For some people, timeshares are a good option. Timeshares can guarantee you vacation time since they often come with fixed annual dates for right-of-use. On top of that, timeshare resorts typically offer larger accommodations (often two bedrooms or more) and more in-room amenities, such as kitchens and washing machines, than a hotel room. Timeshare owners can also “exchange” their shares for accommodations at other resorts around the world.
The image of timeshare owners as elderly seniors has changed too, with timeshare owners becoming younger and more ethnically diverse with a median age of 39 for owners, and more than 40% of U.S. owners either African-American or Hispanic. Nearly three-quarters of owners have college degrees and 23% have graduate degrees, and have a median income of $100,000.
Here are some things experts say to keep in mind before you buy a timeshare:
Don’t pay full price
Like most real-estate transactions, the price is usually negotiable. The timeshare industry likes to point out that over a 20-year period, a family of four could save over $25,000 on accommodations by staying in a timeshare compared with what they would pay for hotel stays. Nevertheless, considering how many options you have when it comes to vacations, you’ve got the leverage when it comes to price.
The “hard-sell” approach from some timeshare companies can be very unsettling and often the reason why timeshares continually get mocked is the way they get sold. People don’t go out and say ‘I want to buy a timeshare today’, it’s sold as a heavy impulse buy.
Know what you are actually buying
It’s also important to know what kind of real estate interest you actually own when you purchase a timeshare. In about 95% of timeshare sales in the U.S. you get a deed to a property, called a “timeshare estate” under state law, which often means you can rent the share out, sell it or exchange it, and pass it on to your heirs. You do have to pay the maintenance fees each year, just like property taxes and beware, if you don’t make your payments, the timeshare company can foreclose.
If you are buying a timeshare in an unfinished property, the Federal Trade Commission recommends that money should be placed in an escrow account registered to a local bank until the property is completed, and include a “non-performance” clause in the sales contract. That way, the timeshare developer goes bankrupt or defaults before the property and unit are finished, you can get your money back, the FTC says.
Because timeshare companies know that you can likely find cheaper options from existing buyers, they usually offer closing incentives and other perks. But those perks don’t usually recoup the money you would save from buying from an existing owner. Websites such as Timeshare Users Group and RedWeek.com, are great sites to visit if you are seriously thinking about buying a timeshare.
Know your state’s right of refusal on timeshare contracts
Because of many documented cases of abuse on timeshare sales and resales, most states have put in fairly generous opt-out clauses for consumers, known as the “right of rescission.” Typically consumers can have up to a week to rescind a sales contract for a timeshare, for any reason. In Florida, for example, where nearly 25% of U.S. timeshares are located, it is 10 days, and money must be refunded back to the consumer within 20 days after receiving a cancellation notice.
Be wary of any company that requires you to sign the contract documents in a different state than where you plan to buy as you may be entering into a contract in a state that has fewer protections.
If you opt out, the FTC recommends you send a letter via certified mail or hand-delivered with a signed receipt. In addition, be sure to keep records of any correspondence and who you talked with, the FTC says.
Beware of scams
Some dissatisfied timeshare owners may encounter a scheme where they’re cold-called and offered a “buyer” for their timeshare, typically for an inflated price over the price they originally paid. “If someone calls you up to buy something from you that you haven’t advertised, you should hang up,” says Gary Prado of Red Week.
It isn’t a real-estate investment
Nusbaum, ARDA’s president, cautions that timeshare properties aren’t for those who are looking to make money on real estate but for planning future vacations. In addition, he says, to get the most out of a timeshare, you have to use it.
You could call these a notoriously lousy investment if you could call them an investment at all, but you can’t because what real investment is guaranteed to lose 30% to 70% right off the bat?
That is, unless you buy used. There’s a huge number of folks who caved into three hours of hard sell and are now desperate to dump their shares.
Exception: Some of the higher-end properties in exclusive resorts don’t lose much value, and may offer benefits like frequent-flyer miles that could be worth the extra money if you buy from the developer. Before you buy, though, check resale values online; don’t take an agent’s word for how much depreciation to expect. Also, a relatively new type of expensive time share, called a fractional interest, may actually gain in value over time.