What is a timeshare? The basics explained
If you’re not already a timeshare owner, you’ve probably received an invitation in the mail or your inbox for an ”unbeatable weekend getaway” at some point in your life. The only catch is that you have to agree to sit through a sales presentation, first.
Timeshare salespeople are good at their jobs — very good. The timeshare industry contributes over $80 billion to the U.S. economy, and much of this success is driven by timeshare sales on an annual basis.
But what is a timeshare and what exactly does ownership involve? No matter what you invest in, it’s always wise to understand the product first, especially when it comes to timeshare.
Understanding the Basics: What Is a Timeshare?
In short, owning a timeshare means you have entered into an arrangement that allows you to share the costs of a vacation property with other owners.
In exchange for this, you receive vacation time at the property, generally suited to your schedule. You can also receive timeshare points that allow you to access other resorts within the same timeshare network.
Why Are Timeshares So Popular?
In recent years, timeshares have received a pretty bad rep. One of the main reasons is that timeshare contracts can be fairly tricky to get out of. But it’s not as impossible as many people make it out to be, for example, you can click here to learn how to cancel your timeshare.
The reality is that it’s still a massive industry with many happy customers. There are numerous benefits in owning a timeshare, some of which include:
• A timeshare is akin to a home-away-from-home
• Timeshare accommodation includes large bedrooms, a private kitchen and balcony, and a scenic view
• The amenities of a timeshare resort far outweigh those of a regular hotel or Airbnb
• Owning a timeshare offers vacation savings you may have never considered
• The premise of a timeshare is that you pay for tomorrow’s vacation, at today’s prices
• You are always guaranteed vacation time during your timeshare week/slot
But one of the biggest drawcards of owning a timeshare is that you get to vacation in some of the most popular, sought-after spots in the world.
This includes destinations such as Disney World, and many world-renowned hotel groups including the Wyndham, Hilton, and Marriot Hotels. Many timeshare networks are scattered across the globe, too. This means you can travel internationally and enjoy accommodation that feels like a second home.
The Different Types of Timeshare Contracts
Timeshare contracts may seem complicated and even intimidating when a pushy salesperson is explaining them to you. But what it really boils down to is two main considerations: the type of contract and the type of ownership. Basically, what you need to know is who owns the property and how you are able to visit the timeshare.
There are two main types of timeshare contracts:
1. Shared Deeded Contracts
This is a contract where ownership of the timeshare property is divided between individual timeshare owners. In short, it’s a shared ownership deed of the property.
Each owner chooses a specific week or set of weeks based on when they want to visit the property. There are 52 weeks in a year, so this means the timeshare company can divide ownership between 52 different owners.
A shared deeded contract does not expire. But it is possible to sell, will, or give your timeshare week to others. It’s important to bear in mind that you only own time at the property, you do not own the property itself.
2. Shared Leased Contracts
A shared lease contract is much the same as a shared deed contract. The only difference is that the deed for the property remains with the resort, and not with you, as an owner. You don’t receive a deed of the property because you are only leasing your timeshare block. You are also tied to the use of a specific property within the network.
A shared lease contract has a set limit of time before it expires. This time limit depends on the timeshare company.
The Different Types of Timeshare Ownership
Timeshare ownership refers to how and when you get to use the vacation property. Some of the most common ownership options include:
1. The Fixed Week Option
A fixed week option allows you to choose a specific week within the year to vacation at the property. This is the only week within the year that you can use the property. The remaining weeks throughout the year belong to other timeshare owners.
The catch is that it’s fairly difficult to change your allocated week and often includes hefty upgrade fees.
2. The Floating Week Option
You are entitled to choose your vacation week, within specific limits. This option gives you a little more flexibility within a certain time period. For example, you may be told that you can choose any week ”between March and June, except for the week/s over Spring Break”.
You have to ensure you reserve your vacation week within a designated window of time, too. This means you’ll have to pre-plan your timeshare vacation and book your specific week well in advance. This ownership option is based on a first-come-first-served basis.
3. The Points System
The points system is also known as a timeshare exchange program. Basically, your timeshare unit is worth a certain number of points or value. You can use these points to gain access to other resorts within your timeshare network. Occasionally, you may have to pay additional fees to access these resorts.
Be careful that when you choose resorts within the network. You want to make sure it’s of the same or similar value to your original property ownership. If you choose a pricier or more popular resort, you could find yourself having to pay in for that specific vacation week.
The Lowdown on What Timeshare Really Costs
While timeshare ownership sounds great, there are hidden costs that can be draining. So before you sign up for timeshare ownership, it’s important to understand what it really costs.
Upfront Purchase Fees
First thing’s first, you will be faced with upfront purchase fees. These are usually pretty hefty, in the range of $22,000. You’ll need to have the budget or savings for this cost because you won’t be able to qualify for a loan from the bank.
Banks are reluctant to fund the purchase of timeshares because they won’t have anything to repossess if you default on your loan. They cannot repossess the property because you don’t technically own it.
Be warned that the timeshare company will offer you a loan to help you fund your upfront purchase. But this comes with high-interest rates that can also become crippling later on down-the-line.
Maintenance, HOA, and Exchange Fees
Other expenses that can catch you off guard include annual property maintenance fees which tend to hover around the $900 mark. They also increase by an average of 4% each year.
You are also expected to cover a certain amount of HOA dues, as well as exchange fees when you don’t have enough points for your desired vacation week.
What about Timeshare Cancellation?
Depending on the timeshare company you sign up with, they should brief you on several options if you ever want to opt-out or get rid of your timeshare ownership. They may also encourage or recommend the assistance of companies or individuals with WFG ratings that can help you sell your timeshare block.
There are a plethora of companies today that offer assistance in selling timeshare or transferring ownership. But make sure to do your homework on the company you choose, first.
Be wary of companies that ask for large upfront fees, tell you to stop paying timeshare fees, or sell the idea of an entire timeshare exit team. Generally, these companies are not members of ARDA. Always ensure the company you go with is reputable, reliable, and recognized by the American Resort Development Association.
Before You Buy Timeshare, Here’s What You Need to Know
The overall picture of timeshare ownership sounds brilliant. You have a guaranteed yearly vacation in a destination that you and your family truly love. Your accommodation is guaranteed, comfortable, and ideally located.
But, before you commit to the investment of timeshare ownership, here’s what to know first:
• Do your research and become familiar with leading timeshare brands
• Choose a timeshare company/developer that aligns with your travel style and family preferences
• Carefully consider the type of timeshare ownership that suits your lifestyle: points, fixed, or floating week options
• Remember that fixed week options are binding and don’t offer much flexibility
• Do your research on the reputation of a timeshare brand — carefully consider their timeshare exit policies
Some of the best timeshare brands to invest in include big brand names such as Wyndham, Hilton Grand, and Holiday Inn Club Vacations. These timeshare companies are members of the American Resort Development Association (ARDA).
This means these companies tend to follow strict ethical guidelines on timeshare ownership, development, and exit policies.
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If you’ve been pondering what is a timeshare and how does it really work, we hope this blog has been helpful. It’s important to understand the good and more questionable aspects of timeshare ownership before you commit. Any salesperson will sell you the dream, but what you should really know more about is the reality!
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