Let's start with the basics: what is a timeshare? A timeshare is a type of property that allows multiple owners to share the rights to a vacation property. Timeshare resorts are usually vacation resort real estate properties in which consumers share the rights of ownership and use during a specific allotted period 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 an annual week. Located around the vast majority of U.S. Coasts, many of these properties are 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 unique 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 have three types: partial ownership timeshares, a shared lease, or a "right-to-use" property. The latter of which the owner holds no claim to ownership of the property.
Right-to-use timeshares are pretty 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 properties are often larger units in which the owners retain 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.
This type of timeshare ownership means that each owner shares a percentage of the deeded title to a particular property. In this case, each owner's annual vacation gets sold in weekly shares. That means that out of the 52 weeks a year, 52 other owners could be staying on the property you invested in. In return, you (and all other owners) have the task of claiming a week that is not already reserved, along with providing the payment for resort amenities and maintenance fees.
What often gets misrepresented in timeshare sales pitches is that during the busiest times of the year, you may not have access to your vacation spot. That means your available vacation time is limited to a schedule you may never have a say in.
A shared lease timeshare agreement differs from shared deeded agreements in several ways. The most notable difference is how property ownership works. The resort owner or developer is the property's current owner with shared lease ownership. However, the "lease" of said real estate gets sold out to a prospective buyer. Thus the initial purchase of a timeshare is more similar to a right-to-use deal than a purchase of actual usage time.
Given what we have just discussed, you may wonder, "Now that I've bought my timeshare, how do I use it?" Well, there are three standard systems for usage: fixed-week, floating-week, and points-based.
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 stressing about someone else taking it. The downside is that changing or swapping the fixed week may be challenging.
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 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.
Points are the newest system within the timeshare industry, and many timeshare companies only operate on a points system. The points system credits are based on or used as a 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. That means points do not come with a set week or location, so using points to book a vacation can be difficult if the resort you want to stay at is booked two years in advance.
Most timeshare owners today fall under the type of ownership known as the points-based system. As explained above, this system gives the owners a fixed amount of points at the start of every year. While this might provide owners flexibility, it is also harder to book a vacation in many cases.
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 a 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.
Not all timeshares are created equal. Some timeshare companies have created trustworthy brands that deliver on their promises. Other timeshare companies don't.
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 companies, you may enjoy owning a timeshare.
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. They are in addition to the timeshares' upfront cost. Maintenance fees generally increase yearly, with some owners paying thousands of dollars. In addition to the annual maintenance fees, the owner must pay their monthly mortgage 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 term whether or not you use the property. Most timeshare agreements are written in perpetuity, meaning there's no expiration date.
It is challenging and almost impossible to resell a timeshare. Timeshares will also depreciate very fast, and with many timeshare owners trying to exit, it's tough to find someone willing to buy your timeshare.
If you are still on the fence about buying a timeshare, take some time to consider the following:
Timeshares have a reputation for 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. Often, buyers are exhausted by the end of the presentation and agree to deals 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 your 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 paperwork carefully, do not just take the salesperson's word as the truth.
Even though a consumer gets 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 say you have the right to use the resort whenever you want. That is not always the case. Just because they say so does not mean 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 these so-called benefits in their timeshare presentation, only to discover that many 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 gets 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 week to the same places you want.
Timeshare companies are also notorious for pushing owners into "upgrades." Suppose you call the resort to complain about being unable to book your desired trip. In that case, they often explain how the package 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. It can feel like an endless pyramid scheme at times.
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.
Like any major financial decision, you shouldn't impulse buy a timeshare. If you attend a timeshare presentation, do your best to avoid buying anything on the first day.
Trying to rid yourself of your timeshare agreement is not a walk in the park. Since you signed the dotted line, it is not always easy to get out of. However, there are a few options for you, especially if you feel you were manipulated into purchasing your timeshare:
Watch out for fraud within the timeshare cancellation industry.
Victims of timeshare exit fraud often report 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.
A timeshare unit can be a valuable alternative to vacationing for you and your family. But it comes at a cost. There are various timeshare units and systems you must be aware of before signing any dotted lines.
If you're not ready to purchase a unit with a few stipulations, you might be better off just vacationing in different hotels on your own. Timeshare units and the fees attached can cause 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.