What To Know About Timeshares Before Purchasing

Sep 27, 2019
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You won’t find much variation in opinions among financial planners when it comes to timeshare membership from the investment perspective. Unless you’re the developer, you shouldn’t expect to make a profit from buying into one, nor should you view a timeshare as an asset that has the potential to grow in value. Fundamentally, a timeshare is one of many options for enjoying a planned vacation every year, and arguably, one with a number of possible downsides, depending on your situation and travel style.

On the other hand, the many attractive incentives offered by premier travel brands could make a compelling case for attending a timeshare sales presentation—for those motivated by free offerings ranging from hotel stays, tickets to major attractions and restaurant vouchers, to complimentary vacation packages in popular destinations. If you decide it’s worth hearing them out in exchange for these freebies, be sure to come prepared with this basic knowledge to remain in control of your money and time:

Be prepared for a hard sell: In most cases, you’ll be required to attend a 90-minute sales pitch and possibly take a tour of the resort. If you don’t fulfill this obligation, you’re be on the hook for the full price of your stay, or won’t be entitled to their free offerings. And although not every company uses highly aggressive sales tactics, you should come ready for this kind of encounter, and for the possibility that the sales team may try to keep you longer than the stated time.

Factor a screening process into the experience: Keep in mind that the company will want to ensure that you meet their eligibility criteria before putting you through their sales pitch process. Many will need to know that you meet a certain income level and are over the age of 25 or 30 (the age varies). Additional qualifications may apply, and you’ll have to present a valid major credit card.

How a timeshare works: Essentially, a timeshare membership is an arrangement in which people own the right to use a shared property for a certain period of time every year. In addition, most timeshares enable members to exchange the use of the property for other vacation destinations. As NerdWallet explains, timeshares may include a specific week or two of each year, or “floating weeks” that can change from year to year. Alternatively, a member may use “points” to make reservations at timeshare resorts. Because the title is held by the developer, a buyer’s equity won’t increase in value over time, or fluctuate with the real estate market. Debt.org clarifies this point in “Timeshares: Are They A Good Investment?”

What timeshares cost: If you’re paying full retail price, you can typically expect to hand over approximately $16,000-$20,000 and upwards for your timeshare membership, which will include an initial payment as well as regular maintenance fees. According to NerdWallet, annual fees average about $900, but may total $3,000 or more for upscale properties. Importantly, timeshares can be very difficult to sell as they often come with perpetuity clauses that don’t allow “voluntary surrender.” As Debt.org explains, you can’t simply give your timeshare back to the developer for free, and this clause even extends to your heirs. This way, the developer can keep on generating income from their maintenance fees.

Don’t let them rush you into buying: It’s fairly common for companies to use a team of trained salespeople and managers that are adept at countering every conceivable objection, and able to present a convincing argument of why you must act urgently to secure the deal. In hindsight, it may seem ludicrous that you would consider racing through such a major financial commitment, but don’t underestimate the sales dynamics in play. Even if you’re quite comfortable with voicing a firm but polite no in the face of pressure from someone who wants your business, you can find yourself drawn in despite your intentions if you don’t have what Lifehacker refers to as an “exit strategy” in mind.

If you do decide to buy, don’t overpay: On the secondary market, an owner might sell a timeshare for 10 percent of what they originally paid, and memberships have been known to appear on sites like eBay for as little as one dollar. So even if a timeshare fits your particular vacation priorities and your budget, you will probably want to think twice about agreeing to pay full retail price for a membership. In many cases, you’ll get better value by buying from owners on reputable sites like TUG2.com (Timeshare Users Group) or RedWeek. In addition, these online marketplaces allow you to rent timeshares from owners. However, as The Coalition to Reform Timeshare points out, you aren’t likely to find highly visible brands like Disney, Marriott and Hyatt available for purchase at rock-bottom prices. These companies monitor their resales closely to protect their brands and inventory quality. Find tips and a few words of caution on buying a timeshare on the secondary market at Consumer Reports.

Don’t let guilt creep in: Just in case you’re concerned about the prospect of accepting a company’s perks without making a purchase, these facts should assuage your discomfort. First, companies that provide timeshares are well aware that only about 1 in 10 attendees of their sales presentations will enter into a timeshare contract, and they build this into their marketing budget. Secondly, these kinds of sales pitches are an effective way to showcase a resort’s facilities and value to enhance opportunities to earn your repeat business. Finally, don’t forget that the company has a captive audience that will help them to increase exposure of their brand, and might turn out to be a lucrative source of referrals to family and friends.

 

 

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