A timeshare involves sharing the value of a property among multiple users or owners, each having access for a limited time each year. Primarily used for vacations, these properties are shared among families who agree on specific times, such as a week or a month, for individual use. Typically, timeshare properties include hotels, resorts, or vacation homes. Owners do not fully own the property but rather a fraction of it based on their usage time each year. This fractional ownership makes it more affordable, with the purchase price calculated based on the overall property cost and the time of year the owner will use it.
For instance, owning the property for one week in a year means owning and paying for one-fiftieth of the property’s value. While using the property for one month means owning and paying for one-twelfth of the property’s value. This fee gives you the ownership of a lifetime to use the place as a family vacation home. Apart from the initial payment, you will have to pay annual maintenance fees plus any charges needed to upgrade or renovate the property.
What Are The Uses Of Timeshares?
Simply put, a timeshare is a shared vacation property whereby many owners own a part of it. The timeshare property is usually beautiful and can be of different types, such as villas, resorts, beach houses, or apartments. The timeshare is available for a fixed amount of time, based on the type of timeshare owned-a fixed week or a floating week. The biggest advantage to a timeshare is being able to vacation in a place that is maintained and handled professionally. Therefore, you will have everything you need without worrying about it. The way timeshare works are dependent on the type of contract. Examples of timeshare contracts include
Fixed Week
The fixed week timeshare contract, the original type of contract, allows the buyer to use the timeshare property for a specific week each year. Depending on the contract, this period can include multiple weeks. The advantage of a fixed week contract is that it enables the purchaser to plan vacations during predictable times, such as summer when children are off from school. With this contract, specific dates, weather conditions, and units (in the case of apartments) are pre-determined. However, the downside is the potential difficulty in rescheduling vacations to different weeks. Despite this, the user won’t need to compete with other timeshare users for the specific unit or time, as everything is already pre-decided.
Floating Week
Companies offer floating week contracts to give the timeshare clients more flexibility. The floating week gives the freedom of selecting a week or weeks in a specific season or even throughout the year.
The positive aspect of the floating week contract is that there is no fixed week, and the user can select the time used on any occasion (like a wedding or honeymoon), the availability of family (family members visiting), and even the mood for vacation. Through this, the buyer can enjoy the property in different seasons, for instance, using it in winter one year and then in summer the following year.
The negative side of this type of contract is that getting the property for the desired time is difficult due to it being already booked. For example, it will be almost impossible to gain access to the property during Christmas or Thanksgiving. Therefore, the user may have to book the time in advance to use it during the desired time.
Point System Timeshare
The timeshare point system allows users to get points based on their resort size, location, and time spent at the specific location. Users can then use these points for timeshare exchanges of resorts. Two types of exchanges can be done, depending on the timeshare company; exchange of resort to a different one of the same company (internal exchange) or exchange with a resort with a different company (external exchange). The point system is similar to credit card points, flier points, or hotel points.
What Are The Types Of Timeshares?
The type of timeshare depends on the type of ownership. There are two types of timeshare ownership:
Shared Deed Ownership
The shared deed ownership gives the ownership based on the time the user will use it. For example, a user using the property for a week in the year will own one-fifty-second of the property. Additionally, there will be fifty-one more timeshares sharing the property contract. Similarly, a buyer using the timeshare for a month will own one-twelfth of the property.
Shared Leased Ownership
Shared leased ownership is also known as right-to-use ownership. In this contract, the purchaser will be able to use the property (for the decided number of weeks) only for a few years instead of forever. In this case, the buyer will not be the user and hence will be unable to rent out or sell out their share of the timeshare and hence will not receive any real estate interest. This type of ownership usually costs less than a shared deeded ownership.
Why Does A Timeshare Lose Its Value?
A timeshare has many positive aspects that convince people to purchase it. The idea of having an easily accessible holiday home with many happy memories linked to it makes the choice easy. However, deeply examining the financial aspect of owning a timeshare tells a completely different story and helps explain why a timeshare loses its value. When purchasing a timeshare, you must pay a lump sum based on the number of days per year you will use it. While this amount secures ownership, you must also pay annual maintenance fees.
The maintenance fee covers upgrades, repairs, and property upkeep throughout the year and depends on the cost of repairs, often increasing with inflation. This fee can rise up to 25% annually, which is expensive for many. Additionally, many users find they no longer use the timeshare after a few years, preferring to vacation in different destinations. Consequently, the combination of vacation costs and yearly maintenance fees makes managing a timeshare expensive.
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The value of a timeshare often hinges on the benefits it offers. Initially, buyers fully enjoy their timeshare, creating memories and enjoying vacations. Over time, however, many buyers use it less frequently, diminishing its appeal and value as an enjoyable getaway. Another prevalent misconception about timeshares is viewing them as investments or real estate properties, which they are not.
Unlike real estate where ownership is full and year-round, timeshares offer limited usage periods annually. Real estate properties generally hold or increase in value over time, providing a reliable investment. In contrast, while timeshares may appreciate in value, the ongoing maintenance costs outweigh any potential gains. Reselling a timeshare is also challenging, often resulting in financial losses due to the difficulty of canceling memberships or finding buyers willing to purchase.
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Timeshares are often in the most desirable and beautiful locations and are thought of as sensible investments that will increase in value and bring returns once sold. However, the reality is quite different. Once you buy a timeshare, its value starts to decline. Even without considering the maintenance fees, which drastically increase yearly, timeshares are nearly impossible to sell or cancel.
Unlike real estate property, which can sell for an exponentially increased price, timeshares often sell at alarmingly low values, if they sell at all. This low value doesn’t cover the total cost spent on the timeshare, including the purchase and maintenance costs paid over the years. While several resale listing sites may help sell your timeshare, most of these sites list your timeshare at a price that gets little to no response. The loss in value of a timeshare is evident from the fact that many timeshare listings on eBay start at $1, yet receive no bids.
What To Consider When Calculating The Cost Of Timeshare?
While calculating the price of a timeshare, interested buyers often consider the total cost and, in some cases, the down payment coupled with the interest of the total payment. But there are better ways of calculating the total price of a timeshare. The incorrect method is often the reason why the value of timeshare falls.
To calculate how much the timeshare will cost you, the following points must be kept in mind:
Type Of Purchase
You can purchase a timeshare with a one-time payment or by dividing the total amount into several payments. With a one-time payment, you pay the total cost upfront. With installments, you make a down payment, which is a small percentage of the total price, and the rest of the amount is broken down into installments. Keep in mind that with installments, you will have to pay interest, increasing the overall cost compared to a one-time payment. The interest rate and the total purchase cost depend on the resort type, location, and company.
Type Of Contract
As mentioned above, different contracts are based on the customer’s needs; therefore, each contract’s cost will vary. The contract for one week will be cheaper than the one for a month. Similarly, the shared deeded contract is more costly than the shared leased ownership. However, the different types of contracts have different positive and negative aspects.
Buying A Resale Timeshare
There is even an option of buying the timeshare from the owners who want to resell their share. The resale value of timeshares is very low, and many previous users sell them for as low as $1 as they are bored with their vacation spot and want to sell it as soon as possible.
Opting for a resale timeshare, you can easily save up on the initial purchase cost and will have to pay the yearly maintenance value. But, getting a resale timeshare is more complex than it seems, as many companies have different rules regarding reselling the timeshare and the restrictions a resale user will have to face.
Therefore, you should thoroughly research and consider before opting for a pre-loved timeshare. Although a pre-owned timeshare may have fewer benefits, it will also be more inexpensive than a new timeshare contract.
The Yearly Maintenance Cost
Yearly maintenance costs, also known as yearly dues, cover property taxes, property management, property insurance, area improvements (like rooms, grounds, and the general area), and overall resort maintenance. These fees do not include funds for sudden renovations or constructions, which may be necessary due to natural disasters like floods or hurricanes. If refurbishment is needed, the additional cost is divided among all timeshare holders. Maintenance costs increase every year, making timeshares more expensive and contributing to their loss in value. The annual hike in maintenance fees makes it difficult for many users to afford their timeshares, which is an important consideration when purchasing a timeshare.
The Resale Price
The resale of any investment is important, especially real estate. So, before considering any purchase, the resale value is an important aspect to consider. The resale value of any real estate either remains the same or increases; therefore, the chances of loss in real estate are almost none.
However, as discussed above, a timeshare is not real estate for many reasons (there is a common misconception). Therefore, the resale value of the timeshare needs to be sufficient. Many timeshare holders have even kept their bid prices as low as $1 on eBay, and still, there has been no response. When selling the timeshare, the user wants to recover the initial payment and the total amount paid in the yearly dues.
Furthermore, reselling a timeshare is difficult, and getting a good price for it is even more difficult. Therefore, many timeshare users who want to get rid of their timeshare look to sell for as little as possible. Why? It is because although it will not bring any returns, there will be no more need to pay the yearly maintenance amount. Therefore, when considering purchasing a timeshare and calculating its value, it is essential to consider its resale value.
Exchange Fees
Usually, timeshare users get bored of spending every vacation in the same resort. Therefore, timeshare companies can exchange their resort for a different location when they feel like having a change. However, many companies also charge exchange fees depending on the resort type, location, number of rooms, and occasion (like during the Christmas season). This exchange fee may be expensive for some users.
How To Get Rid Of Timeshare?
Learning about timeshares and the advantages of owning them seems advantageous at first and can easily convince you to buy them. But what if you start to feel its financial weight and want to get rid of it?
The timeshare sales professionals are well-trained to persuade individuals to purchase a timeshare. Their pay depends on the commission they receive on the number of sales, so convincing is their job. They tell you how owning a timeshare can solve all your problems, save money on your yearly vacations and bring your family closer than ever. But after a while, some people have difficulty bearing the financial expense of owning a timeshare. In addition, the pandemic has made things hard, and many people are looking into ways to cancel their timeshare.
There are numerous ways to cancel your timeshare, such as:
Making Use Of The Rescission Period
It is the period in which you will get a full refund if you cancel the timeshare. The rescission period laws differ for each state and company in the United States. The rescission period usually ranges from 3-15 days but can be up to 30 days depending on your location. So enjoy your vacation in the rescission period and think thoroughly about the decision. Knowing the length of rescission, by reading up on the rescission laws of your specific state, you can save up to thousands of dollars by deciding in time.
Reselling Your Timeshare
You missed your rescission period and are now deeply thinking about canceling your timeshare contract. One of the best options may be to resell your timeshare to another interested buyer, which will help you regain some of the money you spent buying it. But reselling has many complications, such as no interested buyer or the timeshare not being sold for a good price.
Taking The Help Of Many Other Companies
Many other companies, agents, and law firms will come forward and offer you their assistance. They would assure you that you can easily cancel your timeshare subscription without any hassle, but that will be only possible through them. And while that may be true, it won’t be for free at all. You will have to pay a certain fee for their services which may not seem like much when you are willing to do anything to get rid of a timeshare.
Final Thoughts
There are many advantages to owning a timeshare. Most timeshare companies have the most desirable and beautiful locations, making the perfect vacation locations. The companies also offer many great amenities which elevate the vacation experience.
Furthermore, the companies ensure that the resorts are neat and clean and agave all the things the users may require. Hence, a timeshare is a perfect decision for those who like to have a predictable setting for their vacation every year and want to avoid the hassle of booking and checking different locations and their facilities. While there are many positive aspects of owning a timeshare, there are some downsides too. A timeshare can be costly for many users, considering the front payment and the yearly dues. Moreover, the yearly maintenance fees also increase yearly in correspondence to the rise in the inflation percentages.
In addition, exchanging the resort for another resort or changing the pre-decided weeks for another time of the year is very difficult. There is little flexibility in exchanging or renting the resorts as well. Selling the timeshare is almost impossible as many people want to avoid purchasing a pre-used timeshare due to the different restrictions applied by the company for the purchaser of the resale unit. There is also unevenness in the market as the number of people looking to share their timeshare is more than the number of people looking to buy one; therefore, it is difficult to find any interested clients.
To continue educating yourself about the timeshare industry, read more Timeshare Exit Bureau blogs.