How to Buy a Timeshare

Guide Note

Owning a timeshare is an appealing idea for people who love to vacation, but the timeshare market has a reputation for being full of scams and ripoffs. However, smart and safe timeshare deals happen all the time. You can make sure you are one of the satisfied timeshare customers by doing a little research on How to Buy a Timeshare.

Introduction
Step 1: Is a Timeshare Right for You?
Step 2: Do Your Research
Step 3: Get the Best Price
Step 4: Make a Safe Transaction
Avoid Timeshare Scams
References

Timeshare Tips

Be sure a timeshare is right for you. Its resale value can be unpredictable.
Get the best price possible by paying in cash or by seeking financing from a local bank.
Avoid high pressure sales tactics by asking plenty of questions.
Don't sign any paperwork if you've been drinking.
Be sure all closing costs are included in the contract.
Check the seller's references, and have an attorney review the contract.
Never call a 1-900 number.

by Brigitte G

Introduction

A timeshare, or an alloted piece of time that you own a vacation property, is a popular way to own a little getaway in a desirable place without the expense of completely buying a property that you'll leave empty for most of the year.¹ There are as many timeshare scams as there are bargains to be found, so you need to be smart when you're timeshare shopping.

Step 1: Is a Timeshare Right for You?

(Creative Commons photo by muha...)

Although it's certainly nice to think about owning a little piece of a vacation resort, timeshares are not right for everyone.

It's not a good idea to buy a timeshare purely as an investment property since their resale value can be unpredictable.²
- Timeshares will typically be worth only 50% of their value in resale soon after purchase.³
- Although they are not a smart real estate investment, a timeshare can save you time and money on yearly vacations.²
An average two bedroom timeshare costs $18,000 with average annual maintenance fees of around $500.²
- Ask yourself, honestly, does this fit in your budget, and do you see this continuing to fit in your budget for years to come?
- Even with possible life changes such as the addition of children or the purchase of a new home?
A time share is definitely not for you if you don't plan on vacationing for at least one week per year and staying at accommodations costing over $100 per night. If this is not your current lifestyle, don't buy a timeshare assuming you'll suddenly change!
- A financial planner can help you decide if a timeshare fits your budget and lifestyle.⁴
Another way to look at it: Let's say you paid $100 per night for a hotel room, and vacationed 10 nights per year. If you purchased a time share for $13,500 instead, you'd break even after 13 years.²
Unlike hotel rooms, timeshares typically include things like kitchens, washing machines, barbecue grills and hot tubs, so if you're the type who'd like to do some cooking and spend some time at "home" during your vacation, a timeshare might be a good choice for you.⁵
If you can afford it, and you will use it, a timeshare might be a smart purchase for you! Now it's time to start doing some research on timeshares.

Step 2: Do Your Research

(Creative Commons photo by Russell Bernice)

If you're considering buying a timeshare, you should expect to spend the same amount of time planning and doing market research as you would with any other large purchase. The three main things to consider when buying into a timeshare are when you'll own the timeshare, where the timeshare is located and what type of timeshare you'd like to purchase.

When

Your timeshare's trade value is decided by the timeshare exchange company that it's affiliated with. The two main timeshare exchange companies are Resort Condominium International (RCI) and Interval International (I.I.).⁶

Both systems divide timeshares into three levels of demand, categorized by color:

R.C.I. Rating System:

Red week time = peak demand
White week time = average demand
Blue week time = lesser demand

I.I. Rating System:

Red week time = peak demand
Yellow week time = average demand
Green week time = lesser demand

In either system, the peak season is red season, and therefore the most valuable to resell.⁷ If you own a red week timeshare, you can request to exchange it for any other week of the year. Red weeks typically coincide with holidays and school breaks.

Where

(Creative Commons photo by Reiner Kraft)

Obviously, you'll want to choose a timeshare in a location that you love and would like to visit more than once. At the same time, most likely you won't want to vacation in the same place every year for as long as you own your timeshare.

One great thing about timeshares is that you can trade them with owners of timeshares in other parts of the world.

It's the law of supply and demand: The most highly desirable timeshares for trading are those in an area with lots of vacationers, but relatively few timeshare resorts.⁸
Travel to the region where you would like to own a timeshare, and visit several timeshare resorts in the area. Talk with guests there about how satisfied they are with their timeshare.⁹

What Type

Points System: A points system timeshare will assign your time share a certain number of points, decided by how desirable the time of year your timeshare is in plus its location.⁶ You then have that number of points to use towards a timeshare in any location or also things like rental cars or hotel rooms.
Fixed Timeshare: A fixed timeshare is available at the same time every year.¹⁰
Floating Timeshare: A floating timeshare means that each year, you can reserve the timeshare for a different week or weeks.¹⁰
Deeded vs. Right-to-Use: It's also important to note whether the time share you're considering is a "deeded timeshare", which means you can pass on ownership to your heirs or just "right-to-use," which is not actual real-estate ownership.⁶

If you plan on trading your timeshare for vacations in other places, you'll want to buy a timeshare that will be easy to trade. Key factors to consider are:

Number of bedrooms (the more, the better)
Number of stars the timeshare resort is rated as⁷
The week which you own the timeshare (as referenced above, peak weeks are always in much higher demand)

Step 3: Get the Best Price Possible

(Creative Commons photo by Katie White)

Once you've decided on the right timeshare for you, it's time to concentrate on buying that timeshare for the lowest price possible.

Buying a timeshare from the current owner rather than a developer can seem like a great idea, since you'll save 50-70%. But if you choose to go that route, you need to proceed with caution. The government regulations and consumer protection that apply to the initial contract may not apply to a resale contract.²
The smartest way to pay for a timeshare is always with cash.⁶ An upfront payment can save you money, as it will with any big purchase.
- When you are ready to pay the entire purchase price up front, you may be able to negotiate a much lower price as you'll save developers the administration costs of financing the purchase.
- The interest rates most timeshare developers will offer you will be extremely high. Since they offer financing to almost everyone who wants to purchase a timeshare, rates are often around 15-20%.³
- If you must finance your timeshare, talk to a local bank. Many offer timeshare loans for roughly 7-10%.³
Be prepared to deal with high pressure sales tactics that will try to get you to agree to a set price. One of the best ways to divert the pressure from yourself is to ask questions. Some important questions to ask so that you're fully informed are:
- Does the property do special assessments, and how much are they?³
- What are the maintenance fees and how often do they increase?
- If it's a point system timeshare, are the points inflation-proof?⁶

Step 4: Make it a Safe Transaction