Pros and Cons of Timeshare Ownership

In my research for Affiliate Marketing for Grandparents, I have seen Timeshare Ownership come up on more than one occasion. Some people like the timeshare idea, while others say “steer clear.” In this article I will lay out the pros and cons of timeshare ownership, and let you decide for yourself if vacationing with a timeshare is right for you.

What is a Timeshare?

“A timeshare (sometimes called vacation ownership) is a property with a divided form of ownership or user rights. These properties are typically resort condominium units, in which multiple parties 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. The ownership of timeshare programs is varied, and has been changing over the decades.” From Wikipedia

A timeshare is basically a condo that you own with several other owners, and you are assigned a time period in which you get to use the condo. There are several variations of how this ownership works, which I will describe below.

Fixed Week Ownership: This is the most common type. You get to use the property as designated by your deed, for one week per year, that is always the same week. An example would be the first week of February. This falls on Week 6 of the year 2020, as designated by the International Organization for Standardization (ISO).

 

Floating Week Ownership: This timeshare option offers a range of weeks available on a first come, first served basis. Often these will exclude holiday weeks, which often are assigned on a rotating schedule, so that everyone gets a chance at staying at the condo on a holiday week.

Flex Week Ownership: Also known as rotating week ownership, this type changes the week designation every year. On year one, you might get use of the condo on week 37. The next year, you would get week 38, and the year following that, you would get week 39, and so forth.

Right to use: This type of timeshare isn’t ownership. It’s a leasing arrangement where you sign an agreement allowing you use of the property on your allotted week, for a specific time period. For example, you would spend your week, week # 37 every year for 10 years. After that, the agreement ends, and you can lease it again, or go somewhere else.

Vacation Points Programs: A timeshare based on points works as follows: Ownership is available in “packages” where you have ranges of how much you pay for your deed. Depending on how much you pay, you will get a specific amount of points. You can “spend” the points to stay at your condo, or any condo within that particular timeshare organization. Let’s say you bought a timeshare that allots you 20 points. 20 points gets you two weeks stay at any condo in your network. You could spend a week at one in Florida, and a week at one in Colorado. Or you can stay two weeks in Florida. And the next year, you can stay at some other condo within your network, like Santa Fe New Mexico, or San Diego California. These are the most flexible types of timeshares, but they are also the most expensive.

The Advantages of Owning a Timeshare

Your vacation home will not sit empty for most of the year. For some, it doesn’t make sense to have a house sit empty. There are repair issues that come up, such as water leaks, or break-ins, animal infestation, and any number of issues that can occur if you aren’t visiting the home regularly. And unless you’re willing to rent out your home for the rest of the year, you aren’t gaining anything.

You only pay for what you use. If you only have 2 weeks of vacation from work, you only need to buy two weeks of a timeshare, not the whole house. The costs are shared with around 50 others. In some cases, you can afford nicer accommodations than you otherwise could afford to buy a whole house.

You don’t have to worry about year-round maintenance. Snow removal is a big expense, and maintaining landscaping is another. Owning a vacation home, you will have to provide all of that to maintain the value and comply with HOA bylaws.

You have predictability. If you like going to the same place every year, you are guaranteed a place to stay.

You may be able to trade times and locations between the other owners, allowing variety in places you can stay. Check your deed paperwork to assure you are allowed to do this.

You may be able to rent out your designated time allotment. Another time to check the paperwork to be sure this is OK.

You can allow your friends and family to use your timeshare if you can’t use it at your designated time.

You can offer it for free in a charity auction.

The Drawbacks of Owning a Timeshare

There are usually annual maintenance fees, an average of $660 per year, that you must pay, whether you use the condo or not.

You could be liable for special assessments. Perhaps the condo building needs a new roof or some other extensive repair. You will have to pay those or you could face foreclosure. You generally don’t have much control over when or how these special assessments are made, just a yes or no vote at your HOA meeting.

Timeshares are hard to sell. They usually go on the market at a fraction of the original price. If you are looking for a good deal, buy a used timeshare on a secondary market. But watch out! The Better Business Bureau has seen a lot of fraudulent activity in timeshare reselling schemes.

The IRS will not let you claim a capital loss if you sell your timeshare at a heavy discount, like they would other investments or real estate.

If You Still Want to Buy A Timeshare

Here are a few considerations you should contemplate if you still think a timeshare would work for you:

A Timeshare isn’t really an asset. Think of the costs of depreciation, travel, and maintenance, plus the uncertainty of whether you get to use your condo or not. Compare those costs to just going on a regular vacation. The costs might outweigh any gain you would perceive.

Take a good look at your previous vacation tendencies. Do you really want to go to the same location year after year? Do you really want to take the same two weeks off year after year? If you prefer going more places and doing a variety of things, then perhaps to buy a timeshare with limited locales and limited time frames is not for you.

If you are expecting family members to use your timeshare, be prepared for less use than anticipated. Flying a whole family to a far off vacation home IS expensive, and more of a one time deal than a yearly event. I speak from experience of spending nearly $2000 to buy four airline tickets. Can your kids afford that? Also, lining up the same week every year is difficult when you have a family of four to think about and schedule. You may not be using your timeshare as much as you anticipate because of these factors.

Borrowing for a timeshare isn’t a great strategy. Timeshares depreciate in value very quickly, so most banks will not lend you money to buy them. Often, the developer will arrange financing for you, but at a much higher interest rate than banks that do make the loans. What’s more, usually in a foreclosure, the outstanding mortgage balance and the unpaid maintenance fees are higher than the timeshare’s value, which creates what is called a deficiency. Then, lenders can go after your other assets. If you must borrow to purchase a timeshare, you have no business buying one.

Timeshare sales campaigns are often a shiny object designed to attract you to buy something you otherwise wouldn’t. They offer a “free trip” or a “free stay” where you must attend a sales meeting, and then you’re free to enjoy other activities. During that meeting, there will be some heavy arm twisting for you to buy the shiny object. If you don’t agree to make a purchase during their sales meeting, the sales team badgers you for the rest of your “‘free stay” until you finally break down and buy the timeshare.

Beware of sales people who avoid answering your questions, or won’t be up front about the purchase price.

More legitimate timeshare deals allow for a grace period, for you to change your mind before committing.

Never pay anything until you have seen the actual unit. If you are not allowed to see the unit, that’s a big red flag that you are being defrauded.

My Personal Experience

My parents owned two timeshares, one with a fixed week ownership. It was for two weeks in February, and it was for only that building in that particular ski area. I never stayed at it, because I could not afford to be away for my job that long. I was never convenient for any of us kids. My parents didn’t ski, so they only used it once or twice themselves, if I remember correctly.

The second timeshare was a little more usable. I think we got two weeks, based on availability at any condo in their network. Also, we could make a reservation and stay over non-blacked-out weekends, and just pay the “maid fee” which was around $100 for the weekend at the time. We used the weekend aspect more often than anything, but it was still only once or twice per year, because who can afford to get away that often? Not me obviously. My parents used their two weeks in Florida one year that I remember. We kids were invited, but none of us could go.

I remember when my mom said they were selling the timeshares, I think she expected us to all protest, but none of us really did. It was always more convenient, and priced similarly, to just get a hotel room where we wanted to stay. I do know they let the condos go for far below asking price, and ended up paying into the timeshares long after they were sold to make up the deficiency.

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In Conclusion

Don’t buy a timeshare on the spur of the moment. Think it through. Run the numbers. Truly assess your vacation needs and that of your family’s. Weigh all our options. Don’t throw your money away on a shiny object, promoted by a sales person with a quota to meet and an offer too good to refuse, and a really hard sales push. Once you have considered all the issues, and a timeshare still looks good to you, be cautious when you buy it, and watch out for fraudsters.

Please place your comments and questions below, and thank you, as always, for reading!

references:

https://www.seniorliving.org/timeshares/

https://en.wikipedia.org/wiki/Timeshare

https://www.forbes.com/sites/nextavenue/2014/09/16/buying-a-timeshare-the-pros-and-cons/