What Is A Timeshare?
A timeshare is a way of sharing a property between multiple users or owners who share it for a limited time in a year. The main use of the timeshare property is for vacation purposes. These vacation houses are shared among families who have decided on a fixed time ( for instance, a week or month) the specific user will use it.
Typically timeshare property includes hotels, resorts, or vacation homes. It is qualified as not fully owning the property but a fraction of it based on the time the buyer will use it in a year. Owning a fraction of the property makes it easier to afford, and the purchasing price is calculated depending on the overall cost of the property and the time of year the user will use it.
For instance, owning the property for one week in a year means owning and paying for one-fifty of the property. While using the property for one month means owning and paying for one-twelfth of the property price. 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
The fixed week timeshare contract is the most initial form of contract, which means that the buyer can use the timeshare property for a fixed week in the year. This can also be a week or weeks, depending on what is decided in the contract.
The advantage of the fixed week contract is that it is easier to fix the week in which the purchaser will be sure that they can take a vacation (such as the summer vacations when the children will be off from school).
In addition, it will already be decided, and the purchaser can get the specific dates, weather, and often the specific units (in the case of apartments) in a fixed-week contract. The downside of this type of contract is that it may require more work to schedule the vacation in that specific week.
Moreover, it may be difficult to change the time to a different week of the year. However, the user won’t have to compete with other timeshare users for the specific unit or time, as it will already be pre-decided.
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 which convince people to purchase it. The idea of having an easily accessible holiday home with many happy memories linked to it makes a choice easy.
But, looking deeply into the financial aspect of owning a timeshare is a completely different story. It also helps in understanding why a timeshare loses its value.
When purchasing a timeshare, the purchaser must pay a lump sum (depending on the days of the year it will be used). While this amount will be enough to give the buyer ownership of the timeshare, the buyer will have to pay maintenance fees each year.
This maintenance fee is used to upgrade, repair, and maintain the property throughout the year. Also, this maintenance fee is not fixed and instead depends on the cost of the repairs. For instance, with increasing inflation, the price of things increases, and hence, there is a spike in the maintenance cost.
Moreover, this maintenance fee can increase up to 25% a year, which is expensive for many. Apart from that, most users faced the issue of not using it after a few years (often explaining it as wanting to travel or vacation in a different destination). Therefore, the cost of a vacation and yearly maintenance fees make it expensive to manage.
The value of the timeshare often depends on the advantage it can bring you. In the beginning years of the purchase, the purchaser makes full use of the timeshare and, in return, gets memories and an enjoyable vacation. With time, many buyers get bored and have a decreased usage of the timeshare vacation home; hence it loses its value in being an enjoyable place.
Furthermore, the biggest misconception related to timeshare is that people often consider it an investment or a real estate property even though it is far from it. A real estate property is one in which you have complete ownership (every nook and cranny of the property for the whole year) compared to a timeshare in which you can use the property for a limited time in a year.
Additionally, the real estate property is always assumed to be profitable when you decide to sell it as the prices of real estate always either increase or remain the same. Therefore, the chances of loss are null. While the timeshare property also increases in value and the maintenance cost you need to pay, it is a loss for you.
The main aspect of timeshare that buyers often need to consider is reselling the timeshare. A timeshare is easy to acquire, but it is difficult to cancel the membership or resell further, which is an additional cause for the loss in the value of the timeshare.
Even though the property of a timeshare is often one of the most desirable and beautiful locations, it is often thought of as a sensible investment that would increase in value and bring returns once returned. But it is the complete opposite of that. Once a timeshare is bought, it starts to decline in value for the buyer. How so?
Even not considering the maintenance fees (which drastically increase yearly), a timeshare is impossible to sell or cancel. Compared to real estate property which sells for an exponentially increased price, the timeshare does not sell, and when it does, it is sold at an alarmingly low value.
This value does not cover the total cost spent on the value (the cost of purchase combined with the maintenance cost paid over the years). Several resale listing sites may help sell your timeshare, but it should be noticed that most of these sites enlist your timeshare along with the pricing, which gets little to no response.
The loss in value of a timeshare could be understood from the fact that there are many timeshare listings on eBay in which the bidding starts from $1. Additionally, no bids are placed with a bidding price as low as $1.
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
A timeshare can be purchased directly with a one-time payment or by dividing the total amount by several payments. In the option of a one-time payment, the total cost is paid upfront, while in the case of installments, a down payment (equalling a small percentage of the total price) is paid, and the rest of the amount is broken down into installments.
It should be kept in mind that in the case of installments, a purchaser will have to pay a percentage of interest which causes a hike in the rate compared to the one-time payment. Additionally, the amount of interest and the purchase cost will 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
The yearly maintenance cost is also referred to as the yearly dues, which include the fees that cover property taxes, property management, property insurance, improvement of the area like the rooms, grounds, and the general area, and the maintenance of the overall resort.
Additionally, these yearly maintenance fees do not include the money required for any sudden renovation or building that may be required. This can result from any natural disaster, like a flood or hurricane. The maintenance fees do not cover this sudden financial need for refurbishment; therefore, the additional amount will be divided among all the timeshare holders.
The maintenance of the timeshare increases every year, which makes the timeshare more expensive and is one of the reasons that the timeshare loses its value. The yearly hike in maintenance value makes it difficult for many existing users to afford timeshare. Therefore, this is an important aspect to consider while 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.
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.
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.