Best advice from timeshare consumers

Making a vacation can be a complicated and expensive undertaking for any individual, couple or family. Many people choose to rent a room at a hotel or buy a vacation home as a summer residence. Timeshares offer an alternative to these traditional vacation options, but timeshare ownership isn't right for everyone.

Definition

A timeshare is a vacation property with shared ownership. A management company handles the construction and sells shares, which entitle buyers to spend a specified amount of time (usually one week per year) at the property. Some timeshares are large complexes with dozens of living units, while others resemble a single family home and are only large enough for one owner to occupy at a time. Most timeshares are located in popular resort areas where vacation property is in high demand.

Ownership

Owning a timeshare is not the same as owning vacation property outright. Owners don't have the right to make changes or improvements to the property directly. Instead, the timeshare's management company performs maintenance, cleaning and improvements using funds pooled by owners. The management company also lays out rules for using the property, which owners must agree to when they sign a purchase agreement. These rules may include how many people can occupy the unit and where owners must park.

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Advantages

Owning a timeshare has a number of advantages over other forms of vacationing. Unlike renting a hotel, owning a timeshare guarantees the owner space and secures the dates in advance. Some timeshares allow owners to trade, sell or gift their time, which makes vacationing more flexible. Some even offer multiple locations where owners can choose to spend their allotted time. Timeshare ownership also removes much of the inconvenience associated with owning vacation property outright, such as hiring a caretaker for the winter months or paying property taxes.

Cost

Timeshares generally represent long-term savings over renting hotels each year. However, owners need to be prepared for the true cost of ownership. Besides the initial cost of the share, owners are responsible for an annual maintenance fee, which goes toward improving the timeshare at the discretion of the management. Owners may also be liable for special fees to deal with emergency damage or perform a major upgrade, such as a new roof.

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Selling

Timeshare purchase agreements lay out the rules for an owner to sell her share. Usually owners must wait for a set amount of time before selling. Timeshares tend to lose value over time, making them a poor real estate investment. This is especially true when newer timeshares occupy the same area, giving potential buyers more attractive options. Owners who sell may recoup some of the purchase cost, but fees and depreciation prevent timeshares from turning a profit in the majority of cases. Instead, timeshares save money on vacation costs and offer convenience.

Timeshare properties encompass more than 5,000 resorts in nearly 100 different countries, according to the consumer and trade organization American Resort Development Association. Timeshares are generally sold with extended monthly payments similar to a mortgage, in exchange for a designated number of weeks at a vacation resort or a partner property. Vacation ownership programs cater and appeal to frequent, flexible travelers.

Perpetuity

Unless specifically outlined in your contract with a statement of perpetuity, time shares generally have an expiration date, whether for a designated number of years or when you die. With a statement of perpetuity clause, the indefinite term of use of the timeshare gets passed onto your heirs upon your death. Although many timeshare sellers use perpetuity as a selling feature, buyers should remember that, along with inheriting use of the timeshare, your family members also receive all of the financial responsibility that comes with timeshare ownership.

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Fees

In addition to your installment payment for your timeshare purchase, you will receive annual billing for maintenance and assessment fees and possibly taxes. Because timeshare resorts rarely write in a fixed amount for fees applicable to you as an owner, buyers should thoroughly investigate the fine print, obligations and any dollar amount caps which exist.

According to Bill Bruss of the Timeshare Consumer Group, unless your contract specifies otherwise, a timeshare association may implement high assessments to cover major repairs and hold you liable even if you’ve fully paid for your timeshare. Bruss cautions that associations can sue to collect your portion, and even a last-ditch effort of signing the deed to give your timeshare back won’t eliminate your financial responsibility or the potential of credit report damage.

Use

Flexibility and advanced travel planning will allow you to get the most from your timeshare ownership. Since most timeshare operators give you a choice among properties, the American Resort Development Association recommends exploring less popular locations which offer your desired activities and experiences and considering travel during the off-season to increase resort options. Enlisting the assistance of a resort vacation representative can provide enlightenment in selecting the right destination. During peak times, accepting a room that comfortably accommodates your group vs. an unnecessarily over-sized space gives you more properties to choose from.

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Taxes

Because the Internal Revenue Service considers a timeshare personal property and not real estate, selling your timeshare at a loss will not warrant any tax deductions, warns financial analyst Ric Eldman.

Resale

Developers of timeshares often offer a hefty discount or incentives for timeshare buyers, making the resale market difficult. While some sellers market timeshares online in resale forums or Internet auction sites, many find success with the help of sales brokers and timeshare title companies. In the case of fully paid timeshares, some owners elect to donate ownership to a charity to alleviate future financial responsibilities and potentially capture a tax deduction for a charitable donation.