Timeshares are mysterious to many consumers, and they have questions about them—is a timeshare worth it?…what are some timeshare pros and cons?…what are the advantages of a timeshare? For guidance, Bottom Line Personal spoke with Brian Rogers, owner of Timeshare Users Group, which advises consumers on all matters concerning timeshares.
What Is a Timeshare?
Recently, the timeshare industry has stopped using the word “timeshare,” thanks to decades of bad press. Instead, it is pushing the term “vacation ownership,” but we’ll stick with “timeshare,” since that’s what the public still calls it.
Traditionally, a timeshare was fractional equity in a vacation property along with many other owners. Example: Say you loved spending Christmas week in a particular resort in Jamaica. You could purchase a timeshare giving you ownership rights to that unit for that week each year. This “deeded week” was the primary model of timeshare ownership for decades.
But the industry has all but abandoned that model today, favoring a points system similar to airline miles. You buy into a resort chain and get a certain number of points that are redeemable at properties throughout the system. The flexibility of the points model reflects modern consumers’ preference for variety rather than having to repeat the same vacation each year.
How Do Timeshares Work?
Under the traditional deeded-week model explained above, you enjoyed the right to vacation in your favorite spot every year in perpetuity.
Today’s points model may offer different contracts and durations, including…
- Rights in perpetuity
- Rights-to-use contracts that expire after 20, 30 or 50 years
- Hybrid of the two models.
Despite the industry’s shift toward points-based systems, a wide range of ownership types still exist, including fixed weeks, floating weeks and vacation club memberships. Each offering has very different rights, flexibility and usage options. This variety can be confusing, which is why it’s so important for prospective buyers to fully understand what they’re purchasing before committing, rather than trying to figure it out after the fact.
Costs of Timeshare Ownership
Purchase price: The single biggest timeshare expenditure is the upfront purchase price. The average cost today for the equivalent of a two-bedroom unit is $25,000.
Additional costs: Buying into a timeshare makes you a partial owner, similar to purchasing a condominium. You must pay maintenance fees annually, which typically run between $1,200 and $1,500. And occasionally, you may be hit with special assessments when the company faces unforeseen budget items such as major repairs or renovations as these costs are shared among all owners.
Pros and Cons of Timeshares
At first glance, timeshare ownership can be appealing.
Pros
If you like resorts with great amenities and commodious personal space including full living rooms and kitchens, a timeshare for families beats cramming into a hotel room. A hidden value comes from being able to prepare meals instead of dining out, and that can easily save hundreds of dollars on a single trip. On top of that, if you’ve done all your research and make full use of ownership, it’s possible to save even more money compared with booking resorts independently, which is the entire appeal of timesharing itself.
Cons
There are good reasons why timeshare sales take place in high-pressure environments. Salespeople emphasize the timeshare benefits and leave out the timeshare drawbacks, including…
The economics of timeshare ownership often don’t withstand scrutiny. Example: Let’s say you pay $30,000 outright for a timeshare plus $1,500 a year in maintenance and other costs for the rest of your life. Will that really be cheaper than shelling out a few thousand dollars each time you stay in a resort?
Points are not the same for all properties. Salespeople often say, “Don’t worry. These points can be used at our properties worldwide.” In reality, point requirements vary widely by resort, season and unit size. Without doing research ahead of time, many owners find their annual allotment falls short of the types of vacations they originally had in mind.
Result: These hard facts account for the enormous timeshare-resale market. Tired of paying maintenance fees, thousands of disappointed owners are trying to sell out of their timeshares. And while salespeople encouraged those buyers to view ownership as an investment, they quickly learn that they must either figuratively or literally give away their timeshares for far less than they originally paid.
How to Exit a Timeshare
There are only three ways to unload a timeshare…
Give it back
Some companies have deed-back programs and will accept your surrendered timeshare. Many of these programs require the owner to pay a fee to surrender their ownership and end their maintenance fee obligations.
Sell it
List it on an online platform. Timeshare Users Group, Ebay, Redweek and Facebook Groups all are valid outlets to try to find a new home for your timeshare. Getting even 10% of your purchase price back would be a coup. Most timeshares sell for $1 or even $0, with many sellers offering to pay closing costs or the next year’s maintenance fees. Buying a timeshare is easy…getting out of one is far more difficult!
Default (last resort)
If all other options have been exhausted, some owners consider stopping payments. But defaulting on a loan used to purchase the timeshare can damage your credit. Even falling behind on maintenance fees may lead to collections or other consequences. In most cases, resorts may reach out to discuss surrender options, since foreclosure can be costly and time-consuming for them—but this is not guaranteed. This approach should be considered only after fully understanding the risks and deciding which bad idea is worse—stopping payment or paying forever.
Timeshare Scams and Consumer Protections
Beware so-called “timeshare exit companies” that promise to intervene to get you out of your unwanted timeshare, usually for around $5,000 to 7,000. All they do is have you stop paying, as described above—and that is something you could have done yourself for free. States have put some such companies out of business, but plenty of others remain and convince thousands of owners to pay millions of dollars every year to stop paying for their own timeshares.
Ironically, some developers have adopted this strategy and now offer to “let you out”—for a hefty fee, of course. The tradeoff is that you’re working directly with the resort, which may help you avoid credit hits or collection activity that can come with simply walking away.
In reality, most owners end up choosing the least painful option since a perfect one likely doesn’t exist. That’s why knowing all your options is critical—it puts you in control to allow you to make an educated and informed decision about what’s best for you and helps you avoid the scams that target owners looking for a way out.
