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Authored by John A. Weeks III, Copyright © 2008, all rights reserved.
For further information, contact: john@johnweeks.com
Step #1 |
Understand fractional ownership. Owning a timeshare property is much like owning a townhome or condo unit, with the exception that your ownership is limited to a specfic time period during the year. A timeshare has a deed and a property descritpion just like any other real estate. It is recorded in the county courthouse just like other real estate, and it requires property tax, insurance, a title, title insurance, and a formal closing like other property. The one difference is that the property description will have a time element included. That is key since if you don't like the time slot, you essentially have to sell your unit and buy a new one to get a different time slot. Two more rules that apply to real estate may be important here. First, understand that nothing that the salesperson tells you is binding since in real estate matters, the only thing that matters is what is in writing. Second, since these purchases are legally recorded, they are very difficult to un-do. |
Step #2 |
Red, blue, and white weeks. The key difference between a condo and a timeshare is the time factor in ownership. A unit owner typically gets one week per year. That week nearly alwasy starts at noon on Sunday, and ends at noon on Saturday, but this varies at different resorts. Some resorts offer points that can be used at different times of the year. This is more flexiable, but the best weeks often require more points that you are allocated in a given year, so you get to visit less often. The very best weeks of the year are called Red weeks. They are in the most demand. The middle demand weeks are called Blue weeks, and the off-season weeks are White weeks. The Red and Blue weeks will typically cost more than White weeks, however, most White weeks are truely times that you would typically not want to visit the resort. Think of Minnesota when it is minus 20 degrees, or Bombay during the rainy season. While you should ultimately pick the time that works the best for you, keep in mind that anything less than a Red week will hurt resale value and be hard to trade. |
Step #3 |
Do not get sold down the river.
Never allow yourself to be sold a timeshare. Don't get involved in the
high pressure sales events. It is not worth the TV set or whatever they
offer to give out. Timeshare sales commissions are so high that it is
worth whatever mind games and illegal tricks that they can think of to
get you to sign on the bottom line. If they tell you that this is a
unique property, read that as the market is almost flooded. If they say
it is a limitied time offer, know that they have more units on the drawing
board ready to go when yours is sold.
The best way to buy a timeshare is to be a buyer. You are the one who needs to research resorts, then find out who has units for sale. The Internet makes this relatively easy. The secret of the industry is that many timeshares end up being abandonded and foreclosed. You can buy these repo units for next to nothing. For example, a $20,000 new timeshare can be picked up for 10% of that on the resale market. I have seen deals at older resorts where they will give you the unit and several years of waived management fees just to get you locked in to pay future management fees. Never, ever pay full price. |
Step #4 |
A timeshare is not an investment.
Salespeople will tell you that a timeshare is an investment that you can
will to your kids or sell for a profit down time line. That is true, you
can will or sell the property. You will likely never sell it for more
than 25% of what you pay. So, expect to lose 75% of your value within
5 seconds of signing on the dotted line.
The definition of an investment is a capital tool or item that you buy with the intention of using it to manufacture goods or services at a profit. A timeshare does not fit that definition. A timeshare is actually an expense item. In fact, since you don't have to have one, it falls in the luxury expese category. There is nothing wrong with that if you can afford it, and you have no delusions of making money on the deal. |
Step #5 |
Management fees. The key problem with a timeshare is that it eats money. Typical time share fees are $500 to $750 per unit per week per year. You pay this management fee on top of any ownership fees. That $500 to $750 doesn't sound like much when you are thinking of spending $20,000 to $35,000 on a unit, but trust me, it gets old after a few years, especially if you don't use your timeshare every year. In fact, it becomes such a problem for some people that they simply walk away and take the credit report hit. The yearly fee prevents most charities from accepting timeshare donations since they don't want to get stuck with the fee, either. |
Step #6 |
Selling a timeshare.
Selling a timeshare is very difficult. This goes double for someone who
bought a timeshare without understanding how the work. The truth is that
a timeshare drops in value by 75% or more the moment you buy it. Most
people find it impossible to sell a time share. The management companies
don't want to compete with individual sellers, so they often make it
impossible to advertise on-property where new victums might see the signs.
Also, some scam artists prey on this problem by offering to sell your unit
as long as you give them an up-front fee. In reality, this fee only serves
to get you alisting in their timeshare book. You will never sell your unit
this way, and simply end up losing the fee on top of your other losses.
There are a few ways to sell your timeshare. You may be able to list it on E-bay or in your local newspaper. It may sell if you have a price that is under $2500 or is a high-demand unit for some reason. You might also be able to brige your sales agent into selling your unit if the place still has new sales going on. They don't normally resell units, but if you offer a huge commision, they may sneak it into the mix for you. |
Step #7 |
Trading your timeshare. The timeshare people allways tell you that you can trade your timeshare for properties all over the world. For example, you can trade your Branson unit for something in Paris, the Rivierva, or Wikiki Beach. In reality, people with the good units like this don't trade very often. Second, it is difficult to get someone to trade down. Why sould someone who owns at Pebble Beach come to Branson? Hopefully not for the golf. Third, the trading organizations all require a membership fee and a fee for each trade that they arrange. By the time you pay the fees for a trade, you are probably just as well off staying in a nice hotel at the destination and keep your week in reserve. |
Step #8 |
Letting others use your timeshare. If you don't use your timeshare in a given year, you have the option of letting someone else use the unit. You can simply give them the usage, or rent out the unit. If you do this, make sure to let the management company knows so they don't question the strangers that show up, and to allow these guests to use the facilities. The issue here is that if your guests do not behave, or cause damage, you are on the hook to pay. Make sure that you only give your keys to someone that you trust in your house. |
Step #9 |
Damage and upkeep risks. All properties deteriorate over time and need updates. In some cases, mother nature speeds up this process with hurricanes and ice storms. The bottom line here is that if the reserve fund for the resort cannot pay for something, they are free to pass the costs onto the members in the form of a special assessment. For example, many timeshare owners received bills for $500 to $2500 to fix up hurricane damages, and that was on top of the normal annual fees. Other items that result in these kinds of fees are beach errosion, dock damages, and wooden decks. |
Step #10 |
Benefits of ownership. There are benefits of timeshare ownership. The first is that it is like a short-term condo where you don't have to worry about cleaning or upkeep, so you can focus all your time on vacation. A second feature is that you know in advance exactly what you are getting. This might be nice if you know that you want to spend one week every year playing golf or visting Disney. In fact, the fixed time each year ensures that you will take a one week timeout. Since I am not a beach person, I used it to get caught up on reading and doing some vegging out. But be careful buying a timeshare around some event. Events can move in time from year to year, but your timeshare does not adjust in most cases. |
Step #11 |
Long-term ownership. One also needs to consider long-term ownership. Since you own for the long haul, you need to be concerned if this resort is right for you and your family. Will the resort deteriorate over time? While the shine wear off? How good is the upkeep? Is the general area going to thrive or decline? What will the area and the property be like in 25 years? Do you want to pay those fees for 25 years? |
Step #12 |
The bottom line on timeshares. The bottom line is that timeshares are expensive to buy and expensive to maintain. They are easy to get in over your head, and hard to get out of. Do look before you leap. Don't sign on the dotted line just to get out of a high-pressure sales pitch. Fianlly, look 20 years down the road to get an idea about what the place will be like in the future. |
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Authored by John A. Weeks III, Copyright © 2008, all rights reserved.
For further information, contact:
john@johnweeks.com