Sunday, August 9, 2020

The Good, the Bad, the Ugly : Vacation Timeshares

 Have you ever been asked to attend a small meeting in exchange for something FREE? 

I think we can honestly say that most anyone that has traveled anywhere has, at some point, been offered something FREE in exchange for attending a "small" talk. 

We may have been at an all inclusive resort relaxing and enjoying our vacation and BOOM! We are pestered about attending one mercilessly until we do. Not all all-inclusive resorts allow this and many don't today and sometimes you'll see them marketed anywhere you go. Even in the comfort of your home via telemarketers. Phone calls, emails, fliers, or simply being approached anywhere in public, etc. 

You get the idea...

I think those with experience in attending those "small talks", know what those small talks are....a sales pitch to a timeshare. Some of us are smart to avoid them as many see them as time wasters (time taken away from lounging at a pristine pool while on vacation) and some just don't like being pressured into buying something.

Some of us new to the subject are taken in without doing their own due diligence. They go to the "small talk", get sucked in and BAM(!), they are now owners of a beautiful timeshare. Man, those salesmen are good!

Ok, so let's put the bias aside for a moment and talk about them. 

During those timeshare discussions, we are driven hard to make the purchase and "put up wet" in a fleeting instance. You may or may not actually walk out of the room with your intended objective to own a FREE item.

As attending those small talks,  I've been there and from all my experience with them and those I know that have been involved with them or even purchased one, I think it's worth a moment to share my unbiased (I'll try) observations and knowledge to the GP. Many might disagree with me and be totally happy "owning" one. But let's take a moment shall we?

What is a Timeshare?

Let's explain what a timeshare is. A little history if you will (and for those that do not like history, I'll try to keep it brief).

Timeshares came out in the early 60's in the United Kingdom as potential Vacation Options . In the US it came to be in the 70's.  It is vacation home sharing. You may be offered a term license for a certain number of years by a company owning the accommodations rather than an actual ownership in real estate. True story. However it might not be sold to you as such.  The property "owner" (the buyer of the timeshare ie. You) could alternate your selected vacation weeks. It required trust and in effect, still does. Term licenses are now timeshare contracts. And this is where owning a timeshare can get a bit sticky and often confusing for many. 

Years ago, at the promise of a free spa experience at an all inclusive resort, even I experienced confusion about a timeshare. I was (almost) sucked into buying one. Almost. Thankfully as with any impulse purchase I was inclined to wait, go home and think about it. For many the offer or "deal" might be on the table for a very short time.

Timeshare Contracts

Back in the day, timeshare contracts were pretty simple and straight forward. The company actually owning the timeshare promised to maintain the property and offer a certain type of accommodation for a certain number of years.  The one buying into the contract and timeshare (You) may be frozen and charged maintenance fees and other fees on top of the cost for the timeshare for the length of the term (say for example, 25 years). Read the fine print! You really didn't "own" anything except you had a right to visit a said property at a certain time selected and for a certain amount of time. That's it. In that respect not much has changed with regard to timeshares. Contracts however have become more confusing today than ever. 

The original plan for selling (and buying) a timeshare (or even points to have a partial stake in one) was to offer vacationing options to those that enjoyed vacationing often as a way to save money. And I mean we ALL want to save money when going on vacation or purchasing damn near anything today. Who doesn't? Hey, that extra dollar might actually pay for that soda at the store we want later!  Ok, back to it. While hotels and fees expanded over a period of years,  timeshares were said to stay the same over a record number of years for the term of the contract (Some today are indefinite so be careful). Over time contracts have changed and law makers have gotten involved. 

Timeshare Resales.

Timeshares have also scammed people with regard to timeshare resales. In retrospect and like I mentioned you aren't technically owning real estate as if you owned a house. You are owning "a right" and in some cases like I mentioned "points". Sure, you can try to resell your timeshare (If and when the contract allows) but re-selling can be damn near impossible and tricky. Real estate folks might tell you they can help you. Again, you are at the mercy of added expenses. The idea of "investing" in a timeshare for the purchaser is most likely lost over time due to the all the fees and costs that go along with "owning" a timeshare. Notice how I write in quotes - believe me when I say I'm being sarcastic but with an element of honesty worthy of attention. 

If you are seriously considering owning a timeshare, make sure you do your due diligence and read (not just read, but understand) the contract. Make sure you have your lawyer read the contract.  Make sure you do your research on the company or even the real person selling the timeshare. Be careful.

Are Timeshares and Stocks alike?

Some like to compare a timeshare with owning stock.

 You are buying the use of a unit, paying an up front cost, along with maintenance and other fees (keep in mind the sellers have to consider and somehow pass off the costs from the many incentives and giveaways to entice those to join in on these "small meetings" ), choosing your slot in the year to visit the unit and when you are not using the timeshare, others with similar interests are. In some cases your contract may include "points" in order to further entice you into the purchase.  With regard to stocks, you are purchasing a number of stocks to have stake in the company - an ability to make a decision about what a company does (however small depending upon how many shares you decide to own) through a decision vote. It rarely means a whole lot if you are poor like me or not buying many shares, yet you'll look to make a return on the purchase later at some point. The stock price might rise and fall over time. And if you are not careful in choosing selected stock (company) a company could actually go out of business. There, you've lost your "investment" with regard to any resale of the stock you purchased. If you are really lucky, through the years of owning the stock (a piece of paper), you may make money in the resale of the stock. They're both Risks and even a little bit like playing poker.

If you do attend such a "small talk" keep reminding the sales guy "whats the purpose of "owning" the timeshare again?" Sorry, my sarcasm is getting away with me... and I hope you'll forgive me. It isn't toward you. It's toward the little guy whose trying to sell the timeshare. Nothing is straight forward. If you don't like car salesmen you probably won't like timeshare salesman that much either.

Who benefits and the Drawbacks?

No doubt, the people selling the timeshare are to benefit a lot. They sell timeshares to make money. A lot Some sell timeshares to be free again or to get out of paying those pesky increasing maintenance fees  Yet if you think you're an entrepreneur and wish to own a slice of that pie by buying a building to create a timeshare think again. Complexities abound!

As for you, the buyer of a timeshare (not the building), you are stuck to the contract. And I hope you have the money to keep such a contract in check. If you are a solid vacationer and don't mind going back to the same place (this could get boring people...) again and again and again, you may actually like a timeshare. If you are the adventurous type, avoid it like the plague. You will not be happy. Maybe at first the excitement will overwhelm you but later on you'd regret the purchase.

With regards to timeshares, there is a HUGE resale market. Meaning there are many people out there trying to resell their timeshares. There are far more people selling a timeshare than buying one.  If that doesn't give you pause to reconsider, consider wisely. As a buyer you can sometimes pick up units for less than what the other  individual(s) paid for the use of the unit. (wow, why not do that right? No. Just No. It's still not an investment. ) Wait. How old is that unit again....? You do not know WHO you are buying the use of the unit from. Are they an entrepreneur or are they like you, just a simple buyer who later (will) feel(s) they got duped into purchasing something they now don't want or just want to be released from the contract and maintenance fees?

Like owning a car, the moment you drive it off the lot, it has depreciated.  It is extremely rare that a timeshare will increase in value.  And folks, was buying into that timeshare worth what you gained of that FREE item for attending "the small talk"?  I highly doubt it.

While you are paying monthly or yearly maintenance fees, those fees will most likely increase over time. For the amount you paid in maintenance fees, you could go to a hotel or resort you've never gone to before (what an adventure!) and pay the same or less. 

Let's look at the overall difference.... I buy one timeshare with a contract of  $10,000 one time fee for over the course of 25 years. I pay maintenance and other fees at $800 a year over the course of the 25 years = $20,000. If the maintenance fees rise year to year that amount will be more. But for sake of the conversation let's keep going. That right there has you at $35000 over the course of 25 years. And we don't know what other fees are or are not included now or later on down the road. You may end up be paying for your food, rental car, flight in addition to all that. Let's take the value of $400 per day additional for a 2 person family (I may not be exact in the figures depending upon your level of lifestyle) on a 7 night "visit" (please do not call it a vacation ...yet). That breaks down to $70,000 over the course of 25 years. (Don't forget you may be doing the cooking only if you are smart...) - The total you are up to now is $105,000 over the course of 25 years which breaks down to $4200 a year. Let's not forget the many flights you will have to purchase over that time either. That is only if you go for a 7 night stay each year (and not two or three weeks which we can add more for those additional costs).  If I don't go,or can't as scheduled, the $4200 + flights per year is lost. And your vacation increases next year to the same place you've visited (many times - bored yet?) before. 

Now to compare... 

If you go to several different inclusive resorts in several different locations over the course of 25 years (all meals, drinks, entertainment, flights included - great, unlike these timeshares where you have added expenses of those items) your average expenditures would or might be around $1500 per person for a decent 7 night stay once per year. That's a total of $3000 over the course of 25 years = $75,000. Break that down per year and you're still paying $3000 per year (no added expenditures). If you don't go one year, your money is not lost as you didn't already spend it.

$2800 (optional) per year vs $4200 (required) per year. You do the math. At $2800 per year you also get the use of a travel agent (I am not trying to be biased here just honest) to help you. With a timeshare, any help you got, you got here on this page or from your own research.

If my math is off, please correct me but I guarantee you going on vacation to an all inclusive resort or cruise is a much better and convenient option.

To get out of a timeshare can also cost you anywhere from $4000 to $12000 or more and can take years to do. Not paying a timeshare comes at additional costs, hurting your credit score and more!

If you are truly interested in a timeshare, please consider actual ownership of a property (real estate) instead:  be it a second home, a camp, a camper on a lot, what have you. Just not a timeshare.  And in this article we can't go into an RCI timeshare which is another whole ball of wax, but no less grueling and complex to consider. If you already think a regular timeshare can be a scam, just wait.... and if you don't think a timeshare is a scam, keep doing your due diligence. 

On to more considerations...

When you own a timeshare you are not free to do as you please with the unit while visiting. With an all inclusive I digress it may be the same consideration BUT you do have the choice of the all inclusive you pick (right?) While you may have privacy of the unit while you are "visiting" you will be sharing it with god knows how many other people in a year. And you don't know those people either. Do you have the right to paint the walls a different color, add new furniture, rebuild that balcony, deck, patio? 

You aren't able to rent out the timeshare when you are not taking advantage of it (visiting it).  You will not and I repeat not generate income from that small stake in the use (sellers like to call it "ownership") of a timeshare. You may or may not get the enjoyment of it, for a while, but little to nothing else.

Owning a timeshare seems to market to the young and inexperienced or the older market. The ones somewhere in the middle are most likely to handle their due diligence to consider and run the other way. And I'm not saying everyone will get sucked in. Some will and some do. I'm just pointing out what I know.

 So I hope this article does someone the common decency of considering more than what you've read or heard before. 

I do hope it has helped. I may be a Travel Advisor that plans & sells vacations (and not timeshares) and I can't help you on selecting a timeshare (I'm a travel advisor not a seller of timeshares) BUT I am as honest as they come when I help someone. I work for you. I am not just here to sell. Sure, I make commissions on curating vacations and that's my method of living and while I may seem biased on timeshares in some parts of this article, please know that it couldn't be further from any bias. Awareness is so important.

Thank you for reading and as always I am here if you have questions. Please post any questions you might have below or indeed connect with me by Emailing Me