Timeshares: Fabulous Opportunity or Financial Trap?

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Alluring, yes, but beware: There's much more to these property transactions than meets the eye.

Why spend $150,000 on a vacation home when you could get one for $20,000?

That’s part of the premise of timeshares. By combining forces with other buyers, you can get a second home for a fraction of the price you’d pay as a solo buyer. Not to mention, you might get a better property with more amenities than anything you could afford otherwise.

Tempted yet? Before you get too carried away, watch the video below from Money Talks News finance expert Stacy Johnson. You might want to put away your wallet when you realize how hard it is to unload a timeshare you’ve outgrown.

Watch what Stacy has to say, and then scroll down for more on timeshares, including how to buy and sell them.

All about timeshares

Let’s start with the basics. “Timeshare” might be a familiar term, but do you really know what it means?

As the name implies, a timeshare is a property that you share with others. Often you’re a deeded owner, and your portion of the property can be passed along in an estate or sold as with any other piece of real property. Traditionally, timeshare holders have been allotted a specific week or weeks in which they can use the property.

Nowadays, many timeshares tend to be more flexible when it comes to your accommodations. You’re still a deeded owner, but rather than giving you a specific unit to use at a specific time, you may be allowed to change your vacation week from year to year. Others call themselves “vacation clubs” and dole out points that can be redeemed at other units or resorts owned by the same developer.

On its consumer website Vacation Better, the American Resort Development Association touts a timeshare as being a way to prepay future vacations at today’s prices. The association notes the average timeshare costs about $20,000, and, depending on where you vacation, that could end up being a bargain compared with a lifetime of hotel costs.

Here’s the rub: The purchase price is only a portion of the cost of the timeshare. In addition to what you pay up front, there are annual fees that can range from the hundreds to the thousands. Remember, you’re a part owner in the property or resort, so you’re responsible for helping pay maintenance costs, property taxes and other expenses related to the property management.

And yes, those costs can increase over time.

Why you should always buy a timeshare from a current owner

Those maintenance fees are why you should always purchase a timeshare from a current owner rather than buying directly from a developer.

You see, some people are desperate to get out from under those annual fees. Their kids may be grown; their job may be downsized; they may have developed a health condition that limits travel. And yet those annual fees won’t stop coming. And selling a timeshare isn’t easy.

As a result, some owners may be willing to sell their timeshares for pennies on the dollar, especially if you’ll help cover the closing costs.

Yes, that’s right. There are closing costs. This is a property sale, after all. In addition to paying for a title transfer, you may also find some resorts charge their own transfer fees, which can tack thousands more onto your price.

All those extra fees are part of the reason you don’t want to simply bid on the first penny auction you see for a timeshare. Even if the auction price is practically nothing, you could still find yourself on the receiving end of a big bill.

Five places to find cheap timeshares (plus 12 questions to ask before buying one)

If you’re convinced a timeshare is right for you, you can check out these websites to pick one up at a fraction of the original price.

After spending far too much time browsing the listings on these websites, my verdict is that eBay auctions, although inconsistent, tend to be the easiest to understand and the most complete in terms of laying out what you get and what you’ll be paying. However, not all auctions are created equal, and certainly some of what is posted on the site appears vague or even shady.

The runner-up is the Timeshare Users Group, known as TUG, which has easy-to-scan listings that make it simple to find timeshares with the right number of rooms at the right price. Don’t forget to check out the bargain basement section for plenty of $1 timeshares. You can also head to their Bargain Deals forum where people are literally giving away their timeshares.

Regardless of whether you’re taking a freebie timeshare off someone’s hands or paying thousands for one, you’ll want to know answers to all these questions before completing the transaction.

  • What are the annual maintenance fees? When are they next due?
  • Historically, how often have maintenance fees at this timeshare increased?
  • Am I locked into a specific week? If the timeshare is “floating” and allows reservations for various weeks during the year, am I locked into a certain season?
  • Do I have to use a specific unit on the property or can I pick my room/building?
  • What amenities are included during my stay at the timeshare? Are there extra fees I’ll need to pay for certain services?
  • If a points system is used, how many points are needed to reserve a week? Can I use my points at multiple resorts?
  • Who pays the closing costs if I buy the timeshare?
  • If I later decide to sell or give away my timeshare, does the resort charge a transfer fee?

Above all, don’t make a rash decision when jumping into a timeshare and don’t go into debt for one either. Make it a property you’re sure to love forever, because that’s how long you’ll have it, unless you can find someone else willing to take it off your hands, which, as you’ll see in the next section, isn’t always easy.

Five tips for selling your timeshare

At one point, the working title for this article was “Timeshares: Just Say No.” If you’re one of the people struggling under $1,000+ annual maintenance fees, you know exactly why. The resale market for timeshares is horrendous, with TUG estimating the average resale price being about 30-50 percent of the original cost. For those giving away their properties, the depreciation rate is obviously even more.

If you’re thinking of parting ways with your timeshare, here are a couple of tips and suggestions.

1. Watch out for scams: List your timeshare for sale practically anywhere and get ready for the scam emails and calls to come rolling in. Typically, these come from “law firms” or brokers who claim to be able to get you out of your timeshare in exchange for a hefty fee. Never pay anyone a hefty upfront fee; it’s almost never legit. A second tactic is a version of the old Nigerian scam. You’ll have someone interested in buying the timeshare, but they’re going to send you a big check. You need to cash it and then forward a portion of the money to someone else. Don’t do it. Scam, scam, scam.

2. Ask if your resort has a deed back program: Although not the norm, some resorts would rather have the timeshare deed back than see you sell it on the resale market. You might need to track down someone higher up the food chain than the customer service rep to tell you whether you can deed back your timeshare. In addition, the resort might require you to pay the next year’s maintenance fees before they’ll accept it. When doing a deed back, work directly with the resort. Don’t trust third parties who promise to do it for you in exchange for a fee.

3. Consider a timeshare exchange: Maybe you still like the idea of a timeshare, but your current property is no longer a good fit for your family or lifestyle. You can use sites like RedWeek to exchange weeks with other timeshare owners. You could also see if your resort offers any programs that let you change your timeshare property. Again, be prepared for fees.

4. Rent rather than sell: For most timeshares, there’s no reason why you can’t rent out your unit during your allotted week. Since most timeshare resorts are at desirable locations, this could be a win-win. You could get enough for your unit to cover some or all of the annual fees, and the renter could get bargain priced vacation accommodations. But you might want to do a little due diligence on your renter first because you could be on the hook for any damage they cause during the stay.

5. Price to sell: As a final bit of advice, keep your selling price reasonable. You’re not going to get $10,000 for the timeshare you bought five years ago for $12,000, especially not when others are practically giving theirs away. Do a search for similar units and destinations and then price yours below the other listings. If you’re really desperate, consider covering the closing costs or transfer fees, too.

That’s all I have to say about timeshares. What about you? Love ’em or hate ’em, we’d like to hear your comments below or on our Facebook page.

Stacy Johnson

It's not the usual blah, blah, blah

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Read Next: Ask Stacy: How Can I Get Out of My Time-Share Without Being Robbed?

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