Buying and Selling Timeshares
When buying a timeshare, you’ll typically purchase directly from a resort, vacation club or development company. In most cases, you’re required to attend a 90- to 120-minute presentation, which can include a tour of the facility and its amenities.
Some companies even offer incentives for you to attend these sales presentations, which could include things like theme park tickets, free hotel stays and gift cards.
In general, these are the most expensive ways to buy a timeshare, though. As of 2017, timeshare prices averaged $22,180 USD, with a fair number costing well above that depending on the resort or location.
However, there are now many websites where you can buy or even rent timeshares directly from other people looking to sell theirs. Sites like RedWeek, SellMyTimeshareNow, and even eBay offer marketplaces or act as brokers for buyers and sellers.
Unfortunately, timeshares are notoriously difficult to sell once you buy into one. Values for properties go down significantly after purchase because the original price is often an inflated rate or includes costs for things like marketing and advertising.
In some cases, these online marketplaces and timeshare brokerage companies may be the only way to get rid of an unwanted timeshare, although they do charge a fee to do so. Resorts will also buy back timeshares of their properties, but only at a fraction of the price. In a sense, it’s a lot like trading in a car except you don’t own the whole car and the salesperson doesn’t want to buy it back from you if he can help it.
Timeshare Scams
Timeshares haven’t always had the best reputation, but they aren’t all bad. Sadly, it’s not always easy to wade through the bad to get to the good. There are a lot of timeshare scams out there.
Sometimes sales presentations promise extravagant prizes that then turn out to be fake or are only given away with the purchase of a timeshare. Salespeople can get very pushy, convincing you to buy even if you can’t actually afford the timeshare. And in some cases, you may be buying something that hasn’t even been built yet or which isn’t properly maintained.
One of the biggest timeshare scams right now preys on people trying to resell their timeshares. Often it starts with a sales call where they promise to resell your timeshare for you. The catch is you have to pay them upfront for “marketing fees” or other fake costs. After you give them your credit card information, scammers will take your money and run.
To combat scams, keep these things in mind:
- If an offer seems too good to be true, it probably is.
- Read the fine print, or even better, have a lawyer read it for you.
- Ask to take the paperwork home with you. Try not to make it an impulse buy.
- Buy from a reputable resort or reselling company.
- Don’t buy into something you haven’t actually seen in person.
- Don’t give out your information from an unsolicited call.
- Don’t ever pay a broker upfront. Legitimate companies will take a portion of the sale.
Popular Timeshare Destinations
Timeshares are available on every continent except Antarctica, although the majority are found in the United States. Most timeshares are found at summer vacation destinations, particularly if they’re on or near a beach.
The most popular timeshare destinations are Florida, Hawaii, the Caribbean (particularly Aruba, Barbados and the Bahamas), Mexico and South Carolina.
RedWeek listed the top 25 timeshare rental resorts for 2018, and the majority of them were either Disney or Marriott properties. Disney’s Beach Club Villas in Lake Buena Vista, Florida was ranked number one overall by timeshare owners registered on their site.
However, there are winter timeshares as well, which are usually found at ski resorts. Popular winter timeshare destinations include Utah, Colorado, Canada, Austria and France.
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Fractional Ownership
When looking for a timeshare, you might also come across something called “fractional ownership.” Although the concept is similar to a timeshare, your purchase in a fractional ownership is deeded meaning you actually own a part of the unit and its value.
Fractional ownerships also have fewer people splitting time within a given year, giving you more flexibility for your stay. While a timeshare can have up to 52 people sharing a unit, fractional ownerships typically have around eight and can trade off on when they use the property.
In general, fractional ownerships are offered for homes and villas, whereas timeshares tend to be resorts, hotels, apartments and condos. Timeshare pricing can be inflated up to 10 times the actual value of the property whereas fractional ownership will be listed closer to the real estate value, split among all owners.
As a result, fractional ownerships are seen as more luxurious and are more common at high-end resort destinations. Some of the most popular fractional ownership destinations are Aspen, Lake Tahoe and Jackson Hole in the United States, Bermuda in the Caribbean, and Cabo San Lucas in Mexico.
Things to Keep in Mind
Just because you pay for a timeshare upfront doesn’t mean you get to use it when you want to or even that you’ll use it all. However, you will have maintenance fees to deal with whether you’re using your unit or not; fees for annual maintenance average around $660 USD.
And since you don’t actually own the property, or have equity in it, it’s almost impossible to recoup on your investment. In fact, it’s a lot easier to buy a timeshare for resale because there are so many than to sell your existing timeshare.
Most timeshares do allow you to rent the share out, sell it, exchange it, or in some cases pass it on to your heirs. If you’re unable to sell it, you also have the option of donating it to a charity but don’t expect a huge tax write off. The IRS only allows you to deduct the fair market value, which has to be calculated by a qualified appraiser.
In short, do your research and weigh the pros and cons of a timeshare offer before purchasing. If you visit the same, highly sought after destination year after year without fail it might be a good fit for you, but otherwise, it might not be worth the money or the hassle.
