Timeshare Basics

Since consumers continue to attend timeshare presentations having done no research and timeshare owners sometimes forget the basics, I thought it would be good to go over some basic information. 

What is timeshare?

In the most basic terms, timeshare is buying and owning your vacation accommodations, as opposed to renting a hotel room, resort room or vacation home.  The difference between timeshare and whole ownership of a vacation or second home is that you only purchase and own the amount of time that you plan on using each year.  

 

How do I buy a timeshare?

Timeshares can be purchased on the primary market, i.e. from the developer, or on the secondary market from an existing owner.  Developer sales are generally onsite at the resort, while secondary market sales can occur online between consumers, via a licensed broker, or in some cases through the developer.

 

Can I sell my timeshare?

In most cases, the legal answer is “yes.”  Although the value of the timeshare maybe far less than what you originally paid (see below) and some timeshares sell easier and faster than others. Timeshares can be sold if you no longer want/use it.

 

Why is the resale value of my timeshare so much less than what I paid for it?

Timeshares purchased on the primary market, e.g. from the developer, include the cost of building plus the cost to sell plus the profit margin, just as with any other product. Combine that with the fact that there are millions of timeshare units for sale on the secondary market and the fact that many developers are restricting the rights and benefits to secondary market purchasers, the value of most timeshare is considerably lower than most owners realize. It is simply supply vs. demand vs. benefit.

 

Is timeshare a real estate investment?

The short answer is NO.  Even if a timeshare is backed by physical real estates (and many timeshares are not), a timeshare should not be thought of as a real estate investment as a house, condo or other types of general real estate may be. A timeshare can be thought of as an investment in your future vacations.  You pay upfront now so that you can have vacations later.

 

What is the difference between timeshare weeks and timeshare points?

Timeshare weeks are the standard and are the simplest to understand and use.  Owners have the right to use 8 days 7 nights, consecutively per year, at a home resort or at another affiliated resort.  Point systems vary from developer to developer and from exchange company to exchange company, but all operate under the same premise; owners use their points as the currency to make accommodations and other reservations.

 

Can I donate my timeshare to a charity?

No charity will accept a timeshare due to the ongoing annual fees involved.  If you receive a call from anyone saying otherwise, promptly hang up. 

 

What happens if I stop paying my annual maintenance fees?

As mentioned above, timeshare ownership carries with it benefits and responsibilities.  One of those responsibilities is to pay your share of the annual maintenance fees levied by the resort.  Failure to pay these fees may result in losing your ownership rights and in many cases lead to a foreclosure, which can have a significant negative affect on your credit and your ability to purchase a major item or even obtain employment in the future.

 

What is an HOA and what does it do?

Your HOA or Home Owners’ Association is in charge of the management of the resort or in some cases, responsible for the hiring of the management company of the resort.  HOA duties include assessment of annual fees, budget, and/or special assessments, the day-to-day operations, determination of expenditures or improvements and staffing of the resort with the exception of the marketing and sales departments.  Individual owners are encouraged to get involved in their HOAs.

 

Is a timeshare the same as a vacation or travel club?

No.  While vacation and travel clubs differ, they are both are distinct from timeshare in that a vacation or travel club involve a membership vs. ownership rights.  If you are considering a purchase of a timeshare, vacation club or travel club and are unsure of the differences, do your research before committing to anything.

 

I just received a call saying that someone wants to buy my timeshare…what should I do?

Hang up. It’s undoubtedly a scam. 

Is Your Timeshare Worth More Than A Box Of Hotel Receipts?

Many, many, many years ago when I was a struggling timeshare salesperson, blissfully ignorant of anything but what my sales trainers had drilled into my head, I was often met with this question from my clients: “Can I sell the timeshare if I don’t want it anymore and for how much?”

The answer was always the same: “Yes, you can sell it. Let me ask you this, how much can you sell 25 years of hotel receipts for when you’re done vacationing?”

The first part of the answer was, and remains true. The right to sell your timeshare interests is part of the full bundle of rights. As to the so-called resale value of the timeshare, I never presented the timeshare as an investment and since resale value is based on many things, including supply and demand at any given time, I could not and did not provide a number, but rather reframed the consumer’s question. 

20 years later, it strikes me that both the industry and the owners have forgotten about my reframing question about hotel receipts. I think it’s high time we get back to looking at the truth. 

No matter what you pay for a hotel room over the years and no matter if there’s any inflation in that rate, the fact of the matter is that if you vacation and stay in hotel rooms, the cost of those accommodations is money spent not to be recouped. None of it. 

If you instead choose to purchase a timeshare, depending on many factors including what type/brand involved, you have a choice to sell it when you’re “done” with it and possibly recoup a minimal amount. What is a minimal amount?  Let’s use $1,500 as an example. 

If you purchase the right timeshare for your needs, you’ll probably have nicer/better/roomier/more luxurious accommodations than a typical hotel room you’d normally stay at. The resorts will probably have more amenities and if you’re smart enough to avoid the oh so incorrectly named “concierge” people pestering you for a sales pitch, oh sorry a resort overview, every time you check in, your stay will be better than a hotel in the area. 

Don’t get me wrong...you will pay for this. You’ll probably pay more than you would for a hotel. That’s your choice. If you believe the money saving pitch your salesperson plied you with without doing any research, that’s your fault. Generally speaking, you pay more for nicer things. 

But here’s the thing; I don’t know where or when the price you could sell your timeshare after 20 years became such a big deal. So what if you paid $20,000 for it and could only sell it for $1,500. I assure you that box of hotel receipts can not be sold for $1,500. 

There are much bigger issues to deal with...the restrictions that developers place on secondary market purchases comes to mind.  More on that in a future post.