This Weeks' Topic

Timeshares

Have you ever considered purchasing a timeshare for summer vacations?

Timeshares have been around since the 1970s, but they've developed a bad reputation. Although not all timeshares are scams, it's important to know what you're buying and who you're buying it from.

How does a timeshare work?

Buying a timeshare is a real estate transaction - you're buying property. However, unlike most real property, you don't own the entire interest in the property, only a factional share.

So let's say the vacation resort has 100 suites. You can purchase a share of the property that gives you access to one suite for a week each year. You should get a deed since it is an ownership interest in real estate.

When you are buying or comparing timeshares, are there any hidden fees to watch out for?

Timeshares are attractive to a lot of people because of their low cost, but make sure to read the fine print for hidden, variable and future costs.

For example, there will be an annual maintenance fee which covers taxes, maintenance, and utilities. This fee is still due even if you don't make it out to the resort. Typically there are no limits on future fee increases.

Assessment fees can also be levied in the event of damage or remodeling of the resort - check to see if there are any limits on these fees.

Finally, don't forget the cost of transportation. Factor in a few hundred dollars for air fare or travel each year as well.

What if you get tired of always going to the same vacation spot? Do you have options? For example, what are flex systems?

In a traditional timeshare, you buy a share in one property or unit at a certain time each year. If you get tired of the same vacation spot, you can trade with someone else. There are management companies that can help facilitate a match.

A flex system means that, instead of buying one specific week, you buy one week of time within a season. So each year, you can pick a different week to vacation within that season - weeks are assigned on a first come, first serve basis. Larger companies that own multiple resorts sometimes allow access to any resort within their chain. 

Finally, point systems are the most flexible of all, allowing owners to choose different suites at different times of year by spending points.

It seems that a lot of timeshares have bad reputations. Are timeshares scams?

There's nothing illegal about timeshares themselves. The perception that they are scams comes from a number of factors.

First, some resorts market timeshares as a financial investment. They'll tell you that your share will increase in value in the next ten years. A timeshare is a great idea if you take annual vacations and want to have a resort already reserved for you, but they are not always good financial investments.

The nature of the timeshare market is such that it is almost impossible to make any money on the original purchase price, let alone all the fees and assessments that were paid in over the years.

The Federal Trade Commission is very straightforward about this - their website states that you should not view a timeshare as an investment.

What about the sales pitches that they lure people to buy a timeshare promising expensive, free gifts?

These sales pitches are another reason people distrust timeshares. Not only are the free gift offers sometimes misleading, but you will encounter hard sell tactics at these presentations. They don't usually do anything illegal, but it can be very unethical.

Never sign a contract or agree to anything at a sales pitch. Take a few days to think it over, compare prices, and call the company for more information. Don't trust a few photos in a glossy brochure, either. Ask if you can visit the property before you buy. If it is still under construction, use an escrow service to hold your purchase money until it is completed.

Finally, be cautious of the free gifts. A few free nights at a hotel or an airline ticket are plausible, but if the gift seems too good to be true, don't bother. No one is really giving away free cars or all-expenses paid trips.

Disclaimer
This information is general and may or may not apply to your situation. The information contained on this web site is not to be considered as legal advice. Since no two cases are identical, we recommend that you contact an attorney in your jurisdiction to discuss the specific facts of your case. Furthermore, since statutes and case law change so frequently and due to information provided by other sources, we make no warranty or guarantee concerning the accuracy of the content of this or any other web sites to which we link.