Aug 24, 2018

TimeShare - 8 Things to Consider Before Buying

Have you ever been on vacation and run into a team of sales people trying to lure you into sitting through a Time Share presentation?  They offer all these great incentives, upgrades to a suite at the hotel where you are staying, gift cards to enjoy a delicious meal at a fancy restaurant, free all day passes for the family to an amusement park, electronics devices and even appliances just to sit through and 1/2 - 1 hour presentation with no strings attached and you can walk away with one or two of these amazing gifts. Who could resist, the temptation is real. 

As you ponder over the offer and thinking to yourself, what's 1 hour out of your vacation time just to sit through this and walk away with something free, sounds like a win win situation. But to the unsuspecting consumer these sales people are good at what they do. They have it all lined up. They have set the bait and cast the line, now all they have to do is wait patiently for you bite down on the hook, reel you in and it's a done deal. Before you know it you are signing on the dotted line. 

But before you decide to sign your life away here are are few things to think about. 

What is a TimeShare: A property with a divided ownership or use rights. They are usually a vacation property or a condo within a resort area in which multiple owners have the right to use the property. 

 8 Things to Consider Before Buying

Which TimeShare is Best for me

There are four types of TimeShare: 

1. Fixed - You own a specific unit that you will use the same month and week each year. There is no planning ahead when booking vacation you have a fixed time locked in.  You can rent out your block of time or trade with other property owners if you will not be able to use it at the specific date. 

2. Floating - The owner reserves their time slot for a desire month and date each year. With this type of Time share you have to plan ahead so you can ensure you get your desire destination and date. 

3. Right to Use - A buyer leases the property for a set amount of time each year for a set amount of years. The developer maintains ownership of the property. 

4. Points Club - Similar to the Floating TimeShare, the buyer can stay at various locations depending on the amount of points they have accumulated from buying into a specific property or purchasing points from the club. Points are used like currency for reserving time slots at the properties. Booking is on a first come, first serve basis so it's not a guarantee.

What is the monthly cost of owning this Timeshare 

Besides the loan repayment there is an annual maintenance fee that is assessed and paid each year by the owner. Covered under the maintenance fee is: 
        - housekeeping
        - utilities
        - insurance 
        - onsite management
        - facilities & appliance up keep
        - real estate taxes 
        - replace broken items
        - major improvements ( remodeling, new roof) 

There may also be additional assessment fees in special cases where repairs are needed and cost exceeds the monthly maintenance fee reserves. Maintenance fees can increase by 4% each year so be sure check if these fees are capped by the property management. You can request to see what the fees have been like over the past few years so you can get a clear picture of what to expect. 

Is this a Real Estate investment

No, the salesperson will pitch it to you as a really great investment for your future but it's not. The only investment here is a great vacation memories.  The term investment is used very loosely. Timeshares depreciate in value over time, similar to your vehicle.

Consider your vacation pattern over the past few years  

Do you go to the same place at the same time every year or do you have a mix of destination and things you like to do, such as camping, cruises, road trips or tours? If you are the type to mix it up every year for vacation, then a Time Share may not be for you. Why pay for something that you will not use every year. 

How difficult is it to book my desired date for a vacation? 

This can be tricky depending on the type of TimeShare you have. Those with floating weeks or flexible points should plan ahead to ensure you get the perfect date, destination and resort. Premium vacation dates book up quickly.   

Do you have money upfront to purchase this property or will you need financing

If you don't have the cash to purchase upfront this means you will most likely need financing. If you have a budget you will have to re-do it to account for this extra expense. Can you afford to keep up with the monthly payments for the loan and the maintenance fees. Since it depreciates in value most banks will be hesitant about giving you a loan, this is where the developers/sales team steps in and arranges financing for you at a higher interest rate just so they can make the sale.

What is the grace period for opting out of a recently signed contract

You get home from vacation and you are back to reality and realize that the decision you made to purchase a TimeShare was not a smart one and now you want out of the contract. Most states have an opt-out clause for consumers called "Right of Rescission". This gives consumers up to a week to rescind a sales contract for a timeshare for any reason and money must be refunded back to the consumer. 

What happens if I want out of the contract because this doesn't  suit my life style anymore.

There are some options available after the grace period

-You can sell it but unfortunately the market is saturated with used Timeshares for sale and not     enough buyers. You may have to sell it at a low price to attract a buyer and the IRS will not allow       you to claim it as a loss. 

- Pay someone to take over the Timeshare and relieve you of the obligations AKA Timeshare relief

- You can rent it out

- Donate it to a charity organization

- Return it to the resort - check the contract before purchasing to make sure that is an option

What happens if you are not able to keep up with the payments. and it goes into Foreclosure? 

If you go into Foreclosure and the outstanding mortgage balance and unpaid fees are higher than the TimeShare value this will create a Deficiency. Depending on the state you live in the lender may be able sue you and go after your other assets for non payment.

Do you own or have previously owned a TimeShare? What influenced your decision in making this purchase? What are your thought on owning one? Let's start a conversation. Knowledge is power

Thanks for stopping by and taking the time to read my blog. 

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