The Truth About Timeshare
Thinking about buying a timeshare?
We will give you the good, the bad, and the ugly facts about owning a timeshare
To understand the truth about timeshare, we must examine the pros and cons of timeshare and the timeshare developer business model. Sometimes owning can have benefits, but for most people owning a timeshare isn't what it's cracked up to be.
Here are the facts they won't tell you when you're on a timeshare presentation:
Timeshare has almost no resale value
This isn't conjecture or my opinion. This is a cold, hard fact. Unlike a brand new car being driven off the lot, timeshare just doesn't depreciate in value after the purchase. It has almost zero value, and if you calculate the likelihood of being able to resell the timeshare - it most often has negative value meaning you would likely have to pay someone to take it if you wanted it off your hands quickly. Every year thousands of timeshare owners pay to get out of their contracts. Is it an ethical business practice to charge tens of thousands of dollars for a product that has no real value? I will leave that for you to decide. The reason it has no real value is because the system is designed that way. The benefits of the timeshare come from the developer, which brings me to my next point.
Most of the timeshare benefits convey from a developer
If you were to examine the fine print of most major timeshare developers' bylaws, you would find that regardless of how much inventory you owned that the board of directors is almost exclusively decided from the developer. This means that for folks who want to resell their deed or points ownership most benefits do not convey. Why? Because the timeshare company wants a monopoly on the sales side. Additionally it gives the developer almost complete control of the reservation system. One of the largest developers states in their program summary that they reserve the right to rent "unbooked" inventory at the 60 day mark. How is that an ethical practice when so many families have invested their hard earned money into their timeshare?
Most of the time the timeshare company earns a profit from managing the HOA
Most major timeshare developers earn a hefty management fee for managing resort Homeowners Associations (HOAs). Don't believe me? For the publicly traded companies just check their SEC filings. Whenever you get 'the pitch' you're told that they don't make a dime from maintenance fees which contrary to the honest and ethical timeshare salesman is completely untrue. Not only did the timeshare paradigm change with the points model. Now the developer can sell as many points as possible with the same peak seasons in effect.
The timeshare reservation system is built for failure
With the creation of points systems the timeshare developer engineered a method to sell previously unsellable inventory. Prior to the invention of points, developers would sell fixed and float weeks which allowed the buyer to guarantee either a certain week or season at their home resort. The availability wasn't an issue because the buyer would be able to get that same week year over year. However, the issue was the ability to travel elsewhere or flexibility. On the flipside - an issue for the developer was that most people wanted to travel during several peak times of year - holidays, summer, spring break etc.. Not so great when you're trying to offload fixed weeks and you have to pay the maintenance fees on them until they're sold. The easy solution was to create a points system. This allowed the majority of inventory to be sold off and allowed the developer to pitch buyers flexibility - "you can go when you want, where you want, and book what unit you want." The challenge is that if everyone can go and there are only so many rooms available, then someone will inevitably get their second, third or fourth choice vacation.
Timeshare math doesn't add up
When you calculate the cost of vacations the most important aspect for accomodations is the Cost per Night. The reality is when you add the retail purchase cost, the maintenance fees, any interest or financing that most people set up, and then the actual reservation power - your cost per night could be 3 or 4 times the market rate. Then on top of that they hit you with booking fees, guest certificates, and housekeeping fees.
When does owning a timeshare make sense then?
Timeshares are located where you want to travel
Maybe you love DIsney, or Skiing, or the beach. Sometimes it's even family tradition to go to the same spot every year. If you reliably travel to the same area each year and are committed to continue doing so then owning a timeshare may not be a terrible idea. Just make sure you also follow the other tips here.
Buy resale timeshare
Want to know the difference between buying a timeshare from a developer vs. buying it on the secondary market? Other than the price tag, almost nothing. When you hear the sales people talk they will hammer on the VIP benefits you could receive by buying a timeshare from their company, but most of those benefits don't justify the sticker price. In fact, if you look online for timeshares listed for sale you will probably find someone willing to give you their timeshare for free. Simply pick the best area or resort, or maybe even a points package that fits your needs. Check to make sure the fees are decent for the time it allots you on vacation.
Simple math answers the question if a timeshare is worth buying. Does the annual maintenance cost give you a good amount of time to stay vs. the market prices. For example if a timeshare plan or week has an annual fee of $700 and gives you 7 nights of vacation, then you are paying $100 per night. If $100 per night is less than the market rate for the time, location and room size then it may be worthwhile to look into. Just ask the right questions before pulling the trigger.
The questions to ask
Does the resort offer an exit option if your life circumstances change or you no longer want the timeshare?
How much have the maintenance fees increased over the last decade?
When was the last major renovation to the resort? Does the HOA operate on a cash surplus or deficit?
Is the resort affiliated with a timeshare developer or internal exchange program (points system)?
Who manages the reservation system?
And Always remember - There is no rush to make a decision. Never let you or your family be pressured into making a decision regarding your finances; this is especially true for timeshare. No deal is too good to walk away from. If someone tries to force you into a deal, they are trying to sell you. There is always time to evaluate what is right for and your future.
We hope this article helps you in finding the right vacation solution for your family. Every family is different and we all want different things in life. We just believe someone has to help the timeshare owners or potential timeshare owners navigate the confusing and high-pressure arena of buying a timeshare.
If you have a timeshare and need help getting out of it legally and permanently, we would love to help you get all your options.