|A TUG Introduction to
This webpage is a comprehensive introduction into timesharing and the timeshare concept, originally written years ago, this article remains updated and is a must read for all those considering a timeshare, or new timeshare owners!
TUG Banner Ads .. click for details on this banner program
by Stephen J. Nelson. All rights reserved.
The purpose of this Introduction is to help timeshare owners understand some of the basic concepts and features of timesharing, and, thereby, obtain more value and enjoyment from timeshare ownership. This course is based almost entirely on information I learned by visiting the TUG message boards regularly beginning in September 1999. While I have supplemented my TUG education with some of my direct timesharing experiences, the true authors of this course are the many TUG contributors who have taken the time to share their knowledge with Newbies such as I. Any mistakes and errors in this course simply reflect my own inexperience and are my own fault.
This Introduction has much more information than you can probably absorb in one or two readings. So please don’t feel bad if it seems overwhelming; I assure you that most of us who have become seriously involved with timesharing have felt the same way. If you take time to carefully go through this course several times, I think it will be greatly help you and your family get the most out of timesharing. If you have questions, post them on the appropriate TUG message boards. Remember the point of timesharing is for you, your family, and your friends to enjoy better, more satisfying vacations; don’t let yourself get so frustrated trying to work with timesharing that you lose that goal.
I intend to periodically update this course, and your comments will help me improve the material. I especially would like to learn of explanations that are not clear, additional topics that you think should be added, and errors that need correction. Please e-mail your comments to: T_R_Oglodyte@yahoo.com.
Table of Contents - Click to go directly to that section
A timeshare is a program in which a group of people shares use of a property by dividing among themselves the rights to use the property for specific time periods. Although the property is usually a residential project such as a condominium, developers have applied the timesharing concept to other types of properties, such as houseboats, campgrounds, and recreational vehicle parks. Virtually all timeshares are resort or vacation properties.
To set up the timeshare, the developer “divides” occupancy of each of the units into time-based intervals. The developer then sells these intervals to buyers, so each owner of an interval receives the right to use a specific unit for a specific time period corresponding to the interval they purchased. Each timeshare owner thus “shares” the usage of the property along with all of the other owners. Through this shared usage, the owners have guaranteed accommodations in the property, without carrying the financial and property management burdens associated with a conventional ownership of such a property.
Timeshare intervals are normally one week long; a few timeshare projects, however, use other ownership fractions, such as one-tenth or one-quarter ownerships. Since almost all timeshare projects are based on one-week intervals, the words “week” or “timeshare week” are generally used in the timesharing community to mean a one-week timeshare interval. In keeping with this convention, through the rest of this course I usually refer to timeshare intervals as “timeshare weeks” or “weeks”.
In addition to the purchase price, timeshare owners also pay an annual fee for property upkeep and management. Most timeshare projects also reserve one or two one weeks usage of each unit for maintenance and repairs.
Historically, many timeshare developers have used high-pressure and deceptive sales tactics, with misleading and inaccurate portrayals of what buyers could expect from their timeshare ownership. The timeshare industry has also had its share of unethical and dishonest resort developers and operators. Consequently, timesharing has a bad reputation with many people. Although the timeshare industry has improved its sales presentations, consumer awareness and education is still essential for owners to avoid being misled and to obtain the most value from their timeshare purchases. This article is one effort in that process.
Despite these perceptions, timesharing is a good product for many people. Timesharing makes resort ownership possible for many people who otherwise would not be able to enjoy such facilities, and there are many satisfied timeshare owners (including the author). After buying one unit and enjoying it, many timeshare owners have purchased additional timeshares. In addition, many well-known hotel and resort operators (such as Marriott, Disney and Hilton) have developed timeshare projects that have been successful and have greatly improved the image of timesharing.Because of the bad impression many people have of timesharing, timeshare developers have developed other names for timeshare projects, such as “Vacation Ownership” or “Fractional Ownership”. These programs are still timeshare projects, and many of the same principles apply.
While all timeshare programs provide you, as the owner, a right to occupy a facility for a given period (usually one week every year or every other year), there are many differences in how this is done. This section discusses some of the major variations among timeshare programs.
1. Fixed, Floating and Rotating weeks
In a fixed week system, your occupancy right is for the same week, and usually the same unit, every year. For example, if your timeshare ownership were for week 34 in Unit 253, you would have a guaranteed right to occupy Unit 253 for the 34th week of the year. (Note that most timesharing calendars count weeks from the check-in day. So, if the check-in day for Unit 253 is Saturday, then week 34 starts on the 34th Saturday of the year, with check-out on the 35th Saturday of the year.) As can be expected, some weeks are more popular than others; this is usually reflected in the purchase price for the timeshare unit.
In a floating week system, you have the right to use a unit during a specified period (the “float” season or "flex" time), but you must contact the resort to reserve a specific week during the float period. A floating right is useful if you don’t want your usage restricted to a given week every year. Since all other owners that share your float period can reserve any time during that period, if you delay making a reservation you might find that all of the units have already been reserved for the times that you wish to reserve. Then you may have to accept a week you may not want, or you may have to forego your usage for that year.
Resorts set their own policies as to how far in advance their owners can reserve their floating week usages. This lead-time can be as little as nine months or as much as two years in advance of the check-in date. Many resorts will require advance payment of maintenance fees to reserve a float week, especially if you plan to use the week in a timeshare exchange.
When you reserve a week for exchange purposes, some floating week resorts will select the week to be deposited for exchange purposes or will restrict you to picking only certain weeks for deposit, whereas other resorts allow you to select and deposit any available week. Since the particular week deposited with an exchange company directly affects the exchange value of the deposit, the procedures your resort uses to assign floating weeks for exchanging will influence the types of exchanges you can complete with your timeshare.
A few timeshare projects use a rotating week system. In this type of program, your usage week changes from year to year on a fixed schedule. For example, with a three-year rotating schedule, in Year 1 your usage might be for week 9, in Year 2 your usage would be for week 26, and in Year 3 your usage would be for week 43. In Year 4, the cycle would start over again with week 9. Rotating weeks allow all owners an opportunity to use the resort during the most popular periods.
2. Deeded and right to use
Another major difference is whether the timeshare is a deeded interest or a “right-to-use” arrangement. Most deeded programs divide ownership of each unit into specific week increments, and as a buyer, you actually purchase a fractional ownership of the unit. For example, if you were to purchase the fraction of ownership associated with week 34 in Unit 253, you would receive a deed conveying to you ownership of that specific timeshare fraction; this deed is also recorded with the local governmental agency (such as a County Recorder or Assessor) that records deeds and maintains property ownership records. In some cases, the deed may simply convey a specific fractional ownership interest corresponding to the ownership period without tying the ownership to a specific week, for example, an undivided 1/52nd interest in Unit 253. Since your ownership in a deeded property is ownership of real estate, you can sell the timeshare unit, give it away, or bequeath it to heirs, just as with other real property.
In a “right-to-use” program, you receive the right to use the unit for a specified number of years. At the end of that period, the usage rights revert to the property owner. Usually you can sell, donate, or bequeath a “right-to-use” contract, but the expiration date will remain the same. Because many countries either prohibit or severely limit foreign ownership of real estate, a right-to-use program may be the only way to successfully develop a timeshare project in those countries.
As part of the process of establishing a timeshare project, the developer also creates a set of legal documents describing the operation of the resort and the timeshare program. These documents are generally referred to as the “program documents”. For a deeded property, the program documents are usually in the form of Codes, Covenants and Restrictions (CCR) that attach to the ownership of each timeshare interval and are binding on all owners at the property (including subsequent purchasers). For a right-to-use property, the right-to-use contract will either contain the program documents or will incorporate them by reference.
Both deeded and “right-to-use” properties can operate with either fixed or floating week programs. In a deeded floating program, the CCR or program documents will specify that the owner’s usage is a floating right that must be reserved, and that the owner does not receive any special preferences to reserve the unit and week that appears on their deed.
A critical difference between deeded and right-to-use properties involves ownership of the resort. With a deeded property the owners of the intervals collectively own the resort. When the resort is first opened, the developer owns the weeks and, hence, controls the project. As the developer sells timeshare units, the developer’s ownership level declines, and control of the property usually transfers to the owners. If the property manager defaults or goes bankrupt, you and your fellow owners will still own the property as reflected in your deeds.
In contrast, with a right-to-use property, the developer typically continues to own the property even after all of the intervals are sold. The developer usually retains the right to sell or transfer the property, including the timeshare program, to a third party. The developer may also be able to unilaterally change aspects of the timeshare program, increase annual fees, or impose special assessments. Owners of right-to-use intervals may have little or no ability to prevent or influence such actions by the developer or operator. Similarly, if owners are dissatisfied with the management of the property they may have little or no ability to force changes in property management and operations. In addition, if the resort closes or the operator becomes defunct, you might lose your right-to-use without receiving any compensation.
In a deeded property, a Homeowners Association (or similar organization) usually has overall responsibility for managing the property in accordance with the program documents, including setting annual fees and levying special assessments. When you own a week in the resort, you are automatically and mandatorily a member of the Homeowners Association. You have the right to cast a vote in all matters requiring a vote of owners, including electing a Board of Directors to govern the Association. The Board of Directors will usually hire a resort management company to operate the resort.
Some unscrupulous developers of undeeded resorts have “oversold” the project; i.e., they have sold more intervals to owners than the resort can provide. (This is most likely to occur at an undeeded resort because the absence of deeds linking units sold to specific ownership interests makes it easier to oversell the resort.) When this happens, owners will find it very difficult to reserve a usage period. Accordingly, if you are purchasing a week at an undeeded floating time resort, you should determine whether you are adequately protected against overselling of the resort’s inventory.
3. Vacation or Travel clubs
Vacation clubs are another timesharing variation. A vacation club is an organization that owns multiple timeshare properties in different locations. If you are a club member, you can reserve space at the various resorts that are part of the club in accordance with club rules. You pay annual fees, and there is an initial cost to join the vacation club. As with a right-to-use property, the vacation club contract will either contain the timeshare program documents or will incorporate them by reference.
Club memberships can usually be bought, sold, or passed to heirs. There can be different levels of membership, with some membership levels receiving higher priority in reserving certain units or having access to larger units. Sometimes memberships may be associated with a “home” resort, with club members receiving priority in reserving space in their “home” resort.
Some vacation clubs operate through a Board of Directors elected by the membership. Conversely, other vacation clubs are simply companies that pre-sell vacations, and membership in such clubs does not include any right in the governing of the club.
Ownership of properties included in a club is usually structured in one of two ways:
· The developer (or its successors) owns the properties, with the club having access to the properties via a contractual relationship with the owner.
· The developer transfers ownership of the properties to the club after they are built. In this case, the properties would be owned by the club collectively and not by members individually. If your club membership also gives you a fractional ownership in the club, then you will own the properties indirectly through the club.
In either case, if the club ceases operations, you can easily lose your right to use the properties without compensation. In some clubs, the properties are placed into a trust that owns the properties on behalf of the club members. This arrangement provides some added security to the club members if the club ceases operations.
Some vacation clubs sell “deeded” memberships. If you own or are considering purchasing a “deeded” vacation club membership, you should read your documents to verify what your deed represents. With some “deeded” vacation clubs, each membership includes a deed for ownership of a specific unit and week at a resort. Then, if the vacation club ceases operations, the deeded owner will still own that interval. In other cases, the “deed” may represent a fractional ownership of the vacation club. In yet other clubs, the “deed” is only a certificate for membership in the vacation club, without representing ownership of any real property.
Vacation clubs and right-to-use resort properties have many common features, and most of the cautions previously described for right-to-use projects also apply to vacation clubs. Overselling the program has been a problem with some vacation clubs, just as it has been with some undeeded resorts.
4. Points programs
In a typical points program, you join the program by purchasing a membership. You then receive a specified number of points every year, with the number of points you receive established by the terms of the membership you purchase. You can then exchange these points for accommodations at the resorts that participate in the points program. You also must pay an annual fee for upkeep and maintenance; the amount of the fee will usually depend on the number of points you own.
As with vacation clubs, most points programs offer multiple resorts in which you can reserve weeks. The number of points required to obtain accommodations will usually vary with the accommodations selected. Factors influencing the number of points required for your requested accommodations include:
· The popularity of the resort;
· The size of the accommodations;
· The number of nights of occupancy;
· The specific nights requested (weekend and holiday nights usually require more points per night than do mid-week nights); and
· The season of the year.
Some points programs also sell different types of points, with the more valuable points having higher priority in reserving accommodations during peak demand periods. Most points programs will allow you to accumulate points over two or more years, so that you can trade to a larger unit or more popular resort if you are willing to travel less often. Some points programs will also allow you to occupy a resort for less than a full week at a reduced number of required points.
Recently, some points programs have started allowing members to redeem their points for other travel related services, such as airline tickets and automobile rentals. I expect that other points programs will add similar features in the future. I also expect that frequent traveler programs operated by travel companies such as airlines and hotel chains will establish tie-ins with timeshare points programs to further extend point generation and redemption opportunities.
Points programs can be linked to a deeded ownership or can be a direct “buy-in” not linked to ownership of a specific week. If the program is linked to a specific week, the number of associated points will depend on the desirability of the underlying week (size of unit, season, resort popularity, and supply/demand balance).
Points programs can be run by a program operator, or can be part of a vacation club timesharing program. Recently, some exchange companies (see Lesson 3 for a discussion of exchange companies) have started developing points programs.
An important concern with points programs is the long-term “value” of your points in reserving accommodations. If the program operator is able to increase the number of points required to reserve units at participating resorts or to obtain other services, the value of your points will erode, and you may be forced to purchase more points to be able to continue to reserve the units you desire. If you own or are considering purchasing into a points system, you should check the program documents carefully to determine what protections you might have against such losses in exchange power.
Points programs and right-to-use resort properties have many common features, and most of the cautions previously described for right-to-use projects also apply to points programs.
One of the most attractive features of timesharing is the ability to exchange your timeshare week for someone else’s week. Through such exchanges, you can obtain timeshare accommodations in desirable vacation locations throughout the world. Exchanging also allows you to vacation at different times of the year, even using a fixed week.
This section briefly discusses the primary methods for exchanging timeshare weeks. Lesson 3 discusses exchanging in more detail.
1. Direct exchange
The simplest exchange approach is to find a timeshare owner who is interested in exchanging his or her week for your week. Each of you then notifies your respective resort that the other owner will be using the week at that resort.
2. Through a resort management group or vacation club
Another exchange option occurs when your timeshare ownership is part of an exchange program that includes multiple resorts in different locations. In these arrangements, you can exchange your week for a week at another resort within the group. Many timeshare management companies that operate resorts in different locations offer this type of exchange service as part of their management services. In some vacation clubs, this is the only way that you can have a week assigned to you.
3. Through a timeshare exchange company
The most common exchange method is through a timeshare exchange company. To do this, you “deposit” your week with the exchange company. As other owners deposit their weeks (and as resorts deposit unsold weeks with the exchange company), the exchange company builds up an inventory of weeks that are available for exchanges. The exchange company then makes available to you weeks from its inventory that the exchange company considers comparable to your deposited week. The exchange company thus serves as a clearinghouse for people making exchanges. Note that the owner of the week you exchange for will almost never be the person who receives the week you deposit.
The demand for many resorts varies seasonally. For example, for people living in the northern hemisphere, beach locations are popular in the summer, whereas ski resorts are most popular during ski seasons. Accordingly, a timeshare week during a high demand season will have more value than would a week for the same accommodations during an off-season. This value affects both the price of the unit and the quality and types of exchanges you can make with the timeshare unit.
Resort Condominiums International (RCI) and Interval International (II), the two largest exchange companies, both divide weeks into three seasons, designated by color. For RCI, the designations are:
Ø Red: high demand season
Ø White: intermediate demand season
Ø Blue: low demand season
For II, the designations are:
Ø Red: high demand season
Ø Yellow: intermediate season
Ø Green: low demand season
The designations of seasons vary with each
resort. Also some resorts in highly
popular locations might not have any low demand period, and in some
locales (such as
Resorts that have float weeks or internal exchange programs may have their own seasonal designations; these are often identified by such terms as “prime”, “peak”, “high”, “holiday” or “swing”. These internal season or date designations often differ from RCI’s and II’s seasonal designations for the same resort.
Timeshare purchases can be divided into purchases of “new” units (bought from the resort developer) and “resale” units (bought from any party other than the developer, such as an owner, a timeshare reselling agent, or a homeowners association). Each of these will be discussed below, followed by some general advice on purchasing timeshares.
Developers are the entities that create timeshare projects by building the resort (or by converting an existing resort) and selling the units to buyers. Developers run the gamut from poorly financed, marginal operations to well-known travel and leisure corporations such as Marriott, Hilton and Disney. Many of the early developers of timeshare projects were marginal operations, and contributed to the bad image of timesharing.
After completing a timeshare project, the developer conducts a sales and marketing program to sell the units. Sometimes the developer handles both project development and sales. Other times, the developer will arrange for a company that specializes in timeshare sales to market and sell the intervals to buyers. To interest people in attending a sales presentation, the sales program usually includes financial incentives to people who attend sales presentations. The incentives typically include items such as gift certificates, discounts on accommodations, or other amenities.
Timeshare sales and marketing costs
can easily be 50 percent or more of the developer’s sales price.
You may be surprised that sales and marketing costs
be so high, but a good timeshare project can easily support these costs. For example, consider that
a developer can probably build and furnish a two‑bedroom condominium
unit in most parts of the
As mentioned previously, a resale occurs when a non-developer owner of a timeshare week sells that week to another party. Sellers include private individuals, brokers that carry timeshares in an inventory, and resorts or homeowner associations that have acquired timeshare units at their resort. Some resorts have on-site resale agents who accept listings from owners who want to sell their timeshare units.
There are a variety of reasons why people sell timeshares they own, including deaths, divorces, financial emergencies, changes in personal vacation habits, and, unfortunately, people finding out that timesharing does not work for their lifestyle.
1. Prices for resale units
When most people initially try to sell a timeshare they bought from a developer, they don’t realize that the resale value of their timeshare is only a fraction of the price they paid to the developer. As was indicated in the above discussion of developer sales, 50 percent or more of a developer’s sales price represents the cost of the developer’s sales and marketing program. A private individual can’t do the same things a developer does to stimulate demand for their week. Generally all a private individual can do is try to let possible buyers know that they have a week they would like to sell, and see what price the market will bear. Because there are many more people trying to resell their timeshares than there are people looking to buy them, the resale market is generally a buyer’s market. As a rough guide, resale prices more closely reflect the cost of the unit absent the sales and marketing program, or roughly 50 percent of the new sales price. Resale prices for a few timeshare units have held above this level; these are usually top quality resorts in locations with high demand and limited supply. In many cases, these resorts also operate repurchase programs to maintain higher resale values. Conversely, some timeshare units are essentially worthless.
Because there is no central clearinghouse for resale prices, you often cannot estimate a resale price based on past sales. Lacking historic sales data, you should simply recognize that the value of a resale unit is whatever price a buyer and a seller agree on. In some cases, a broker who is active in sales at a given resort may have some information on resale prices. Although sales price information for deeded properties will usually be collected by a local agency as part of the deed recording process, unless you live near the deed recording office you will not easily be able to review these records. TUG also has a historical sales database, containing data provided by TUG members, that may be useful.
You may be able to get some guidance from listings of similar units that owners are trying to sell. In looking at these listings, you should consider that if a unit has been adequately publicized but has not sold after five or six months, the unit is probably overpriced. The implication of this is that most advertised prices you will see for resale units are too high.
2. How to find timeshare resales
One of the difficulties in purchasing timeshare resales is locating and contacting owners of timeshare weeks that you might be interested in purchasing. Some of the principal ways of locating timeshare resales are summarized below:
3. Completing a resale purchase
The process to complete a resale purchase will vary with the type of timeshare unit you are purchasing (deeded, right-to-use, points) and the legal requirements of the jurisdiction in which the timeshare is located. As a minimum, you will need to record your purchase with the resort or, in the case of a points program or vacation club, with the program operator. The resort or program operator will identify the procedures to follow to transfer ownership in their records, including the documents that need to be completed and the fees they charge to change the ownership records.
If the timeshare is a deeded property, transferring title will normally also require that you record a deed transferring title with the governmental agency that records property ownership. The agency will usually charge a document-recording fee. If the sale includes purchasing title insurance, the title insurance company will conduct a title search and issue a title insurance policy.
Generally, if you purchase through a broker, the broker will arrange for an escrow company to manage the property transfer. If you purchase directly from a seller, you and the seller will need to manage the title transfer process. One option is to establish an escrow account with an escrow company. If you are purchasing title insurance, the title insurance company will usually also be able to provide escrow services. There are also some companies that assist in transferring title in timeshares. These companies will typically prepare deeds and other legal documents, record the deeds and documents with appropriate agencies and the resort, provide copies of documents to the buyer and seller, and notify parties when the transfer is completed. Some of these companies will also hold the buyer’s check (made out by the buyer to the seller, not to the transfer company) until title transfer is completed; then they will send the seller the check along with the seller’s copies of the final documents.
Many sellers will simply provide you with an executed grant deed or quitclaim deed in exchange for your check. This leaves you responsible for completing the title transfer. If a problem occurs in the title transfer, you will be in a weak position since the seller will already have your money.
Purchasing through an on-line auction is the same as any other purchase directly from a seller. The escrow services that are associated with the on-line auction services will probably not be familiar with the procedures involved in transferring title to timeshares, however. Accordingly, if you want to use an escrow service with an on-line auction, you should work out the escrow details with the seller prior to placing your bid.
It is possible for an individual to transfer title to a deeded timeshare himself or herself. However, as this Timesharing 101 course assumes you are relatively new to timesharing, I do not recommend that you attempt this unless you are familiar with the procedures to transfer title to real estate.
Buyers also often wonder if they should
obtain title insurance for a deeded timeshare purchase.
In deciding to purchase a timeshare, you should evaluate the different types of ownership options to select the type of timeshare that will work best for you. This section discusses some items to help you start your evaluation.
1. Fixed weeks, floating weeks or membership in a vacation club or points program
A key decision you face is whether to purchase a fixed week, a floating week, or a membership in a vacation club or points program. As you make this decision, you should consider the following items:
- The ability to make long-range vacation plans.
Because you know the week the unit will be available to you and what unit you will occupy, fixed weeks work best if you usually vacation at the same time every year and are interested in returning to the same location frequently. Conversely, if you want to vacation in the same location frequently but your vacation times change from year to year, a floating week or membership program would probably work well.
- Exchange value.
Exchange value is the ability of a timeshare week to exchange for another timeshare week. Some weeks are more valuable and desirable than others. If you want to regularly use your week for exchanging, you need to be aware of the exchange value of the weeks you want to obtain and be sure that you buy a week that will have the needed value to complete these exchanges. Generally, exchanges are completed using weeks of comparable value. If the week you own is a lower value week than the areas you want to exchange into, you need to understand this and plan your exchanges accordingly. (Lesson 3 discusses exchange value more completely.) Being able to predict the exchange value of your timeshare aids in making long-range vacation plans.
To be able to plan your exchanges, you need to able to predict reasonably well the exchange value of your week. The highest exchange value predictability occurs with a points program. In a points program you know exactly what your exchange value is in points, and how many points are required to complete exchanges to other resorts in which you are interested. Most vacation clubs also have a high degree of predictability, at least for exchanges completed within the club.
With fixed weeks, the use period is the same every year. Thus, the portion of exchange value that is associated with the season will generally be the same from year to year; some variations in this can occur, though, if the week periodically includes a major holiday. The actual exchange value will also vary with how far in advance of the use date you deposit the unit with an exchange company.
With floating weeks, the exchange value will depend on the demand for the week that you receive to deposit into your account. As explained in Lesson 3, in many floating week resorts owners may have little or no ability to select the week that assigned to them for exchanging.
- How far in advance of use you can deposit a week.
With fixed weeks, the use dates are fixed and known. Therefore, you can usually deposit fixed weeks with exchange companies as far in advance as an exchange company will allow (usually two years). In contrast, with floating weeks, you often can’t deposit weeks earlier than the resort will allow reservations to be made. In some cases, this can be as little as nine months ahead of usage. Thus, fixed weeks allow you to conduct longer range vacation planning.
- Ability to split a week.
Most points systems will allow you to reserve units for less than one week. Some floating week resorts and vacation clubs will also allow you to split your usage right into separate weekend and weekday periods. Fixed week resorts usually have no provisions for splitting a week.
- Frequency of timeshare usage
Most timeshare programs are based on annual usage of the timeshare. If your vacation schedule or preferences are such that you would not use a timeshare every year, you should purchase a unit in a program that accommodates this situation. One option is to purchase an every-other-year (EOY) week. As the name indicates, with an EOY ownership your usage right occurs every other year. Purchase costs for such a unit are correspondingly less. Annual fees for an EOY are usually handled in one of two ways: 1) you pay a full annual fee, but only for the year for which you have a usage right; or 2) you pay half of a full fee every year. Points programs also work well if you don’t vacation annually, since the points will usually carry over to the next year if you don’t use them. Some vacation clubs will also allow you to carry over a vacation usage into the next year.
2. Deeded units versus right-to-use units
As discussed previously, the principal issues associated with deeded and right-to-use units involve the ownership security offered by a deed. With a deeded property, you are a part owner of the property; if the property manager becomes defunct, you will still own your share of the property. In contrast, when the operator of a right-to-use property becomes defunct, your only claim on the property is as one of many other creditors. Also, in a deeded property, the homeowners association can usually replace the resort manager if they choose. In a right-to-use property, the owner and operator are normally the same entity or are closely related entities.
You should also consider the years of usage remaining on a right-to-use contract, particularly as it compares with your long-range vacation plans. Since the price of a right-to-use unit declines sharply as the expiration dates approaches, some right-to-use units can be purchased very inexpensively. If you only plan to vacation for about ten years, purchase of a right-to-use with about ten years of remaining life might be quite practical and economical.
3. Lockout units
In a lockout unit, the floor plan of the unit allows the unit to be divided into two subunits, each of which can be occupied separately. Typically, a two-bedroom lockout unit usually splits into a hotel unit and a one-bedroom unit.
The lockout feature greatly increases your flexibility in using the unit. For example, one year you could occupy the unit as a full two-bedroom unit. Another year, if there were fewer people in your party, you could decide to occupy just the one-bedroom portion and deposit the hotel unit with an exchange company. Another year you might decide to deposit the unit with an exchange company as two units, a one-bedroom unit and a hotel unit, thus allowing you to make two trades with the exchange company. (The exchange value and characteristics the exchange company assigns to these units will be those of a one-bedroom unit and a hotel unit, not a two-bedroom unit.) If you own a lockout that is a prime property located in a peak demand period, both portions of the lockout may have high exchange value.
4. Resort management groups
Many resorts are part of larger group of resorts under common management. Owners within these resort groups may receive benefits not available to other timeshare owners. These benefits can include preferences in completing exchanges to other resorts within the resort group and the ability to reserve unused time at other resorts in the group at favorable rates. If a particular management group has resorts in many areas in which you would like to vacation and offers exchanging preferences to owners within the group, you should consider trying to buy a unit at a resort operated by that management company.
A good general rule is to buy a timeshare you would like to use regularly. By doing so, you are guaranteeing that you will be able to take vacations that you will enjoy, and you will avoid paying exchange fees to obtain accommodations in the area. Furthermore, if you have little flexibility in vacation arrangements (such as specific vacation periods or a need for units that accommodate physical disabilities), owning a suitable week in your desired vacation area may be the only way to reliably secure timeshare accommodations.
If you are purchasing to trade regularly, you should focus on areas and seasons that will provide the exchange value you need for the best price (considering purchase price and annual fees.)
When evaluating a timeshare purchase (or considering whether to sell a timeshare you own), estimating the annual cost of owning a timeshare will make it easier to decide whether or not you should buy a timeshare and if so, how much you should be willing to pay for a timeshare. You can compare this estimate with the cost of renting similar accommodations to see if you are better off buying (or continuing to own) versus renting. By adjusting the purchase price in the estimate, you can identify an upper price above which you are better off renting than buying.
To estimate the annual cost of owning a timeshare, you should add together the investment income you would lose by having your money tied up in a timeshare (the “opportunity cost” of the money) and the annual maintenance fees and taxes for the unit. Then, if you are planning to use the unit for trading, add to your estimate the annual exchange fee and your annual exchange company membership, if any. (If you think you will make more than one trade per year through that company, then divide the annual fee by the number of trades you expect to make per year.)
Let’s consider “opportunity cost” more closely since many people leave this out of their analysis. As indicated, the money you use to purchase a timeshare is money that you could invest elsewhere to generate income. In buying the timeshare, you are giving up that income, so you need to include that lost income in the cost of owning your timeshare. That lost income is the “opportunity cost”, and it equals the after tax return that you expect to receive on your savings and investments. Thus, if you assume that the money you use to purchase a timeshare would yield 8 percent after tax, your opportunity cost would be 8 percent of the purchase price. (If you already own a timeshare, you should compute your opportunity cost on the price at which you believe you could sell your unit, not what you paid for it.)
To demonstrate this timeshare valuation approach, consider the following timeshare purchase:
Using this approach, you would compare the $1360 estimated total annual cost with the cost of renting similar accommodations in the area of the resort, as well as accommodations in other areas in which you would like to vacation. Then, having made this numerical calculation, you should factor in non-monetary elements, such as:
Finally, in making your comparison to rental costs at locations into which you might like to exchange, you need to be sure that you have a realistic possibility of making that exchange with the unit you are considering. If you expect to consistently trade into internationally renowned and highly demanded resort locations, you should own a resort in a similar area. See the sections below on the exchange value of a timeshare and realistic timeshare exchange expectations for more information on these topics.
My advice to people just being exposed to timesharing is to control the urge to buy a timeshare now and take time to get educated. If you’re like most people, you’ve sat through a timeshare presentation that has excited you about timesharing, and you are anxious to start making all of those good things happen for you and your family. Restrain the urge, and instead invest time in learning what timesharing is about, what the characteristics are of different resorts and different areas, and the different types of timeshare programs available.
Remember that if you wait, you still have your money in your investment accounts. If you have to wait a year, you can take the interest from the money you haven't spent, plus the annual fee you haven't paid, and get yourself a nice rental (especially if you are able to make use of TUG's last minute rental board). As you look, learn, and listen, you will begin to recognize the areas and seasons that will fit your needs, the resorts you should consider, the prices you ought to pay, and the methods you should use to find a resale that meets your criteria.
Also, by waiting and learning, you might find better ways of using timesharing to meet your needs. In the first year we were involved in timesharing, we evolved from saying:
it be great to own a timeshare in
"Wouldn't it be nice to have a week 7 or 52 timeshare in Whistler so we can ski there every year, and still be able to get back to Hawaii every other year"; to,
the price of Week 7 or
Week 52 two bedroom in Whistler, we can put that money in the bank and
do two shorter ski trips to Whistler rather than one week, and we still
want to get to Hawaii every other year, but now we think Hawaii would
be a nice place to have family reunions so we need to figure out a way
that we can occasionally have two 2-bedroom units at the same time, and
it should be in Poipu if possible (so maybe we should look for an EOY
unit to combine with the unit we already own), but maybe we should wait
until we have also had more of a chance to explore Maui. But you know
if we get one of those once in a decade deals on
You probably initially learned of timesharing through a developer sales presentation (as did we). If you invest the time and effort to learn more about timesharing, you will probably begin to realize that there are many more options for using timesharing than were explained to you in the sales presentation. As you become aware of these features, you will begin thinking about how you can use those other features as well, much as I described our experience above. Most of these changes in your thinking will also involve increasing your timeshare ownership and usage. When you see that happening to you, you will know that you've caught the “timeshare bug”!!
As you learn more about timesharing, you should begin focusing on those opportunities that will work best for you. You might also visit some of the areas or resorts in which you are interested to help you decide which specific resorts would best suit your needs. Perhaps you can rent a week of accommodations in the area from an on-line auction or using the TUG rental boards. Then, after you complete your investigation, set your price and start looking. Be patient; if you’ve set your price appropriately, you will get it if you diligently seek sellers and bide your time. Remember, it’s a buyers market, and in many cases your offer will be the first one those owners have received. If they don’t accept your offer, they probably do not have another one to fall back on. If you keep at it, you will probably find someone who is willing to sell the unit to you so they will be relieved of the financial obligations associated with continuing to own the unit.
Obviously doing all of the analyses described above takes time and sleuthing. But if you want to invest the time and energy, you can work out a good deal and take some pride in your savviness. On the other hand, if all of this seems like too much work, just go ahead and buy your week, enjoy it, and don't look back. We all know that when there is an active timeshare bug infection, it's hard to resist the urge to buy that unit that you want so badly. (The timeshare sales people know how to play off that emotion very well, don't they?) But, if you learn how to do timesharing effectively, in one or two years (maybe less) you'll probably be back for more weeks!
Finally, before making any purchase you should obtain and review a copy of the program documents for the timeshare you are considering purchasing. You should carefully compare what you were told about the week with what the program documents describe. Sellers (including developer sales staff) and brokers sometimes do make mistakes about aspects of the program. If you are purchasing from a developer and a feature presented in the sales presentation is important to you but is not included in the sales agreement or program documents, you need to have it added to the sales documents before you complete the transaction.
After reading the previous portions of this lesson you may wonder if there is ever a good reason to purchase from a developer. Some situations in which I think a person may want to purchase from a developer are outlined below.
Even if you do decide to purchase from a developer, you may find that the sales price is “negotiable”. You have nothing to lose by offering a lower price.
Most timeshare purchase contracts contain a rescission (or “cooling off”) period, during which a buyer may unilaterally cancel the contract and receive all proceeds back. Typical rescission periods are seven to fifteen days. If there is a rescission period, your purchase documents will indicate the length of the period and should describe the procedures you need to follow to rescind the sale.
If it’s too late to rescind, accept that it’s too late and enjoy your week without regrets. Most TUGgers purchased their first timeshares from developers, at prices far exceeding resale value, so we know what it’s like. You should remember, though, that you bought that week from a developer because the sales person showed you how buying that week, even at developer prices, would still yield you and your family more benefits than the cost of buying and using the week. Learning about the resale market does not change that conclusion at all. So, if it’s too late to rescind, switch your focus towards getting the most out of your timeshare so that you will receive the maximum possible benefits. Then, if you also join TUG and get involved, you will probably learn how to do things with timesharing that the sales person didn’t mention, and you and your family will be even more satisfied.
and post Free Timeshare Classified ads (for individuals) in the