If you’re looking for a permanent vacation spot, buying a timeshare might be a smart move. Here's what you need to know before taking the plunge.
by the American Resort Development Association (ARDA). That marks nine consecutive years of growth.
However, buying a timeshare isn’t right for everyone. Here are six things you need to know before purchasing one.
1. How timeshares work
Owning a timeshare can be a great way to have access to a vacation property that you love without having to shoulder the high costs of owning your own home, like property taxes and mortgage payments.
Traditionally, timeshare buyers pay a lump sum of money upfront, which allows them use of a specific unit at the same time every year. Some timeshare units are located at big-name hotels or resorts, while others are located at off-site communities. A one-week interval is most common – meaning there might be 52 people who share ownership of a property – but the time frame can be shorter or longer depending on the contract. Some timeshares, though, offer “flexible” or “floating” weeks that allow owners to choose when they want to stay at the property (subject to availability) from year to year.
2. Timeshare presentations often use grueling, high-pressure sales tactics
Timeshares are frequently sold during on-site presentations, and to attract prospective buyers, many timeshare companies will offering attendees freebies like dinner vouchers or discounted vacations. Sounds like a pretty sweet deal, right? Not exactly.
These presentations are led by trained salespeople who know precisely what to say to persuade people to buy a timeshare, which is why many consumer advocates recommend people take time to mull things over – and do some comparison shopping to see if they’re getting a good deal – before deciding whether to purchase a timeshare.
Pro tip: if you’re the type of person who is especially susceptible to high-pressure sales tactics, you may want to avoid timeshare presentations altogether.
3. Watch out for high maintenance fees
Most timeshares come with annual maintenance fees to pay for expenses like landscaping, amenities upkeep, and business costs (like recordkeeping, scheduling, or staffing), and these fees can add up. According to the ARDA, timeshare maintenance fees cost, on average, $1,000 a year. Unfortunately, maintenance fees can increase over time. Thus, it pays to look a timeshare community’s maintenance fee history, and find out whether any large expenses (e.g., construction of a new fitness center) are coming up, before purchasing a timeshare unit.
4. Timeshares tend to depreciate…
Though timeshares enable buyers to freeze their future vacation costs, they tend to depreciate in value. Unlike buying a vacation home, which can increase in value as home prices increase, buying a timeshare doesn’t tend to yield a great return on investment. Why? Because timeshare owners face the uphill battle of persuading someone to pay more for a used unit, when they have the option to buy a brand-new timeshare directly from a resort or vacation club – making it challenging for owners to make a profit
5. …but they’re not always money traps
Typically, timeshare owners have the right to rent out their week(s) through exchange programs, such as Resort Condominiums International (RCI), Interval International (II), and Trading Places International. This gives owners the opportunity to travel to cities around the world and stay at rental properties that may cost significantly less than standard hotel rooms or resort rates.
The caveat? Most timeshare exchange programs charge an annual subscription fee (generally between $100 and $300), and some charge an additional fee for each transaction that can vary depending on the length of stay, unit size, and time of purchase.
6. Timeshare scams run rampant
The timeshare industry has been a target for fraudsters since it was born in the 1970s. Because scam artists have developed a number of deceptive practices to dupe consumers, it’s important to look out for red flags.
One common scheme is where a company calls to offer you an exceptionally low price on a timeshare if you book today; the only thing you have to do is pay a large upfront fee of say, $15,000 – except you learn later that no timeshare exists.
There are also resale scammers who target timeshare owners during tough economic times, promising that they have a buyer lined up who is ready to make them an exceptional offer in order to get the owner to send them money and then they disappear.
Your best form of protection is to stay vigilant. If a timeshare company contacts you, do your homework to make sure the business is legitimate. Contact local consumer protection agencies in the state where the company is located, as well as the Better Business Bureau (BBB), to see if there are any existing complaints about the organization.
The bottom line
Buying a timeshare is a good idea for some people, but it’s a bad idea for others. By understanding the pros and cons of owning a timeshare, you’ll be able to make a more informed decision for your travel needs.