After taking a dive during the recession, time share sales are heating up again. With more money available for leisure, many Americans are considering the benefits of a timeshare investment. After all, who doesn't want a yearly vacation?
According to a recent New York Times article, nine million Americans own timeshares
, with sales jumping approximately 25 percent since 2010. In standard timeshare purchase, a buyer buys a certain number of weeks at a resort condominium and agrees to pay homeowners’ association dues covering maintenance and taxes on the property. Payment for the unit can be made at the time of purchase or financed through the company selling the timeshare.
Many timeshare companies use high-pressure sales tactics, which can result in ill-advised purchases. After hooking buyers with a free mini-vacation, sales representatives tout the benefits of timeshares as investments, while downplaying the potential risks. In some cases, salespeople can be less than truthful in order to close the deal.
Given the potential risks, it is imperative to understand all the terms and conditions, particularly those that may be located in the “fine print,” before purchasing a time-share unit. It is also imperative to make sure that any oral promises made by the salesperson are included in the contract.
Pros and Cons of Timeshare Ownership
Below are some key issues to consider:
- Fees add up: In addition to the cost of purchasing the timeshares, owners are also responsible for paying yearly fees, which may include the costs of maintenance, utilities, taxes, and special assessments. In many cases, these fees can also increase without warning. To verify that you will save money, it is important to compare the total cost of owning a timeshare to renting a hotel room in the same area.
- Locked in for life: Timeshares purchases are memorialized in a written contract. In most cases, the agreements not provide any way to cancel the contract and, even if they do, the window is generally very small. For owners who want to relinquish ownership down the road, it is also very difficult. Timeshares companies are also notoriously unwilling to buy back units.
- Very little investment/resale value: There is no shortage of timeshare owners looking to unload their units, which makes it extremely difficult to recoup the cost. By way of example, there are more than 700 timeshares for sale on eBay alone.
- No tax benefits: While many investments have tax benefits, timeshares generally do not. In fact, with a few limited exceptions, owners who sell their timeshare at a loss, can’t deduct the loss on their tax returns.
- Difficulty using points: While timeshare owners used to receive a deed to their particular unit, most companies now operate on a “points system” under which owners are granted points to use at a number of different resorts. While the salespeople often claim this is an easy process, it can be difficult to secure the location and time you want.
- Renting restrictions: Many consumers go into a timeshare purchase expecting to recoup some of the costs by renting the unit. However, many contracts restrict rentals or place restrictions on how units can be leased to third parties.
Timeshares are a frequent subject of consumer litigation
, with aggrieved buyers seeking to cancel their ownership based on overstated benefits, hidden fees and other misrepresentations. While its has made no official announcement, many expect the U.S. Consumer Financial Protection Bureau (CFPB) to adopt regulations governing the sale of vacation units.