Five Things to Know before you Buy A Timeshare

#1 – There is more than one way to buy a timeshare

When considering purchasing a timeshare, most consumers only think of buying directly from a timeshare developer.  This is often a daunting financial proposition as the average retail price is approximately $22,000.  However, the cost of buying a timeshare can be dramatically reduced by purchasing from a reputable licensed real estate broker specializing in timeshare sales or buying directly from the owner online.  Buying directly from the owner may be the cheapest way to go, but buying from a licensed real estate broker is generally the best option.  There are two major reasons why using a licensed broker is the best option.  First, utilizing a broker virtually eliminates the chance of being scammed.  Unfortunately, scams related to timeshares are on the rise and have become an increasing problem.  A legitimate real estate broker’s license information can be easily located to ensure you are not being scammed.  A licensed broker will also vet any potential seller to ensure they are legitimate. 

Second, there are multiple pitfalls in dealing directly with a seller.  The seller may not be aware of the timeshare resort’s transfer requirements.  Selling a timeshare is often not as simple as paying and recording a deed.  Most timeshare resorts require sellers to obtain their approval before transferring the interest to ensure the buyer can meet the financial obligations and prevent fraudulent transfers.  The seller may also not be aware of any restrictions the timeshare developer has for timeshare interests that were not purchased directly from them.  These include limitations on the full usage of the timeshare interest, which can significantly impact the buyer’s ability to make reservations and eligibility for incidental benefits like exchange programs.  A licensed and experienced timeshare broker will know and understand the transfer requirements, which will ensure the process goes smoothly.  The broker will also know which resorts have developer restrictions, so should be avoided by unwary buyers.  These benefits vastly outweigh the difference in cost of purchasing directly from an owner, making the increased expense worth it. 

There is another positive of buying through a broker, which is time.  The vast majority of timeshare interests bought directly from developers are same-day purchases during high-pressure sales meetings while the buyer is on vacation.  This situation inhibits the amount of due diligence buyers can do before agreeing to purchase.  When seeking to buy a timeshare from a broker, you will have as much time as you need to investigate the resort, developer, and other issues related to the purchase.  This research will ensure you understand the positives and negatives of moving forward with the acquisition and are making a fully informed decision. 

#2 – There are different types of timeshares

One thing many potential purchasers do not understand before buying a timeshare is that there are several different types.  There are fixed deeded weeks, floating deeded weeks, deeded timeshares that provide points, and pure point timeshares, which each have pros and cons.  Fixed deeded weeks are what most people think of when they think of timeshares.  Fixed deeded weeks give the owner access to a unit at one resort at the same time each year.  These benefits of fixed deeded weeks are that owners actually own the resort, maintenance fees are paid for a property you own, and there is no competition.  The downside is that there is no flexibility, so you are stuck going to the same place at the same time every year, which can get stale for many owners.  Fixed deeded weeks are great for owners who want to go to the same location at the same time every year.  Fixed deeded weeks are not a great fit for owners who wish to travel to various places or don’t have control of their work schedule. 

Floating deeded weeks are nearly identical to fixed deeded weeks, except they allow the owner to use the timeshare at different times during the year.  Floating weeks provide slightly more flexibility but still limit the owner to the same resort every year.  Floating weeks are suitable for owners who want to vacation in the same location every year but may need to change their vacation dates to fit their needs.  Like fixed weeks, floating weeks are not the best option for owners who want to explore new places every year.  

In an effort to provide owners with more flexibility, many timeshares have switched to deed-based points programs.  Deed-based points program owners have ownership of a specific unit at a resort.  Owners are then allocated points to use each year based on the unit they own.  The number of points allotted depends on the week and unit type.  Owners of high-demand weeks or larger units are given more points.  These points can then be used to make reservations at other resorts in the developer’s portfolio.  Owners will also generally have what is called a “home week”.  Home weeks give the owner priority to reserve the unit during the week they own, much like a fixed deeded week.   The advantage of deed-based points timeshares is greater flexibility to travel to different locations while still having priority to reserve the unit you own.  The cons of deed-based points systems are that owners compete for reservations when not booking a home week, which often leads to having to book at less desired times and locations.  Deed-based points systems are a good fit for people who want to go to the same place most of the time but want to branch out occasionally and visit other destinations. 

The last type of timeshare is purely points-based.  Points-based timeshares are more like a membership.  There is no ownership of real property (real property is the legal term for a physical building or land).  Instead, members own shares in a corporation that holds the various resorts in a trust.  The member is then allocated points each year based on their share of the trust.  The benefits of purely points-based systems are that they offer the greatest flexibility, and points can also be used for other services like cruises and airfare.  The negatives of points-based timeshares are first that you are paying maintenance fees to maintain a resort you may never use and don’t own.  Second, members compete for reservations sometimes with the general public and don’t have priority access to any unit or property.  This competition many times necessitates booking nearly a year in advance and often leaves members unable to get access to certain resorts at the time they desire.  Points-based memberships are a good fit for people who want to vacation at different locations every year and have a flexible schedule.  They are not a great fit for people who have tightly restricted schedules due to work or children.  

Before deciding whether to purchase a timeshare, it is critical to evaluate your vacation desires and limitations and understand the pros and cons of the various types of timeshares to ensure you make the best choice to fit your needs.  Regardless of your choice, spending the time to analyze these multiple factors is worth it as you will be much happier in the long run. 

#3 – Most timeshares are perpetual

We often hear from clients that they had no idea their timeshare was perpetual, meaning they would own it for the rest of their lives.  The majority of timeshares come with perpetual ownership regardless of the type of timeshare.  It is vital to take into account that timeshares are perpetual before you buy because not only do you need to consider your current situation, but you also need to evaluate where you will be in 5, 10, 15, 20, or even 40 years from now.  It is imperative also to consider what you will do with your timeshare when you reach a point in life where you either don’t want to or can’t use it anymore.  It is an unfortunate reality that there is no secondary market for many timeshares due to various factors.  The lack of a secondary market leaves many timeshare owners with limited options when they no longer want their timeshare.  One option is to pass it to a family member, including your children.  However, suppose you don’t have a family member or friend willing to take over ownership.  In that case, the only option left is to give it back to the association or developer.  Most timeshare developers have programs that allow owners who have reached a point when they cannot use their timeshare to transfer it back.  However, it is important to note that these programs often have significant costs and restrictions, and whether to allow you to give back the timeshare is at the developer’s sole discretion.  So, you may not be able to transfer ownership back, leaving you stuck being responsible for the annual maintenance fees with no way out.  Taking the time to research if there is a program to give the timeshare back and if there is a program, the restrictions and conditions of the program are hugely important before deciding to buy. 

#4 – You should review the contract and disclosures carefully

Anyone who listens to the news or browses the internet has probably come across a story about someone’s terrible experience buying a timeshare.  You may even know someone who has had one.  Many of these people complain that they were in the presentation for 3, 4, or even 6 hours.  At the end of which, they signed a huge stack of documents on a tablet, only to find out that what the salesperson told them was inaccurate or just plain false.  This is not to say that every timeshare sales experience is terrible; many people are happy with their timeshare and have positive experiences.  

Unfortunately, most people who have had a bad experience don’t realize that the contract and disclosures they signed and acknowledged often contradict their claims.  These contradictions can be in disclosures that outline specific benefits and programs or a provision that states they have not relied on any oral representations.  There are legal arguments to be made about the validity of these provisions, but what is not arguable is that they make resolving the complaint much more difficult.  

Most timeshare developers have set up systems where the contract is signed in front of an employee who is not the salesperson to ensure the buyer understands the terms of the agreement.  This session is generally recorded either on audio or video.  It is imperative during this session to carefully review the contents of each page before signing and ask questions about any confusing terms or information that appears to contradict any oral statements.  It is also important not to sign incomplete documents; if a page has information missing, ask that it be filled in before signing it.  We understand that after a long meeting, this is a difficult task.  However, we cannot overstate the importance of being diligent about reading everything you sign when buying a timeshare. 

#5 – You have a legal right to cancel your timeshare contract

Everyone is familiar with buyer’s remorse, whether it is an expensive dress you only wore once, a cool new electronic gadget that you forgot about after a week, or the cookies you grabbed off the shelf at the grocery store in a moment of weakness.  A new survey from Thriving Wallet found that one in four Americans make purchases they later regret when experiencing significant stress.  (Thriving Wallet is a new partnership between Discover and Thrive Global with the mission of improving consumers’ financial well-being.) You can read the survey here: https://content.thriveglobal.com/wp-content/uploads/2020/02/Thriving-Wallet-Research-Insights-Report.pdf 

The decision to purchase a timeshare can be a stressful experience for many people, whether it is the cost, the high-pressure sales presentation, or the long-term commitment.  This leaves many new buyers waking up the day after their purchase with second thoughts or remorse.  In most cases, we have to live with this consequence.  

Thankfully, that is not the case with timeshare purchases.  Every state provides the legal right to rescind (rescind is the legal term for cancel) a timeshare contract for any reason within a specific number of days after the purchase.  This is often called a “cooling off period”.  This “cooling-off period” varies from state to state and is generally based on where the timeshare was purchased.  In Nevada, purchasers have until midnight of the 5^th calendar day following their purchase to rescind the contract.  However, it is essential to note that some states have timeshare rescission laws that apply to residents regardless of where they buy.  

To determine the amount of time provided to rescind the contract, look at the agreement itself and the associated documents, including the public offering statement.  Nevada law requires that the amount of time to rescind the contract and the instruction to cancel the agreement be in bold font, so this language is easy to find in most cases.  However, once the “cooling-off” period has expired, the contract becomes binding, and canceling the timeshare purchase becomes a much more difficult prospect.