A timeshare is a type of vacation lodging usually located on or near a resort facility. They are very similar to vacation condominiums (see second homes); however, a timeshare is not sold as a single property. Instead timeshares are sold in weekly time slots or intervals and the timeshare unit is shared among potentially 52 different owners. Timeshares have been sold as fixed weeks, floating weeks, rotating weeks and most recently as vacation clubs or memberships as well as point based systems.
Understand
A timeshare (sometimes called vacation ownership) is a property with a divided form of ownership or use rights. These properties are typically resort condominium units, in which multiple parties hold rights to use the property, and each owner of the same accommodation is allotted their period of time. The minimum purchase is a one-week ownership, and the high-season weeks demand higher prices. Units may be sold as a partial ownership, lease, or “right to use”, in which case the latter holds no claim to ownership of the property. The ownership of timeshare programs is varied, and has been changing over the decades.
Timeshare models
Stock system: after the acquisition of shares of the company one receives a kind dividend eg as points. These points can also be acted. Depending on the season, a certain number of points are required for holidays in a particular apartment.
Points system: The timeshare company has joined a bartering club that has its own points of business standardized around the world, so at barter companies like RCI, you can choose vacation destinations worldwide from a large number of facilities. For the exchange companies are then costs for a multi-year membership and a processing fees per holiday.
With regard to the units, it is important to note whether they are tied to a specific vacation time (fixed) or variable float).
In theory, one can resell shares in timeshare equipment, in practice, the market is relatively low, at least in Europe. The American market is much more open in this regard, even in terms of price, as shown by Hotel Timeshare Resales.
Methods of use
Owners can:
Use their usage time
Rent out their owned usage
Give it as a gift
Donate it to a charity (should the charity choose to accept the burden of the associated maintenance payments)
Exchange internally within the same resort or resort group
Exchange externally into thousands of other resorts
Sell it either through traditional or online advertising, or by using a licensed broker. Timeshare contracts allow transfer through sale, but it is rarely accomplished.
Recently, with most point systems, owners may elect to:
Assign their usage time to the point system to be exchanged for airline tickets, hotels, travel packages, cruises, amusement park tickets
Instead of renting all their actual usage time, rent part of their points without actually getting any usage time and use the rest of the points
Rent more points from either the internal exchange entity or another owner to get a larger unit, more vacation time, or to a better location
Save or move points from one year to another
Some developers, however, may limit which of these options are available at their respective properties.
Owners can elect to stay at their resort during the prescribed period, which varies depending on the nature of their ownership. In many resorts, they can rent out their week or give it as a gift to friends and family.
Exchanging timeshares
Used as the basis for attracting mass appeal to purchasing a timeshare, is the idea of owners exchanging their week, either independently or through exchange agencies. The two largest—often mentioned in media—are RCI and Interval International (II), which combined, have over 7,000 resorts. They have resort affiliate programs, and members can only exchange with affiliated resorts. It is most common for a resort to be affiliated with only one of the larger exchange agencies, although resorts with dual affiliations are not uncommon. The timeshare resort one purchases determines which of the exchange companies can be used to make exchanges. RCI and II charge a yearly membership fee, and additional fees for when they find an exchange for a requesting member, and bar members from renting weeks for which they already have exchanged.
Owners can also exchange their weeks or points through independent exchange companies. Owners can exchange without needing the resort to have a formal affiliation agreement with the companies, if the resort of ownership agrees to such arrangements in the original contract.
Due to the promise of exchange, timeshares often sell regardless of the location of their deeded resort. What is not often disclosed is the difference in trading power depending on the location, and season of the ownership. If a resort is in a prime vacation region, it will exchange extremely well depending on the season and week that is assigned to the particular unit trying to make an exchange. However, timeshares in highly desirable locations and high season time slots are the most expensive in the world, subject to demand typical of any heavily trafficked vacation area. An individual who owns a timeshare in the American desert community of Palm Springs, California in the middle of July or August will possess a much reduced ability to exchange time, because fewer come to a resort at a time when the temperatures are in excess of 110 °F (43 °C).
Varieties
Deeded versus right-to-use contracts
A major difference in types of vacation ownership is between deeded and right-to-use contracts.
With deeded contracts the use of the resort is usually divided into week-long increments and are sold as real property via fractional ownership. As with any other piece of real estate, the owner may do whatever is desired: use the week, rent it, give it away, leave it to heirs, or sell the week to another prospective buyer. The owner is also liable for an equal portion of the real estate taxes, which usually are collected with condominium maintenance fees. The owner can potentially deduct some property-related expenses, such as real estate taxes from taxable income.
Deeded ownership can be as complex as outright property ownership in that the structure of deeds vary according to local property laws. Leasehold deeds are common and offer ownership for a fixed period of time after which the ownership reverts to the freeholder. Occasionally, leasehold deeds are offered in perpetuity, however many deeds do not convey ownership of the land, but merely the apartment or unit (housing) of the accommodation.
With right-to-use contracts, a purchaser has the right to use the property in accordance with the contract, but at some point the contract ends and all rights revert to the property owner. Thus, a right-to-use contract grants the right to use the resort for a specific number of years. In many countries there are severe limits on foreign property ownership; thus, this is a common method for developing resorts in countries such as Mexico. Care should be taken with this form of ownership as the right to use often takes the form of a club membership or the right to use the reservation system, where the reservation system is owned by a company not in the control of the owners. The right to use may be lost with the demise of the controlling company, because a right to use purchaser’s contract is usually only good with the current owner, and if that owner sells the property, the lease holder could be out of luck depending on the structure of the contract, and/or current laws in foreign venues.
Fixed-week ownership
The most common unit of sale is a fixed week; the resort will have a calendar enumerating the weeks roughly starting with the first calendar week of the year. An owner may own a deed to use a unit for a single specified week; for example, week 51 typically includes Christmas. An individual who owns Week 26 at a resort can use only that week in each year.
Floating-week ownership
Sometimes units are sold as floating weeks, in which a contract specifies the number of weeks held by each owner and from which weeks the owner may select for his stay. An example of this may be a floating summer week, in which the owner may choose any single week during the summer. In such a situation, there is likely to be greater competition during weeks featuring holidays, while lesser competition is likely when schools are still in session. Some floating contracts exclude major holidays so they may be sold as fixed weeks.
Rotating or flex-week ownership
Some are sold as rotating weeks, commonly referred to as flex weeks. In an attempt to give all owners a chance for the best weeks, the weeks are rotated forward or backward through the calendar, so in year 1 the owner may have use of week 25, then week 26 in year 2, and then week 27 in year 3. This method gives each owner a fair opportunity for prime weeks, but unlike its name, it is not flexible.
Points programs
A variant form of real estate-based timeshare that combines features of deeded timeshare with right-to-use offerings was developed by Disney Vacation Club (DVC) in 1991. Purchasers of DVC timeshare interests, whom DVC calls members receive a deed conveying an undivided real property interest in a timeshare unit. Each DVC member’s property interest is accompanied by an annual allotment of vacation points in proportion to the size of the property interest. DVC’s vacation points system is marketed as highly flexible and may be used in different increments for vacation stays at DVC resorts in a variety of accommodations from studios to three-bedroom villas. DVC’s vacation points can be exchanged for vacations worldwide in non-Disney resorts, or may be banked into or borrowed from future years.
DVC’s deeded/vacation point structure, which has been used at all of its timeshare resorts, has been adopted by other large timeshare developers including the Hilton Grand Vacations Company, the Marriott Vacation Club, the Hyatt Residence Club and Accor in France.
Resort-based points programs are also sold as deeded and as right to use. Points programs annually give the owner a number of points equal to the level of ownership. The owner in a points program can then use these points to make travel arrangements within the resort group. Many points programs are affiliated with large resort groups offering a large selection of options for destination. Many resort point programs provide flexibility from the traditional week stay. Resort point program members, such as WorldMark by Wyndham and Diamond Resorts International, may request from the entire available inventory of the resort group.
A points program member may often request fractional weeks as well as full or multiple week stays. The number of points required to stay at the resort in question will vary based on a points chart. The points chart will allow for factors such as:
Popularity of the resort
Size of the accommodations
Number of nights
Desirability of the season
Types and sizes of accommodations
Timeshare properties tend[weasel words] to be apartment style accommodations ranging in size from studio units (with room for two), to three and four bedroom units. These larger units can usually accommodate large families comfortably. Units normally include fully equipped kitchens with a dining area, dishwasher, televisions, DVD players, etc. It is not uncommon to have washers and dryers in the unit or accessible on the resort property. The kitchen area and amenities will reflect the size of the particular unit in question.
Units are usually listed by how many the unit will sleep and how many the unit will sleep privately. Traditionally, but not exclusively:
Sleeps 2/2 would normally be a one bedroom or studio
Sleeps 6/4 would normally be a two bedroom with a sleeper sofa
(timeshares are sold worldwide, and every venue has its own unique descriptions)
Sleep privately usually refers to the number of guests who will not have to walk through another guest’s sleeping area to use a restroom. Timeshare resorts tend to be strict on the number of guests permitted per unit.
Unit size affects the cost and demand at any given resort. The same does not hold true comparing resorts in different locations. A one-bedroom unit in a desirable location may still be more expensive and in higher demand than a two-bedroom accommodation in a resort with less demand. An example of this may be a one-bedroom at a desirable beach resort compared to a two-bedroom unit at a resort located inland from the same beach.
Sales incentives
The timeshare will often provide incentives for the prospective buyer to take a tour of the property:
A stay at a vacation resort at a discounted rate (The vacation resort is a timeshare, and a sale is the objective)
Gifts (that may range from luggage to a toaster to a tablet to partial reimbursement towards the cost of the stay)
Prepaid tickets (to a movie, play, or other forms of entertainment available in the general area of the resort)
Gambling chips (usually at a timeshare resort that has legalized gambling)
Various prepaid activities coupons, usually for use in or near the vacation venue
Giftcards or similar pre-paid cards to reimburse a portion of the cost of staying at the resort/location.
The vacationing timeshare prospects are presented these incentives in exchange for the promise to the marketing company that they agree to take a timeshare tour before the completion of their stay. If the vacationing prospects refuse to take the tour, they may find the price of their accommodations significantly increased, perhaps be directed to leave the property, and all incentives withdrawn or voided.
The tour
The prospective buyers (hereby referred to as prospects) are seated in a hospitality room (a term designated by the land sales industry in the 60’s) with many tables and chairs to accommodate families. The prospects are assigned a tour guide. This individual is usually a licensed real estate agent, but not in all cases. The actual cost of the timeshare can only be quoted by a licensed real estate agent in the United States, unless the purchase is a right to use as opposed to an actual real estate transaction via ownership. Since timeshares are sold internationally, these laws vary from venue to venue. After a warm-up period and some coffee or snack, there will be a podium speaker welcoming the prospects to the resort, followed by a film designed to dazzle them with exotic places they could visit as timeshare owners.
The prospects will then be invited to take a tour of the property. Depending on the resort’s available inventory, the tour will include an accommodation that the tour guide or agent feels will best fit the prospect’s family’s needs. After the tour and subsequent return to the hospitality room for the verbal sales presentation, the prospects are given a brief history of timeshare and how it relates to the vacation industry today. During the presentation they will be handed the resort exchange book from RCI, Interval International, or whatever exchange company is associated with that particular resort property. The prospects will be asked to tell the tour guide the places they would like to visit if they were timeshare owners. The rest of the presentation will be designed around the responses the prospective buyers give to that question.
If the guide is licensed, the prospect will be quoted the retail price of the particular unit that best seemed to fit the prospective buyer’s needs. If the tour guide is not a licensed agent, a licensed agent will now step in to present the price. If the prospect replies with “no”, or “I would like to think about it”, the prospect will then be given a new incentive to buy. This incentive will usually be a discounted price that will only be good today (good today only is an untrue statement, and has been used as a sales closing device since day one of the timeshare industry’s inception). If again, the reply is “no”, or “I would like to think about it”, the sales agent will ask the prospect to please talk to one of the managers before the prospect leaves. It is at this moment that the prospect realizes that the tour has actually just begun.
A sales manager, assistant manager or project director will now be called to the table. This procedure is called: “T.O.”, or getting the turn over man to find an incentive usually in the form of a smaller less expensive unit or a trade in unit from another owner. This tactic is commonly used as a sales ploy, because the resort is not interested in reselling already deeded property. Similar to the automobile sales industry, the manager and salesman know beforehand exactly what the lowest price is that will be offered to the prospect, well before the prospect has arrived for the tour. If one incentive doesn’t move a prospect to purchase, another will follow shortly, until the prospect has either purchased, convinced the usually very polite sales crew that no means no, or has gotten up from the table and exited the building.
Cancellation of a timeshare contract
Timeshare sales are often high-pressure and fast-moving affairs. Some people get caught up in the excitement of the sales presentation and sign a contract, only to realize later that they may have made a mistake.
U.S. Federal Trade Commission mandates a “cool off period” that allows people to cancel some types of purchases without penalty within three days. Additionally, almost all U.S. states have laws that specifically govern cancellation of timeshare contracts. In Florida, a new timeshare owner can cancel the purchase within ten days. The law differs by jurisdiction as to whether out-of-state purchasers are subject to the rescission period of their state of residence, or the rescission period of the state where the timeshare purchase was made (e.g., in Florida, the 10-day rescission period applies to all buyers; thus, a Texas buyer who would only have five days in Texas, has the whole 10-day period allotted by Florida Statutes).
Another common practice is to have the prospective buyer sign a “cancellation waiver”, using it as an excuse to lower the price of the timeshare in exchange for the buyer waiving cancellation rights (or paying a penalty, such as losing 10% of the purchase price, if the sale is cancelled). However, such a waiver is not legally enforceable anywhere in Mexico or the United States. If a recent timeshare buyer wishes to rescind or cancel the timeshare contract, the intent to cancel must be made within the allotted time period in writing or in person; a telephone call will not suffice.
In recent years, a timeshare cancellation industry has formed by companies who provide one simple service: timeshare cancellations. However, some of these companies are suspected of being fraudulent.
Reasons for cancellation
It is more than likely that a new timeshare owner could have purchased the same product from an existing owner on the timeshare resale market for drastically less than what the buyer paid from the resort developer, simply by doing a computer search. In many cases, the exact or similar accommodation purchased, will be happily transferred by an unhappy timeshare owner. The new buyer usually pays only minimum real estate transfer fees and agrees to take over the maintenance fees, because the existing owner can’t find a buyer for his/her timeshare without paying a resale company thousands of dollars to absorb it for resale. The reason for this anomaly is that the lion’s share of the cost of a new timeshare are sales commissions and marketing overhead, and cannot be retrieved by the timeshare owner.
Another reason a new owner might want to cancel is buyer’s remorse following the subsidence of excitement produced by a sales presentation. He may have realized that he is uncertain what exactly has been purchased and how it works, or may have realized the unlimited duration of a commitment to pay ownership maintenance fees, or may have observed that he knows too little about the timeshare sales company, due to insufficient time during the sales process.
The fine print
While the format of these transactions varies, they typically involve the purchase of one room or suite in a resort for a week a year, either on a long-term basis (30-99 years) or as actual registered (deeded) ownership in perpetuity. The costs are high: $18,000 (US dollars, 2006) or more up-front, followed by HOA (homeowners association) or maintenance fees of $500/year and up, which continue for as long as the voyager owns the timeshare.
The lawyerly details of what you get very widely:
A deeded property indicates that you legally own a fractional interest in buildings or land, supposedly in perpetuity.
A “right to use” is not ownership; it’s a long-term lease, paid up front, which continues decades into the future. It is often used in countries like Mexico where local law restricts foreigners from buying land.
Another variation is to sell ownership not in the actual land (one “home week” in one specific room type, in one specific resort) but to sell an interest in the company or trust that owns or operates the resort.
The actual results vary just as widely:
Fixed weeks were the original model, ownership of the same week each year at the same property. Most “legacy timeshare” properties – independent properties built by developers twenty or more years ago, sold off as individual timeshares and turned over to homeowners associations with no further involvement by the original promoters and no further sales effort – fall into this category.
Rotating weeks (sometimes mislabeled “flex weeks”) move each owner to a different week each year on a fixed schedule. Sometimes this lands in high season, sometimes this lands too far off-season to be of use, but in theory each owner got a prime time slot at least some of the time.
Floating weeks are slightly more flexible; prospective owners buy a week a year in a specific season without committing up-front to specific dates (which can be chosen each year, subject to availability).
Vacation clubs, memberships and point-based systems are offered by large chains with multiple properties; the buyer gets a certain number of “points” which may be redeemed for accommodation each year anywhere in the chain, but more desirable times and locations cost more points.
If you have time in a timeshare which you don’t intend to use, there may be a few options:
Some operators may be willing to rent your rooms to other voyagers, if the property is still advertising short-term hotel stays.
You may be able to swap places with another traveler using a home stay network or hospitality exchange model if the location is desirable.
Companies like Resort Condominiums International (RCI) and Interval International (II) act as brokers of timeshare exchanges.
Nonetheless, there is a risk – if what you’re holding is simply a bad deal, no one will want to buy out your position and you will be left paying costly annual maintenance fees for a holiday property which you no longer use.
Then there’s the question of what happens if the company operating these schemes goes bankrupt. In some of these schemes you still hold a property deed (with attendant liabilities of ownership), in others you may be left with nothing.
The promoters of these various schemes are quick to point out that these are most often cheaper (and less maintenance-intensive) than buying a full second residence, such as a cottage. A more meaningful comparison would be between timeshares and hotels or other rentals. If you’re staying at the same place (or a property in the same group) for a week a year, every year, for a decade or more, you *might* break even on a timeshare. Maybe the rooms and facilities are better or more spacious than a standard hotel room rental, who knows.
Conversely, if this goes badly you may be stuck with a unit which no one wants to buy which continues to accrue annual maintenance, property tax and HOA fees even when you’re not using the facility. At worse, this is worth less than nothing – a liability instead of an asset – and you might not even be able to give away your ownership stake in a problematic timeshare property. The original promoter is under no obligation to take this back, even for free. There are plenty of elderly folk locked into €450-900/yr maintenance payments for timeshare holiday homes which they no longer use and are unable to sell.
Timeshare costs
The cost of a week in a timeshare facility should be amortized in about 10 years. This is suggested by consumer centers and reputable providers. So, if the timeshare entry for an apartment in Gran Canaria is set at a 5-digit Euro amount per holiday week, this is comparable to the price for pure accommodation in an apartment of 1000 € / week. In addition to the additional costs, they also amount to several hundred € annually. Some of these apartments can accommodate up to 4 people, so it may be worthwhile. Most timeshare facilities are extremely attractively designed and offer the comfort of upscale hotels, equivalent to 4 or 5 stars.
In Gran Canaria, the facilities of Anfi are a good example. Located in Patalavaca, Arguineguín, Anfi del Mar complex offers luxurious accommodation. A white beach of 10,000 tons of Caribbean sand, numerous restaurants, a wide range of activities and artfully landscaped tropical gardens guarantee an attractive holiday, not only for timeshare customers, but also for package tourists visiting a large German tourism company book.
The Anfi Group also owns a facility in Tauro near Puerto Rico, which is known for its exclusive golf club. Not far away is the Playa de Amadores, and here is a times comparable to Anfi del Mar timeshare facility. It is trying to market them by any means (as of Nov. 2010) ).
Buy or share?
Whether or not timeshare interests count is not just a question of money, but also of personal preference. On vacation, however, should be considered:
When concluding a contract abroad, the local contract law applies.
Timeshare shares are usually notarised. This should be clarified before the first payment.
Follow-up costs such as renovation, maintenance, maintenance.
First take a contract before signing, check it out and sleep for a night. A possible discount offer applies to reputable providers on the following day.
In no case make a down payment, such is under German law only 14 days after receipt of the contract, in Spain, a period of 10 days.
Insist on a right of withdrawal of 14 days, this is common law in Germany. Also in other countries there are revocation rights with partly different deadlines.
No holiday club memberships close. These have a shorter duration and the legal basis is less favorable.
First, recalculate whether a timeshare share plus additional costs without flight and without meals really so much cheaper than the cost of 10 package tours to a comparable destination including flight and half board.
Pitfalls
A timeshare contract is a complex real estate transaction with many pitfalls. Don’t sign one without expert advice.
For the traveller, a timeshare can be inflexible in that it represents a commitment to vacation at the same place (or a venue under the same ownership) one week a year, every year. This can be awkward in years when the traveller doesn’t have a week free, can’t afford to take a trip or would prefer to vacation elsewhere. A last-minute cancellation is likely to be difficult or impossible if there is a change in plans. Timeshares also carry a high up-front cost as they must be purchased in advance, not merely rented.
It’s also difficult to predict whether a hotel which was a good place to stay this year will retain the same standards and the same market position in the future. Sometimes a property is renovated and upgraded, with a corresponding increase in prices; sometimes a property or destination goes into decline through years of neglect. Some once-popular vacation destinations have even become ghost towns.
Even if a property gets a major facelift or renovation, the owners of the timeshare will have to pay for that work in higher HOA/maintenance fees. Disbanding an association or converting an existing timeshare building to another purpose (such as apartments or condos) later may be awkward or impossible due to the fragmented ownership structure; it’s difficult to get all owners to agree to a single course of action.
Like any other bet on the real estate market, the value of an individual timeshare may rise or fall over time. A timeshare should not be considered an investment; the resale value is far lower than the prices the original high-pressure salespeople promoted when the project was launched, if the timeshare can be sold at all. It can also be all but impossible to get out of some of these arrangements – even if a person is sick, elderly or bankrupt (and therefore unable to travel) the terms of the contracts vary widely on whether the promoters are under any obligation to voluntarily allow the unfortunate owner to leave the scheme.
Dubious tactics have been used to hard-sell timeshares. One unsolicited pitch claims the victim has won something for free – such as travel or accommodation – but with a few nasty surprises in the fine print; the offer contains more hidden charges than a “Nigeria 419” advance fee scam and the price of the supposed “freebie” is that the voyager is forced to sit through a lengthy, high-pressure sales pitch. These pitches may be packed with spurious claims that timeshares will inevitably increase in value and be easy to get out of at any time – which often isn’t true.
In some cases, there are waiting lists of hundreds of people attempting to get out of unfavourable timeshare arrangements. To add insult to injury, some unscrupulous vendors advertise ‘We can get you compensation for your timeshare’ and then re-victimise the hapless voyager by subjecting them to yet another high-pressure sales pitch for yet another timeshare. In some cases, aggressive “hot room” tactics by which prospective victims are plied with alcohol and subjected to several hours of intensive sales pressure do violate local law. If you have been missold, have been told you cannot exit the scheme or you want compensation you can get legal advice, though that can cost money and there are no guarantees as to the outcome of legal action.
For the owners of hotels and resorts, timeshares represent a locked-in market and a lucrative source of capital. This may explain the eagerness of promoters of these schemes, as well as some of the high-pressure sales tactics. For the voyager, however, an unused timeshare may become a burdensome ongoing expense; in some cases, maintenance costs have increased 400% over the life of the contract.
If you must buy, it’s usually cheaper to buy from a fellow voyager who is no longer visiting the property and looking to sell instead of buying directly from the original promoter.