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What is a Timeshare Unit?

Let's start with the basics: what is a timeshare? A timeshare is a type of contract that allows multiple owners to share the rights to a vacation property. Timeshare properties are usually vacation resort real estate properties, in which consumers share the rights of ownership and use during a specific allotted period of time during the year.

Therefore, a timeshare unit is a house or apartment-like property in which an owner and 2-4 guests or 2-10 guests share a living space for a week at a time. Many of these properties are located around the vast majority of U.S. Coasts, especially common in Fort Lauderdale and the Gulf of Mexico. A condominium accommodation type of timeshare often includes conjoined rooms with separate sections closed-off by a special locking system. This type of vacation option is called a lock-out or lock-off unit. Two-bedroom units like this are either sold together to a prospective buyer or sold separately.

Timeshares are often sold in three different types: partial ownership timeshares, a shared lease, or as a "right-to-use" property. The latter of which the owner holds no claim to ownership of the property.

Types of Timeshare Units

Right-to-use timeshares are fairly uncommon nowadays. When discussing timeshare types, many people are referring to the most popular resort properties offered today: shared deeded timeshares and shared lease timeshares.

These types of properties are often larger units in which the owners are given fractional ownership of the physical property. Today, over 90% of timeshare properties are shared deeded ownership rather than shared lease.

Below is a quick overview of the differences between the two most common types of vacation ownership.

Shared Deeded Ownership

This type of timeshare ownership means that each owner shares a percentage of the deeded title to a certain property. In this case, each owners' annual vacation is sold to them in weekly shares. Meaning that out of the 52 weeks in a year, 52 different owners and their guests could be staying on the property you've invested in. In return, you (and all other owners) are tasked with claiming a week that has not already been taken along with providing the payment for resort amenities and maintenance fees.

What is often misrepresented in timeshare sales pitches is that during the busiest times of the year, you may not have access to your vacation spot. This means your available vacation time is limited to a schedule you may never have a say in.

Shared Leased Ownership

A shared lease timeshare contract is different from shared deeded contracts in several ways. The most prominent difference is how the property is owned. In shared lease ownership, the resort owner or developer are the current owners of the property. However, the "lease" of said real estate is sold out to a prospective buyer. Thus the initial purchase of the timeshare property is similar to that of a right-to-use rather than a purchase of actual usage time.

Types of Timeshare Systems

Now given what we have just discussed, you may be wondering, "Now that I've bought my timeshare, how do I use it?" Well, there are three common systems for usage: fixed-week, floating-week, and points-based.

Fixed-week Systems

Investopedia.com, with a fixed week timeshare, owners have the right to use the vacation property for a specific week (or weeks) every year. The upside is that the owner can have peace of mind knowing they'll get a particular week every year without having to stress about someone else taking it. The downside is that it may be challenging to change or swap the fixed week.

Floating-week Systems

If you purchase a floating week timeshare, you will have the ability to use the vacation property for a week or weeks during a specific period. Although, in theory, the floating week might seem to be more flexible than a fixed week, the trouble lies in booking when you desire. For example, if your family loves to take a vacation on Memorial Day weekend every year, it could be fully booked, and you would have to try and reserve it way in advance.

Point-based Systems

Points are the newest system within the timeshare industry, and many timeshare companies only operate on a points system. The points system credits based or used as a type of currency that allows you to "buy" time to use at a resort property. The number of points you have to use to book a trip varies based on the vacation property, location of the property, and time of availability. Timeshare companies use a points-based system to allow internal or external timeshare exchanges. While the points system will enable owners to choose where they want to vacation, it can also limit users' ability to travel when and where they want to travel. Meaning, points do not come with a set week or location, so trying to use points to book a vacation can be difficult if the resort you want to stay at is booked two years in advance.

What are Timeshare Points?

The majority of timeshare owners today fall under the type of ownership known as the points-based system. As explained above, this system gives the owners their fixed amount of points at the start of every year. While this might appear to give owners flexibility, in a lot of cases, it makes it harder to book a vacation to your timeshare. Availability can be tough to navigate depending on the season unless you buy more points to bump you up and give you high enough status to book longer stays during busy times. The disparage of time allotted per family is often a risk of debt accumulation. Owners are encouraged to spend more money to gain more points, so they have a monopoly over the property. What is the difference between a timeshare and a vacation home?

The most considerable difference comes in the form of proprietorship. Much like a traditional house, a vacation home gives you certain liberties instead of a timeshare. You can rent it out on holiday weekends, make any changes or upgrades to the property or even sell it if you want. The hardest part might be the initial investment or paying a mortgage on a house you're not living in all the time.

In some instances, timeshares can offer more popular destinations than vacation homes. Though you don't have to perform maintenance work for timeshares, the maintenance fees can increase every year, making it an unpredictable financial obligation.

Timeshare Pros and Cons

Not all timeshares are created equal. Some timeshare companies have created a trustworthy brand that delivers on its promises. Other timeshare companies don't.

Advantages of Timeshares

Many timeshare companies have vacation properties in some of the country's most beautiful and sought-after locations. If you prefer vacationing in a predictable area each year and purchase your timeshare with one of the reputable timeshare companies, you may enjoy owning a timeshare.

Disadvantages of Timeshares

There are several disadvantages that buyers should consider before purchasing a timeshare.

One of the most significant drawbacks of a timeshare is the ongoing costs. This is in addition to the timeshares' upfront cost. The annual maintenance fees generally increase year after year, with some owners paying thousands of dollars. In addition to the yearly maintenance fees, the owner also has to pay their monthly mortgage payment until they pay off the timeshare. The interest rate on the mortgage payments is typically high as well. On top of the up-front fee for the vacation property, all of these payments make owning a timeshare a significant financial expense. Overall, a hotel is cheaper than a timeshare resort in the exact location. There is also the benefit of having 0 financial commitment to a hotel room once your vacation is over.

Another issue with timeshares is they offer little flexibility to alter your dates or book the dates you want in the first place. When you want it, getting what you want sometimes requires booking 12-18 months in advance.

Even if you pay off your timeshare, you are still required to pay maintenance fees for the rest of the contract whether or not you use the property. Most timeshare contracts are written in perpetuity, meaning there's no set a date for the contract to end.

It is challenging and almost impossible to resell a timeshare. Timeshares will also depreciate very fast, and with a lot of timeshare owners trying to exit their contracts, it's tough to find someone willing to buy your timeshare.

Consider These 7 Tips Before Buying a Timeshare

If you are still on the fence about buying a timeshare, take some time to consider the following:

Don't fall for the bribe

Timeshares have a reputation for their lengthy, high-pressure sales presentations, where salespeople bribe potential buyers with free meals, tickets to vacation clubs (especially a Disney Vacation Club), and access to hotels in remote locations. Many times buyers are exhausted by the end of the presentation and sign contracts they don't fully understand.

Be aware! Many timeshare sales staff members can be found in popular vacation hot spots looking to offer you a "free vacation" or a ticket to favorite vacation clubs. All they ask in return is for you to attend one of their sales pitches. If you find yourself in one of these presentations, make sure your salesperson tells you the purchase price directly and doesn't evade your questions. Read through the contract carefully, do not just take the salesperson's word as the truth.

Booking may not be easy.

Even though a consumer was promised easy access to booking and special privileges, sometimes timeshare salespeople offer more than they can guarantee. Points-based timeshare systems come with no guarantees. In the sales meeting, a representative might tell you that you have the right to use the resort whenever you want. This is not always the case. Just because they say, this doesn't mean that you'll get to use your timeshare unit anytime you want. Another tactic that representatives use is telling you that you can easily trade your week for a different week at another property within their company's family. Most owners find this nearly impossible unless done way ahead of time.

Many timeshare owners recall hearing all these so-called benefits in their timeshare presentation, only to find out that a lot of them aren't true. The truth always shows itself down the road when owners realize they can't book just a few months in advance, they can't trade points, and their favorite week is blocked by a rule they didn't see in the fine print.

It's also important to remember that some destinations are more popular than others, meaning more people will want to travel the same weeks to the same places that you want to travel.

Upgrades

Timeshare Companies are also notorious for pushing to sell "upgrades" If you call the timeshare companies to complain about being unable to book your desired trip, they will often explain how the package that you bought wasn't "enough" and why you need to buy more timeshare points or credits to take full advantage of all that timeshare ownership offers.

Health

Another primary consideration is your health. That vacation resort property across the country may seem like a great place to visit today, but when you are in your eighties, you may not be so keen on traveling. Although you may be traveling, the charges will never stop. Consider that your desire to travel will decrease with age and health concerns.

Think it over

Like any major financial decision you make, you shouldn't impulse buy a timeshare. If you attend a timeshare presentation, do your best to avoid buying anything on the first day.

Timeshare Agreements are binding

Trying to rid yourself of your timeshare agreement is not exactly a walk in the park. Being that you signed the contract and weren't forced into doing so, it isn't something you can get out of. However, there are a few options for you, especially if you feel you were manipulated into purchasing your timeshare:

  • Contact your timeshare company and state your case while attempting to reach an agreement with them about getting out of your timeshare
  • Try to rent or sell your timeshare online
  • Use a legitimate timeshare cancellation company

Watch out for fraud

Watch out for fraud within the timeshare cancellation industry.

Victims of timeshare exit fraud often report receiving scam phone calls telling them they have a timeshare buyer on the other line and need an immediate answer. They may ask you for payment but never agree to pay someone before doing your research. Also, beware of any company that cold calls you or harvests your information as a "lead." They are just trying to make as much money off you as possible, and chances are they can't deliver.

Summary

A timeshare unit can be a valuable alternative to vacationing for you and your family. But it comes at a cost. There's a variety of timeshare units and systems you need to be aware of before signing on any dotted lines.

If you're not ready to purchase units that come with a few stipulations, you might be better off just vacationing to different hotels on your own. Timeshare units and the fees attached to them can cause a lot of financial stress on families that were otherwise happily unaware when signing up. If you are interested, be sure to do your research, so you're aware of the details of your timeshare upfront.

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