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Buying a Timeshare FAQs
A timeshare purchase can take one of two forms:
Fee simple plans (usually referred to as a
"timeshare estate,") offer the benefit of ownership,
tax advantages, and equity. They also allow the
buyer a voice in management of the resort. Most
timeshares are fee simple.
With a right-to-use timeshare (usually referred to
as a "vacation interval"), although usually less
expensive, you do not own the property, but have the
right to use it for a specified period of time.
Because it will revert back to the developer at some
future date, the developer has a greater incentive
to keep the property in good condition. However,
your resale rights may be limited. Also, with
vacation intervals or right-to-use timeshares, your
unit may be "fixed" (you’re entitled to use the same
unit each time) or "floating" (you’re entitled to a
similar unit, but not necessarily the same one). The
time you’re entitled to use your timeshare, also,
may be fixed or floating. Time and unit could also
be some combination of fixed or floating.
Can it get more complicated?
Deeded Timeshare Ownership. In a timeshare, you
either own your vacation unit for the rest of your
life, for the number of years spelled out in your
purchase contract, or until you sell it. Your
interest is legally considered real property. You
purchase the right to use a specific unit at a
specific time every year, and you may rent, sell,
exchange, or bequeath your specific timeshare unit.
You and the other timeshare owners collectively own
the resort.
Unless you've bought the timeshare outright for
cash, you are responsible for paying the monthly
mortgage. Regardless of how you bought the
timeshare, you also are responsible for paying an
annual maintenance fee; property taxes may be extra.
Owners share in the use and upkeep of the units and
of the common grounds of the resort property. A
homeowners' association usually handles management
of the resort. Timeshare owners elect officers and
control the expenses, the upkeep of the resort
property, and the selection of the resort management
company.
"Right to Use" Vacation Interval Option. In this
option, a developer owns the resort, which is made
up of condominiums or units. Each condo or unit is
divided into "intervals" either by weeks or the
equivalent in points. You purchase the right to use
an interval at the resort for a specific number of
years typically between 10 and 50 years. The
interest you own is legally considered personal
property. The specific unit you use at the resort
may not be the same each year. In addition to the
price for the right to use an interval, you pay an
annual maintenance fee that is likely to increase
each year.
Within the "right to use" option
several plans can affect your ability to use a unit:
Fixed or Floating Time. In a fixed time option, you
purchase the unit for use during a specific week of
the year. In a floating time option, you use the
unit within a certain season of the year, reserving
the time you want in advance; confirmation typically
is provided on a first-come, first-served basis.
Fractional Ownership.
Rather than an annual week, you buy a large share of
vacation ownership time, usually up to 26 weeks.
Biennial Ownership.
You use a resort unit every other year.
Lock off or Lockout.
You occupy a portion of the unit and offer the
remaining space for rental or exchange. These units
typically have two to three bedrooms and baths
Points-Based Vacation Plans.
You purchase a certain number of points, and
exchange them for the right to use an interval at
one or more resorts. In a points-based vacation plan
(sometimes called a vacation club), the number of
points you need to use an interval varies according
to the length of the stay, size of the unit,
location of the resort, and when you want to use it.
Timeshares are usually sold in one-week increments,
often through promotions offering "free" vacation
certificates or other prizes or gifts as inducements
to inspect the developments. The cost of a unit
depends upon size, amenities, location, and time of
year in relation to the area's peak or off seasons,
but usually ranges between $8,000 and $12,000. As we
all know, it can be much higher… Factor in the
maintenance fees that accrue over the years and you
have yourself quite an investment! The big question
is… Where’s the return? This often leaves the owners
wondering… “What have I gotten myself into?”
According to information from resort developers,
property managers, homeowner associations and
vendors, consumers have little appreciation for the
limited resale potential of their timeshare. Another
problem, unique to vacation ownership, is that
resale "bargains" hurt developers. But development
of a secondary market for timeshare units has also
been difficult partly because, from the consumer's
standpoint, "vacation ownership resale" conveys a
"tired," "worn down," or "cheap" image.
THERE ARE NO “USED” TIMESHARES!
Timeshares are resold daily; this secondary market
can benefit consumers greatly as you will pay a
greatly reduced price for the same property that
commands a much greater value in the primary market.
What is the difference?
Am I getting a “used” fruit basket?
The truth is your neighbor with the same
accommodations, week, bedrooms, bathrooms etc. may
have paid double for exactly what you have the
opportunity to enjoy for much less!
- Why buy a
timeshare?
A timeshare is normally purchased as a
vacation investment. Many times, the cost of
owning a good timeshare is less than renting
comparable accommodations year after year.
Another advantage of owning a timeshare is
the ability to trade vacations with other
timeshare owners through exchange programs
and travel to destinations all over the
world. Non-travelers also buy timeshares
simply to resell them in order to make a
profit. However, this is usually only
successful with high-demand properties and
locations.
- Should I
purchase a fixed week or floating week?
The advantage of owning a fixed week
timeshare is that you are guaranteed the
same specific week and unit every year. On
the other hand, having the option to request
a week within a specified time period of
each year (the floating system) allows for
flexible planning. A few timeshare programs
also use a rotating week system, in which
your usage week changes from year to year on
a fixed schedule, allowing all owners to
stay during the most popular season. Choose
a timeshare plan that best fits with your
lifestyle.
- How popular are
timeshares these days?
According to the ARDA (American Resort
Development Association) State of the U.S.
Timeshare Industry report: There are 5,310
timeshare properties worldwide. There are
1,517 timeshare properties in the U.S., an
increase of more than five percent per year
since January 1997, when 1,204 were
identified. Nearly 85 percent of timeshare
owners call themselves either "somewhat" or
"very satisfied" with their timeshare.
These are just some of the issues that make
timeshare re-sales a much more attractive
prospect. When you eliminate the costly
promotions, the astronomical overhead that
some of the resorts assume to sell these
properties, it can become a much more
attractive prospect, making much greater
financial sense.
Take advantage of this and
enjoy yourself!
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