Timeshares may appear to be a great bargain, however they can quickly become costly and hard to untangle. The timeshare business model is regularly criticized for its “Today Only” sales strategies which misguide customers into signing up for timeshares without fully revealing the future monetary responsibilities that come with it. In some cases, timeshare companies may even misrepresent their timeshare vacation offerings, leading to a vacation contract that costs more than expected. Let’s look at Timeshares: Bargain or Burden?
Understanding the Depreciation of Timeshares
It’s important to keep in mind that timeshares are not investments that will increase in value. Rather, they depreciate quickly and significantly, meaning it is likely you won’t receive what was initially paid for the property when it comes time to sell – or worse yet, nothing at all. Although timeshares are backed by real estate deeds held in trust, they have increasingly been marketed as a use product rather than an investment opportunity.
The timeshare concept has been around for over fifty years, and many timeshares are now reaching the end of their life cycles or in need of expensive renovations. For timeshare owners who want to get out of their timeshare contracts, the process can be tedious and costly. In some cases, owners may even find themselves facing timeshare foreclosure and subsequent debt as a result of timeshares they can no longer afford or want as a result of these additional expenses.
Before buying a timeshare, it is best to research the developer and its resort offerings thoroughly, weigh other vacation options that may be more affordable or flexible, consider consulting with a financial planner versed in timeshares, and always read the timeshare contract and the fine print carefully. It is important to remember that timeshares are a long-term commitment and can become costly if not managed properly.
When considering timeshares, it is essential to ask yourself if this purchase could be a bargain or will it turn out to be a burden? Making an educated and mindful decision before purchasing a timeshare is crucial, as it may have grave financial effects in the long run.
High Upfront Initial Costs
Timeshares can be exorbitantly expensive over time and generally involve a 10-year promissory note for prepaid vacations. Interest rates on timeshare purchases vary from 14.9% to 19.9%, depending upon the resort finance provider. There are also additional closing costs and title fees thrown in as well.
Timeshares also come with property taxes, which are often paid to timeshare associations along with maintenance fees. These fees can range from hundreds of dollars to several thousand a year. While timeshares may appear to be an attractive vacation option at first glance, the long-term financial burden they can cause may outweigh any benefits they provide. You should look at your personal finances to ensure this cost benefit is really there for your needs.
Ongoing Timeshare Maintenance Fees
In addition to the initial costs of purchasing a timeshare, vacation owners are responsible for timeshare maintenance fees. Timeshare management companies are paid yearly fees that vary from several hundred to thousands of dollars for the upkeep, maintenance and repair or resort properties. No matter if you use the timeshare or not, it’s essential to recall that these fees will reappear annually. In addition, timeshare companies may also assess timeshare owners with additional fees for special assessments when reserves are not sufficient to cover timeshare upkeep.
If timeshare owners find themselves unable to pay the maintenance fees, timeshare companies may place liens on their timeshares or even foreclose on them. This can be another significant burden for timeshare owners and it is important to fully understand all of the associated financial costs before deciding whether to purchase a timeshare.
The Difficulty of Timeshare Resale
Owning a timeshare isn’t merely about navigating the financial intricacies; it’s a journey filled with various challenges that aren’t always apparent at the outset. One of the most prominent hurdles that owners face is the presence of stringent restrictions which can hinder the usability of their timeshares. Such restrictions can range from limited availability during peak seasons to unexpected maintenance shutdowns, making it challenging for owners to enjoy their investment to the fullest.
Furthermore, after being tightly bound by the timeshare contract, those looking to resell often find themselves saddled with substantial advertising and transfer expenses. But what exacerbates these challenges are the developer-imposed restrictions on resale. Developers often have a specific set of rules governing resale:
- First Right of Refusal: Some developers retain the “first right of refusal,” meaning if an owner receives an offer for their timeshare, the developer has the right to buy the timeshare back at the same price before the owner can sell it to another party.
- Transfer Fees: Even if an owner manages to find a buyer, they might be required to pay hefty transfer fees to the developer, further eroding any potential profit from the sale.
- Resale Disclosure Requirements: Developers may require a full disclosure of the sale, including the price, buyer’s details, and more. This can be cumbersome and can deter potential buyers.
- Limitations on Future Use: Developers might impose restrictions on buyers of resold timeshares, such as denying them certain amenities or benefits that original buyers enjoyed.
- Advertising Restrictions: Some contracts prevent owners from publicly advertising their timeshare for resale or rental under a use clause, limiting their options.
Depreciation and Resale Pitfalls
Adding to these burdens is the depreciating value of timeshares. Unlike traditional real estate that might appreciate over time, timeshares generally lose value, making the resale market even more challenging.
To add another layer of complexity, timeshare owners must also navigate the perilous waters of unknown and unlicensed resale companies. These dubious entities can magnify the challenges, sometimes engaging in deceptive practices, leading to even more substantial financial losses. In essence, many owners find themselves trapped in a maze of regulations, contractual obligations, and predatory entities, making their timeshare journey far more complex than they had ever imagined.
Timeshare Exit Options
You might find that some developers offer a timeshare exit program for owners who do not owe a balance on their vacation ownership. While these programs are not always transparent, owners can sometimes opt-out or surrender their interest in the timeshare contract through the resort developer.
In contrast, the practices of timeshare exit companies have recently come under greater scrutiny due to their questionable nature and illusory services when offering a time based money back guarantee. For proper guidance, a timeshare attorney can provide vacation owners with timeshare exit options and help them make the best decision for their situation.
The Bottom Line
It is critical for owners to understand their rights and obligations, as well as the timeshare exit options available. If timeshares are becoming a burden instead of a bargain, seek legal advice from an experienced timeshare attorney to explore exit strategies and protect your financial future.
Led by Attorneys Michael D. Finn and J. Andrew Meyer with over 75 years experience in consumer protection. The Finn Law Group specializes in timeshare cancellation and relief from timeshare obligations. Call us today for a free consultation at (727)214-0700 or email us for a free consultation.
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Disclosure: This article is for information purposes only and is not intended as legal advice. Always seek professional advice when it comes to buying a timeshare.