Compensation in the form of free entertainment tickets, five-star dinners, reduced-priced trips, or gift cards for attending timeshare presentations might be worth a couple of hours of your time. But are vacation timeshares worth the money in the long run?
While it might be hard to say no to these free or great “sale” priced offerings in exchange for your time, you’ve been burned before ignoring the old saying – when it sounds too good to be true, it probably is.
You’ve also heard some bad things about timeshares, yet they seem so popular. So what’s the truth about timeshares?
Read on to see if all of the negative press is valid or if timeshares could be worth the money by saving you on vacation expenses over the years.
What is a Timeshare?
A timeshare is a deeded interest in a specific resort-type property. Even though you only own a small part of the property, you usually have voting rights and a voice in operation and maintenance of the resort. According to Lisa Ann Schreier, The Timeshare Crusader, “more often than not today – timeshares sold in the US are not deeded property at all.”
Schreier has been writing about the timeshare industry and educating consumers on timeshare matters for more than 15 years. She says it’s important to ask and understand what type of ownership if being offered and what you’re rights as an owner will be.
According to the American Resort Development Association (ARDA), overbuilt condo projects were converted to timeshare resorts in the 1970s.
Early timeshare purchases were “fixed” for a specific time period (usually a particular week) each calendar year. Variable vacation periods or floating weeks at specific resorts became a popular deeded option for buyers over the next decade. Many timeshares now run on a points-based system.
“Right To Use” (RTU) timeshares are a subset of each of the three types of timeshares. In an RTU, you don’t actually own a share of an RTU property. Instead, you lease a part of the property from a developer for a specific period – usually decades. These properties offer more flexible arrangements for travelers.
Are Vacation Clubs Different?
Vacation clubs are another option providing more flexibility than timeshares. In vacation clubs, groups of people share access to groups of vacation properties. When you join a vacation club, you’re basically joining an organization that advertises discounts on a variety of travel-related products and services.
Vacation clubs usually work on a points-based system. Properties are located all over the world, and some even include cruises. Many vacation clubs do use timeshare properties as travel options.
You aren’t guaranteed a particular week or time period with a vacation club. While there are more options to choose from, it is often challenging to book accommodations during peak season.
How Many Own Timeshares?
You may have read or heard from others that timeshares are bad investments and not worth the money. Some even say to consider timeshares liabilities, not investments at all.
With all the bad publicity and so many other ways to book travel, it might surprise you that over 7% of all households in the U.S. own some type of shared vacation product. That’s over 9 million owners who think (or once thought) timeshares worth their cost!
With the average timeshare price approaching $22,000 (without fees), the timeshare market is still growing. As people flee the snow and cold, timeshare sales increase during spring break months.
About half of all buyers purchase new units from a developer, and the rest buy timeshare resales. The ARDA reports there are over 1,500 timeshare resorts in the US and over 5,000 in the world.
While some people want the newest and most luxurious options, there are thousands of timeshares available for purchase at any time. A quick check on eBay shows you can buy some timeshare resales for as low as $1 at certain resorts.
You can also purchase hundreds of thousands of vacation club points for specific properties for $5.
If this raises red flags to you, it should. But before we consider all of the drawbacks of buying timeshares, let’s take a look at reasons people buy them in the first place.
What Makes a Timeshare Seem Worth the Money?
- Your week is yours. Spending vacation time at your favorite “away from home” destination is a big bonus. When owning a fixed timeshare, you don’t have to worry about booking a place at your popular vacation spot months in advance. Your week is deeded to you at purchase. And you know the quality you are getting too.
- No fuss lifestyle. Some believe timeshares are worth the money because the units are more spacious and usually offer more amenities than hotels and other vacation rentals. When you buy a timeshare, you’re buying a “lifestyle,” and you can focus on relaxing and doing the things you enjoy. Timeshares are much less expensive than buying a vacation home too. And when you leave, you don’t have to worry about it sitting empty or dealing with renters or property managers.
- Plenty of easy options. Timeshares are easy to buy, and there are many options and locations to choose from. If you want to vacation at popular beaches, ski at top resorts – there’s a good chance you can find a timeshare property. The prices vary widely depending on the time periods and locations you choose. Timeshares may also offer rewards programs and other discounts to owners.
- Feeling invested. Some prefer timeshare ownership for the same reasons they join gyms. If they’re paying for something, they’re more likely to use it. After buying a timeshare and paying all the associated fees, you might side with a growing number of workers who are realizing the importance of using their vacation days. If you can’t get away for some reason, renting or “gifting” your timeshare week to someone else might be an option.
Drawbacks of Buying a Timeshare
There are some great perks to owning a timeshare, but there are plenty of disadvantages too.
- On-going costs. One of the most significant issues with owning a timeshare is the amount of money you have to spend each year. If you don’t buy the timeshare outright, you’ll have a mortgage to pay in addition to a long list of fees. You will be responsible for property taxes, maintenance, utilities, and special assessments – averaging about $1,000 a year.
- Complicated resale. Selling a timeshare isn’t easy, and you’ll likely lose money when you sell – if you can actually sell it. Some people essentially give away their deed to get out from under the annual costs of owning their timeshare. People who can’t sell sometimes get taken by scam resellers who charge big upfront fees and guarantee a sale. You can probably guess what happens next – they lose their money and still own their timeshare.
- Foreclosures. The real estate developer can foreclose on the timeshare if you don’t pay the mortgage and fees. While you may not have to worry about the timeshare after a foreclosure, your credit score will be negatively impacted. You’ll pay higher interest rates, and there’s even a chance you could face wage garnishment if you’re subject to a deficiency judgment.
- Rules. If you’re thinking of renting your timeshare when you can’t use it – you might learn that’s not allowed at all resort properties. And if you want to purchase a timeshare where you have more flexibility in scheduling, you might find it is booked solid during the weeks you’d like to vacation.
- Longevity. Most timeshares sold in the U.S. also have a perpetuity clause. This means the timeshare contract extends beyond the owner’s death – making it very difficult to break. While passing your paid off timeshare to your kids or other relatives when you die may sound generous, it can cause significant problems. If they don’t want the timeshare, the executor of your estate will have to pay the timeshare fees until resolving all the legalities.
Is Buying a Timeshare Worth the Money in the Long Run?
You might think it’s easy to just say no to signing a contract after a timeshare presentation. But walking away with just the “freebie” or a cheap vacation might be harder than you think.
Many people say that even though they had no intention of buying one, they almost changed their minds. The sales people are that good.
Don’t purchase a timeshare out of guilt – as many people (especially senior citizens) do. Also, do not purchase in haste. Schreier added, “if it’s a good deal today, it will be a good deal tomorrow or even next month.”
Regulations now exist to help protect consumers from high-pressure sales tactics. If you buy a timeshare and quickly regret it, you may have options for getting out of the signed contract.
The most important things you can do if you’re considering a timeshare purchase is to take time to read every word in the contract. You’re given a mandated legal rescission period ranging from 3-10 days.
If you change your mind and decide to cancel during this period, it’s imperative to follow the instructions that are in the contract. The instructions may be difficult to find in the myriad of paperwork. The developer may not honor your decision either.
Don’t believe there are only a few units left or that buying a timeshare is a great investment you can pass on to your kids. You’d be giving a gift continuing to cost them money every year. Is that what you really want to do?
With all of the cons of owning one, does anyone believe purchasing a timeshare is worth the money? Certainly.
If you fully understand the contract, enjoy traveling, and if it fits your lifestyle – buying a timeshare might pay off. If you can easily afford the initial purchase and the ongoing fees over the years, the money might be well spent. But that isn’t the case for many people who go to timeshare presentations.
Schreier suggests consumers “avoid these four words in all timeshare related matters; free, perfect, always, and never. Free and perfect don’t exist and always and never are exceedingly long periods of time.”
Renting at a resort is generally less costly upfront and in many cases, you can rent for less than many owners pay in annual maintenance fees! It also allows a lot more flexibility while reducing risk. With as difficult as it is to sell a timeshare, not buying one may be the most important decision you make.