What exactly are timeshares?

It was successful, and the concept spread around the globe.

Deeded and non-deeded timesharing plans are the two primary types.

With the deeded type, you acquire an ownership interest in real property. In the non-deeded plan, you purchase a lease, license, or club membership that allows you to use the property for a specified number of years for a specified amount of time each year. The unit’s price is proportional to the season and the length of time you wish to purchase it.

Before Purchasing

Before signing any documents or paying any fees, you must understand what you are getting, as with any major purchase. The general information should be supplemented with a thorough analysis and, if possible, professional advice covering all aspects of a specific timeshare purchase.

Before investing in a timeshare, consider the following factors.

People purchase timeshares primarily for the convenience of having prearranged vacation accommodations. Therefore, it would be prudent to determine whether you will have regular access to the timeshare facility. When evaluating a timeshare with units in multiple locations, consider whether enough units are available at the sites you prefer during the desired dates. Examine any investment claims made by the seller with skepticism. The future value of a timeshare is contingent on a variety of factors. Timeshares are almost impossible to resell. 4 Therefore, if you are considering purchasing a timeshare, you should do so with the understanding that you will likely not be able to resell it, and even if you do, you will likely not be able to sell it for anything close to your original purchase price. Closing expenses, broker commissions, and financing fees must also be included in the investment costs. Included in the total cost of a timeshare are mortgage payments and expenses such as travel costs and annual maintenance fees. Typically, the annual maintenance fees increase by an amount equal to or greater than inflation, which could add hundreds of dollars to the purchase price. To evaluate the purchase, compare the total cost of the timeshare to the cost of renting comparable accommodations and amenities for the same time period and location.

* Don’t act impulsively or under duress. Before making a purchase, you should review all documents or have someone familiar with timesharing review them. Don’t make a purchase unless you’ve had a few days to consider it. Determine whether the contract provides a period of time during which you can cancel and receive a refund. Make sure everything the salesperson verbally promised is included in the contract. Keep in mind that exchange programs, which provide the opportunity to trade resort units in different locations, are not guaranteed. When you exchange your timeshare unit for another, you should receive a unit of roughly the same value. Many sellers of timeshares offer gifts to prospective buyers who attend a sales presentation. Consider the worth of these prizes and gifts. The majority have little value. 5 You would only benefit from attending a sales presentation if you are interested in the program. Your timeshare will only be a desirable vacation destination if it is properly managed. Before making a purchase, you should conduct background checks with local real estate agents, the Better Business Bureau, and consumer protection agencies on the seller, developer, and management company. If you are contemplating purchasing a timeshare on a property where the facilities have not yet been completed, obtain a written guarantee from the sellers that the facilities will be completed as promised, and require that a portion of your money be held in escrow.

* Determine your rights if the builder or management company has financial difficulties or otherwise defaults. Ensure that both non-disturbance and non-performance clauses are included in your contract. A non-disturbance clause guarantees continued use of your timeshare unit in the event of default and subsequent third-party claims against the developer or management company. A nonperformance clause permits you to retain all ownership rights even if a third party is required to buy you out of the contract. Contact the Real Estate Commission of the state where the timeshare property is located as well as the Correspondence Branch of the Federal Trade Commission, Washington, DC 20580, if you have any questions or complaints about timeshares or a timeshare that you have purchased.

How Resale Timeshare Scams Work

If you already own a timeshare, be wary of individuals who offer to assist you in reselling it for a fee. Because many of these types are scams, you should only conduct business with legitimate sales companies. Companies that engage in dubious resale practices operate similarly to numerous other telemarketing frauds. You may be contacted by a telephone salesperson or sent a postcard requesting that you call a specific telephone number regarding the sale of your timeshare. The salespeople are likely to assert that the resale market for timeshares is “hot” and that their company has a high rate of success reselling these units. They may even claim to have extensive lists of sales agents and potential buyers for timeshares, and for hundreds of dollars in advance, they will sell your timeshare for the same or a higher price than what you originally paid. 7

Since there is no secondary market for timeshares, the market for resale is actually extremely poor.

Currently, 1.5 million Americans own timeshares. Approximately 870,000 of these are currently available for resale, with 845,000 being offered for sale at prices significantly lower than the original purchase price. In reality, only 3 percent of owners who attempted to sell their timeshares over the past two decades were successful, and the vast majority of them had to sell below their original purchase price. Therefore, it is extremely unlikely that a company will be able to sell the timeshare at all, much less for the original purchase price.

If you decide to resell your timeshare and are approached by a resale company, there are certain precautions you should take. (1) Never consent to anything over the phone. (2) Request that the salesperson send you study materials. (3) Request references from clients who have utilized the company’s services. (4) Inquire about the company’s location and the states in which it conducts business. (5) Inquire if the company’s salespeople are licensed to sell real estate in the state where your timeshare is located, and verify this information with the state licensing board. (6) Be wary of companies that charge a “listing” fee in advance for their services.9

Conclusion

Timesharing is not an investment product and is not designed to generate income. However, there is a cost associated with your leisure time. How much do you value leisure and preplanned vacation time? This is the question you must ask yourself before purchasing a timeshare. If it is not worth the initial investment of thousands of dollars plus hundreds more in maintenance fees, you should probably avoid timeshare promotions. If you enjoy preplanned vacations and understand that a timeshare is not a money-making investment, then it may be a good option for you.

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