Vacation timesharing, or using a home for a limited, preplanned time, has become a popular way of taking a vacation. Many timeshare programs are highly regarded, but others are little more than real estate swindles. You should consider the risks, as well as the benefits, before signing a contract or a check.
What are Timeshares?
Modern timesharing started in Europe many years ago and was simply an arrangement whereby a number of parties joined together to buy and run a holiday resort for their mutual benefit. It worked well, and the idea spread throughout the world.1
There are two main types of timesharing plans: deeded and non-deeded. With the deeded type, you buy an ownership interest in a piece of real estate. In the non-deeded plan, you buy a lease, license, or club membership that lets you use the property for a specific amount of time each year for a stated number of years. With both types, the cost of the unit is proportionate to the season and the length of time you want to buy.2
Before You Buy
As with any major purchase, you need to understand what you are getting before you sign any papers or pay any fees. The general information should be accompanied by careful analysis and perhaps even professional advice that concerns all aspects of a particular timeshare purchase.
Before purchasing a timeshare consider the following points.3
How Timeshare Resale Scams Operate
If you already own a timeshare, be cautious about people who offer to help you resell the timeshare for a fee. Because many of these types are rip-offs, be careful to deal only with legitimate sales companies. Companies that use questionable resale practices operate like many other telemarketing scams. You might be contacted by a telephone salesperson or through a postcard, asking you to call a particular telephone number about selling your timeshare. The salespeople are likely to tell you that the market for resale of timeshares is “hot” and that their company has a high success rate in reselling these units. They may even claim that they have extensive lists of sales agents and potential buyers for timeshares and for an advance fee of hundreds of dollars these salespeople promise to sell your timeshare for a price equal to or greater than the amount you originally paid.7
The market for resale is actually extremely poor, because there is no secondary market for timeshares.8 Currently American consumers own 1.5 million timeshares. Approximately 870,000 of these are presently available for resale, with 845,000 for sale far below the original purchase price. In truth, over the past 20 years, only 3 percent of owners who have wanted to sell their timeshares have been successful, and the vast majority of those have had to sell below their original purchase price. So, it is highly unlikely that a company can sell the timeshare at all, let alone for the original purchase price.
There are some precautions to consider if you decide that you want to resell your timeshare and are approached by a resale company. (1) Do not agree to anything over the telephone. (2) Ask the salesperson to send you written materials to study. (3) Ask for company references of customers who have used their services. (4) Ask where the company is located and in what states it does business. (5) Ask if the company’s salespeople are licensed to sell real estate by the state where your timeshare is located, and check with the state licensing board to verify the information. (6) Be cautious of any company charging an advance “listing” fee for its service.9
Timesharing is not an investment product and is not intended as a way of making money. It is, though, a financial commitment to your leisure enjoyment. So, how much is leisure and preplanned vacation time worth to you? This is the question that must be asked before you decide to buy a timeshare. If it is not worth thousands of dollars in initial investment, plus hundreds more in maintenance fees, then you should probably stay away from timeshare promotions. But if, on the other hand, you enjoy preplanned vacations and realize that timeshare is not a money making investment, then it may be a good choice for you.
4 www.accessatlanta.com/partners/clarkhoward/ cliffnotes/tips/timeshares.html
5 www.accessatlanta.com/partners/clarkhoward/ cliffnotes/tips/timeshares.html
6 www.triwest-timeshare.com/InThePress/4-14-97/ BusinessJournal.html (Link no longer valid)
8 www.wutzon.com/scams/scams.htm (Link no longer valid)