Let’s start with the basics: what is a timeshare? According to Wikipedia.org, a timeshare is a property with a divided form of ownership or use rights. Wikipedia.org goes on to say that these properties are typically resort condominium units, in which multiple owners hold rights to use the property, and each owner of the same accommodation is allotted their period of time. Units may be sold as a partial ownership, lease, or "right to use", in which case the latter holds no claim to ownership of the property.
Therefore, a timeshare unit is a room in which a timeshare owner can lay their head down to rest a night. These units are usually found in timeshare resort buildings near beaches around U.S. coasts like the Gulf of Mexico. Many of these rooms have the ability to be conjoined to another unit or separated through a locking system on a door that connects two rooms. This is called a lock-out or lock-off unit and it allows the owner of the units to either sell two units to one family or sell them separately to two different parties. This means that as timeshare owners, you could lock the door between two units in order to make sure both guests have privacy during their vacation.
When talking about the varieties of timeshares, there are two different types that are most common: share deeded ownership and shared leased ownership.
Shared deeded ownership or “fee-simple” timeshares give the buyer a share of the ownership. According to The World Tourism Organization, around 90 percent of timeshares are fee-simple or shared deeded ownership.
Shared leased ownership —or right-to-use contracts —allows the buyer to use the timeshare for a predefined period of time.
A shared deeded timeshare means that each owner possesses a certain percentage of the room or unit along with all of the owners. The timeshare is sold on a weekly basis meaning there could be a possibility of a total of 52 (weeks in a year) owners on one unit. These types of timeshare ownership are often held in perpetuity and can be willed to one's estate.
A shared leased ownership interest differs from a shared deeded ownership in a few ways. The main difference comes down to how you own your unit or property as a timeshare owner. In a shared leased ownership interest, the resort developer or management company retains ownership as opposed to a shared deed ownership where the timeshare owner holds the deed. The other difference comes down to the right to use.
The question usually comes up that once you buy a timeshare at a resort, how do you use it? Well, there are three typical systems for usage: Fixed-week, floating-week, and points-based.
According to 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 very difficult to change or swap the fixed week.
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 of time. 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.
Points are the newest system within the timeshare industry, and many timeshare companies only operate on a points system. The points system can be best described as having a form of currency (points) 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 timeshare exchanges either internally or externally. While the points system allows owners to have more choices of 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.
The majority of modern-day timeshare owners fall under the point-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. This is how a lot of timeshare owners begin to accumulate even more debt – they continue to purchase more points so they can plan their vacations how they want. What is the difference between a timeshare and a vacation home?
The largest difference comes in the form of proprietorship. Much like a regular house, a vacation home gives you certain liberties as opposed to a timeshare. You can rent it out on holiday weekends, make any sort of 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 certain cases, timeshares can offer access to more popular destinations than that of vacation homes. Though you don’t have to perform your own maintenance work for timeshares, the maintenance fees can increase every year, making it a financial obligation that’s hard to plan for.
All timeshare are not created equal. Some timeshare companies have created a trustworthy brand that delivers on their promises. Other timeshare companies don't.
Many timeshare companies have vacation properties in some of the most beautiful and sought after locations in the country. If you prefer vacationing in a predictable location each year, and purchase your timeshare with one of the reputable timeshare companies, you may enjoy owning a timeshare.
There are several disadvantages that buyers should consider before purchasing a timeshare.
Some of the biggest drawbacks of a timeshare are the ongoing costs. 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. All of these payments, on top of the up-front fee for the vacation property, make owning a timeshare a large financial expense. Overall, it is much cheaper to stay a week in a hotel in the same location as a timeshare resort without actually owning a timeshare.
Another issue with timeshares is they offer little flexibility to alter your dates or book the dates you want in the first place. To get what you want, when you want it, requires booking sometimes 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 date for the contract to end.
It is very difficult 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 very hard 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 their lengthy, high-pressure sales presentations, where salespeople bribe potential buyers with free meals, tickets, and accommodations. Many times buyers are exhausted by the end of the presentation and end up signing contracts they don't fully understand.
Be aware of this when a salesperson stops you on your next vacation and offers you free tickets to attend a sales presentation. If you do 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.
Even though you may have been promised easy access to booking and special privileges, sometimes timeshare salespeople offer up 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.
A lot of 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.
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 to take full advantage of all that timeshare ownership offers.
Another major 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 done traveling, the fees and charges will never stop. Consider that your desire to travel will decrease with age and health concerns.
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.
Trying to rid yourself of your timeshare contract 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 just 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. It’s important that you only work with companies that have a 100% money back guarantee. If they don’t, then they may be trying to take advantage of you.
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 a 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 useful alternative to vacationing for you and or 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 that are 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.