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5 Things Buyers Should Know about Timeshare and Vacation Ownership

Whether drawn in by the sprawling beachfront resorts, the travel to exotic places, or the promise of a free, 3-night stay just for listening to their sales pitch, millions each year consider timeshare and vacation club ownership. In fact, the industry itself is an $8.6 billion-a-year juggernaut. So be honest: Have you ever considered timeshare or vacation ownership, or perhaps even sat through a sales pitch from some smooth-talking salesperson?

Those who have will know firsthand that the benefits sound pretty tempting. Again, there’s the potential for yearly travel to beautiful places, and (hopefully) some luxurious accommodations awaiting you once you get there.

For some travelers, timeshare and vacation club ownership makes very good sense and is a purchase that owners and their families enjoy for many years. Regardless, though, this is a significant purchase that requires a level of understanding that, unfortunately, most simply don’t have when they agree to buy in.

Should you buy a timeshare or not? Things to consider.

5 Things to Think About When Considering Buying a Timeshare

1. When Timeshare or Vacation Ownership Actually Saves You Money

One of the primary advantages of timeshare or vacation club ownership is that it enables buyers to lock in future vacations using today’s pricing. However, owners really should be both likely and able to travel each year in order to get the most bang for their timeshare or vacation club buck.

That’s because, even after the initial cost of buying ($16,000-$19,000 on average), owners must pay annual maintenance fees, which tend to run about $700-$1000 per year (and rising) for most units. Those maintenance fees are due whether or not owners are able to use the property, and as such, the inability to travel freely due to financial- or health-related limitations, or simply a preference to take longer or more spaced out vacations, may leave owners paying for an unused asset.

2. It’s Not an Investment

Aggressive, high-pressure sales tactics across the timeshare and vacation club industry have been ridiculed for many years now. Quite often, actually, timeshare and vacation properties are positioned as income or real estate investments by salespeople just trying to close the deal, but what they don’t tell prospective buyers is that:

  • Timeshare sales prices are often negotiable;
  • It’s very difficult to resell the asset if you no longer want it; and…
  • Prices don’t appreciate like real estate and other investments often do

So, while renting out your unit might create limited income opportunities for owners, a timeshare or vacation club membership is not an investment-quality asset. In fact, the combination of the above factors means that buyers almost always pay more for their stake in the unit than what it’s ultimately worth, and those who opt to resell their units commonly do so at a loss.

The timeshare and vacation industry itself even (loosely) admits that sales tactics have been created to position these products for impulse purchase:

‘We’re a sold good, not a sought good….People love the product but hate the (sales) process.’

~Howard Nusbaum, President American Resort Development Association (ARDA)

3. Fees and Transfer Policies

Consistent with the buyer doing their due diligence, it’s important for timeshare and vacation club owners to know the product they’re getting, including any and all fees associated with ownership, ongoing maintenance and the future sale or transfer of the property.

Maintenance fees tend to be the most transparent costs for timeshare and vacation owners, but less-obvious might be prospective fees for, say, banking unused vacation weeks, gifting a week or even transferring outright ownership of your unit to a friend or loved one, or transferring ownership in the event that you no longer want or can use the unit.

The rules, fee structures and pricing are different among the various ownership groups so it’s important for buyers to ask about potential costs, as well as inquire about and independently verify any changes in maintenance or other fees in recent years. That may help clue you in on rising costs of maintenance, or worse yet, uncover a costly special assessment.

4. Options for Unused or Unwanted Weeks

Access Free Financial EducationFor many timeshare and vacation club owners, a big reason for buying is their desire to visit their favorite destination on a regular basis. And for such loyalists, timeshare or vacation ownership makes taking that annual trip to, say, Aruba or a Walt Disney World theme park easier and more cost effective. Travel bugs who want to see new places each year, however, should thoroughly investigate their options for both trading in their unit and trading up before making a decision to buy.

For example, does the company offer friendly policies for banking or trading in weeks that you can’t or don’t intend to use? Some allow owners to pay a fee and save weeks for up to one year, while other programs require you to use it or lose it. Certainly consider these policies and any related fees before buying, as well as investigate if, or how readily, you can trade your unit in exchange for access to sister properties in alternate destinations.

Major players like Marriott, Hilton, Hyatt and the like allow owners to rather freely trade their unit for a similar stay at any one of literally hundreds if not thousands of other properties around the world, while smaller outfits may yield owners less flexibility and fewer choices. As a consequence, some owners will have to then pay to join timeshare or vacation exchange programs like RCI and/or Interval International in order to gain access to more diverse travel options.

5. How to Protect Yourself against Scams and Fast-Talking Salespeople

As with any financial transaction, a buyer’s best and strongest line of defense is  becoming an informed, empowered consumer. Hopefully the above information helps identify which features to look for from any timeshare or vacation club property you might be considering, as well as the key questions to ask to better protect yours and your family’s best interests throughout those sometimes anxiety-filled sales presentations.

In all, four (4) ways to go about avoiding potential scams and/or falling victim to aggressive sales tactics are:

  • Be careful about buying an unfinished property: Artist renderings and a salesperson’s hype may look and sound good, but traditionally, this is where many timeshare and vacation scams have originated. What if the project is never completed, or the project owner sells to another company before completion? The risk for buyers of unfinished properties is simply too high, especially when considering that literally thousands of actual, completed assets are on the market at any given time that are ready for new owners to buy and begin enjoying immediately.
  • Don’t sign anything at the presentation: Remember, this whole situation is designed to facilitate impulse purchasing, and that puts the company, not the buyer, in the driver’s seat. Take back your share of the power by never signing a contract or giving a deposit or other payment on the spot. Exercise your right to leave if the sales tactics become too aggressive; or the deal sounds too good to pass up. Take the contract home with you, think it over and maybe even have a lawyer review the terms to avoid any surprises and ensure that you remain in charge of the transaction.
  • Talk to actual owners instead: Amidst all the glitz and glamour of the sales presentation, it’s easy to forget that there are unbiased sources of information all around you. While onsite, take a walk around on your own and talk to actual owners about their experiences and satisfaction with regards to unit availability and the ease of trading or transfer, fees and maintenance, and the customer service they receive from the company. Armed with honest info from folks just like you, it’ll become easier to make a well-informed and confident decision.

Buy resale, not retail: Selling unwanted or unused timeshares is big business all by itself, and the Internet is a powerful tool that can help prospective buyers locate and purchase a quality property often at a highly reduced price. Tweet: Selling unwanted or unused timeshares is big business all by itself. https://ctt.ec/01DL4+ As such, take time to research reputable purchase and resale sites including Redweek.com, Tug2.net, and even others like eBay and more, where you can compare pricing, availability, and terms. These few minutes spent online can provide helpful information or even shift bargaining power in your favor. Plus, they may even enable you to purchase a property without ever coming face to face with a timeshare salesperson.

DISCLAIMER This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.

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