You’ve just returned from summer vacation and already wish that you were back at your favorite destination. But, you can’t help but wonder if, in lieu of spending on hotel accommodations or a vacation rental for next year’s trip, wouldn’t it be wonderful to own a timeshare?
Having a guaranteed spot in a favorite resort or vacation area—and at a fraction of the cost of a second home—are the reasons many prospective buyers start to shop the timeshare market. However, once you begin looking, you’ll notice that ownership rights aren’t one-size-fits-all.
In Part 1 of our series “Buying a Timeshare: What to Know Before You Start Shopping,” we talk about how timeshares are usually either sold as deeded or Right To Use. What’s the difference?
- Deeded Timeshare: You own a share of ownership in the property, usually for a particular unit for a specified time period. (This is typically one or two weeks a year.) Depending on your contract, you either own the timeshare for life, for a specified number of years, or until you sell it.
- Right To Use Timeshare: A developer owns a resort, and divides each unit into intervals—this can be either by the week, for a fraction of the year, or for a certain number of points. You purchase the right to use an interval at the resort for a specified number of years, but don’t own any real property. While your share is not necessarily for the same unit or time period each year, RTU ownership often allows you to swap or use your points to stay at an affiliated resort, lending additional flexibility to your ownership plan.
Timeshares are an attractive alternative for families who can’t afford the expense of owning a second home. But, they’re not as low-cost as seminars would make them seem. Before we share tips to start shopping, here’s a breakdown of potential costs.
How Much Does It Cost to Own a Timeshare?
The price for buying a brand new timeshare from a developer can vary depending on the area and amenities offered. For example, the average cost for a one-week timeshare in Florida is $19,000. However, if your heart is set on a posh space in Aspen or sunny Kauai, plan on spending tens of thousands more—and that’s just the initial cost.
Here’s a quick breakdown of how seasons and location come together to affect the price of your timeshare:
The Cost (and Value) of Peak Seasons
The timeshare time period you have will greatly influence the cost (and value) of any timeshare—including your chances of trading your timeshare for another destination.
Most timeshare resorts divide the year into seasonal segments according to demand similarly to how hotels rate the times of the year as being “peak season” and “off season.” This means that any given unit’s price can vary substantially depending upon what time of year the owner has the privileged to use the timeshare.
To keep things simple, we’ll use the seasonal coding used by major timeshare resort operator RCI (Resort Condominiums International) as an example. For RCI, the seasonal designations are color coded:
- A red week is peak demand
- A white week time is average demand
- A blue week time is lesser demand
Using the above seasonal designations, buying a timeshare in Maui during the desirable Christmas season would be priced as a red week, or peak demand. However, during the shoulder months of April or October, a week would be priced as blue, or lessor demand.
According to Timeshare 101.com, those considering purchasing a timeshare should only buy “red” and forget the rest, since owning a week in a low-demand season severely limits your flexibility.
The Best Locations to Buy a Timeshare
The same three things that matter in real estate are equally important to picking a timeshare: location, location, and location.
If it’s the flexibility of trading that you’re after, doing so not only demands that you own a red week to have a chance at another seasonally in-demand spot, but the locations also need to be a fair swap. Meaning, don’t expect to be getting London or the Caribbean over New Years if you own a timeshare in Las Vegas.
So, what are the best locations to buy with future trading in mind? Hawaii, Orlando, Florida, and the aforementioned Aspen are top U.S. locations, while the Caribbean islands of St. Maarten, St. Thomas, Aruba, and the Cayman Islands hold the highest demand.
The Long-Term Costs of a Timeshare
While a timeshare doesn’t require you to shell out cash for repairs as often as your primary home, you still need to pay annual fees and other costs. And remember, if you aren’t a deeded timeshare owner, those annual fees can continue to rise.
What’s the average cost of annual fees?
According to the American Resort Development Association, the average annual maintenance fee for a timeshare is $660. Remember, you owe annual maintenance fees whether you visit the property or not. (If you don’t pay up, the developer can foreclose on your timeshare!)
If you plan on owning your timeshare for 30 years, those annual fees add up to over $19,000—essentially doubling the cost of your timeshare. And, that’s assuming that they’re not hiked regularly. (Note that you can ask if your plan has a fee cap.)
Aside from paying for the timeshare and annual fees, timeshare owners are responsible for various other expenses:
- Major repairs or improvements might also result in one-time assessments.
- If you use an outside timeshare exchange company to swap your share for someone else’s, you might be charged a fee.
- If you decide to sell your timeshare, the resort usually will charge additional fees for property transfer and recording.
- If you’re a deeded timeshare owner, and someone gets hurt on the property, you can be help liable.
Finally, there’s also the cost to travel to and from your property each year. And, should you choose to swap your timeshare for some variety in your vacation plans, traveling to an alternate spot might be even more expensive.
If you’ve considered all the associated costs and still think that owning a timeshare would compliment your family’s lifestyle, here’s what to ask before committing to any purchase.
How to Research Before Buying a Timeshare: Owners Share 7 Tips
There are an overwhelming number of timeshares available for purchase. Thankfully, there are almost as many resources sharing tips on how to best evaluate your options. Here’s what experienced timeshare owners recommend before signing:
1. Only consider buying a timeshare somewhere you will enjoy going for your vacations.
While there are opportunities to trade your timeshare within several different companies, the only way a trade become available anywhere in the world is for the current owner to decide they don't want to use the unit themselves during a given week.
This means there will also be times when the trade you want won't be available, and you'll end up going to your own resort instead, so it’s important that it’s a location you want to return to time and again.
2. Research the location and reputation of the timeshare.
Timeshares are notoriously associated with various scams, so make sure that you’re doing business with a reputable company in your location of choice.
The BBB suggests researching the company and desired vacation spot before you buy and says consumers should be doubly cautious if they are looking to buy a timeshare outside of the U.S., since international companies are not subject to the same rules as those in the states. The BBB Business Reviews website is a good place to start.
We also found the reviews and forums at the Timeshare Users Group to be particularly useful. Here, you can browse user ratings of resorts around the world. If you have any questions, head to the forums to ask one of TUGs members.
3. Inspect the quality of the timeshare resort and units.
Don’t just take their word for it! If you’re interested in purchasing a timeshare, be sure to visit the facilities and talk to current timeshare or vacation plan owners about their experiences. Also, check for complaints about the resort developer and management company with the state Attorney General and local consumer protection officials.
To really dip your toes in, consider renting a unit from a current owner first to make sure you like the complex or resort. Can’t find time for the trip? Consider that it’s unlikely that you’ll want to commit to going there every year.
4. Compare the costs of buying and maintaining a timeshare with renting a similar property.
With so many vacation rental websites online, it’s easy to search for similar properties in the same area to estimate annual costs. But, how to make sure that you’re accurately accounting for the costs of owning a timeshare?
Start by asking for a copy of the current maintenance budget for the property. You can also investigate their policies on management, repair, and replacement furnishings, as well as how long said services take. Again, don’t forget to search online for complaints associated with the development.
5. Don’t give in to impulse or pressure.
If you’re visiting a resort for the purpose of considering a timeshare, you might be offered purchase incentives that make you feel rushed to sign. While these bonuses might seem like a good value, buying a timeshare is a serious commitment. Remember that you have the right to get all promises and representations in writing, as well as a public offering statement and other relevant documents.
6. Read and understand the timeshare contract before you sign.
As we mentioned above, agents are likely to make plenty of promises when you’re shopping for a timeshare. Make sure that they’re all recorded in the contract before you proceed—including your rights to rent or swap your points when desired.
Be sure to break out your reading glasses to examine the fine print before signing, since many companies have strict cancellation policies and fees associated with backing out of a purchase. The BBB suggests getting an attorney or trusted real estate expert to read the contract before you sign to ensure that you are getting a fair deal.
7. Always cancel in writing.
Because there are many documented cases of abuse on timeshare sales and resales, most states have put in fairly generous opt-out clauses for consumers, known as the “right of rescission.”
This means that consumers can have up to a week to rescind a sales contract for a timeshare. For example, in Florida, where nearly 25% of U.S. timeshares are located, it’s 10 days, and money must be refunded back to the consumer within 20 days after receiving a cancellation notice.
If you do decide to back out of your purchase, the BBB and Federal Trade Commission both suggest that it’s best to send a letter through certified mail with a return receipt request so there is formal documentation of the cancellation.
What About Buying a Used Timeshare?
Before investing in a brand new timeshare, consider buying one used—a frequent suggestion by the members of TUG. That’s because, like new cars, timeshares quickly depreciate.
While there might be more financing options when considering “new” timeshares, timeshare owners have one word of advice: don’t. If you can’t afford to purchase a timeshare without borrowing, then you should wait. That’s because, should your timeshare foreclose, the outstanding mortgage balance and the unpaid maintenance fees are usually higher than the timeshare value. This creates what is called a deficiency, allowing lenders to go after your other assets.
To explore used timeshare options, follow the same due diligence you would when purchasing a new unit, whether you’re buying through resale services like TUG, Redweek, MyResort Network or an online auction site like eBay.
Bottom Line on What to Consider Before Buying a Timeshare?
Remember that a timeshare isn’t an investment property, so don’t plan on making extra money off the purchase—just happy vacation memories.
To ensure that a timeshare lives up to your expectations, make sure to consider beyond the first five or six years before you sink tens of thousands of dollars into the purchase. Are you assuming that swapping will be easy? Then be sure to purchase a timeshare during the most desirable season.
Do you envision your children or grandchildren vacationing with you? If so, will they be able to afford the travel costs as well? If not, you may wind up not using your timeshare unit or points as much as you expect.
While everyone has their own personal preferences regarding location, amenities, time of year, and perks, there are certain bases that each potential timeshare owner should cover. Download and print out this list of questions for easy reference to decide if a timeshare is right for you.
List of Questions to Ask Before Buying a Timeshare
In the final installment of our three-part series, we’ll take a look at popular timeshare scams, from unexpected fees, raised rates, and sales scams.