By Ozzie Jurock
This article appeared in The Vancouver Sun on August 3, 2002
Usually a small investor is away on holiday somewhere and it's a bright sunny day and to kill some time he finds himself walking into a timeshare building and by some mysterious chemistry he finds himself having this vision of owning the suite that is being shown. That investor should at that point run for the hills as fast as he can.
Time-share units bought on holidays are not an investment. They are almost always a self-inflicted financial wound. To begin with they are not real estate. You own that investment with 51 other investors and you have to ask yourself this question. "What happens if I own the week of July 1 - 7 and I want to show it to a prospective purchaser in December?" It's going to be very difficult for you to do this when someone else owns that time segment.
An estimated 94% of all timeshare owners never intended to buy in the first place; they are swept away by high pressure sales pitches and cleverly disguised promotions.
The promotion may offer a new camera, a half-price parasail ride, a free day's rental car, a free gourmet meal -- you name it; timeshare sellers offer it. (Particularly in Mexico, Hawaii and in other more exotic places.)
In the usual case, the catch for the gift is that you must sit through a presentation about a timeshare vacation property. The presentations vary, but most include high-pressure sales pitches that drone on for hours and leave visitors desperate to get out. Timeshare salespeople frequently go over the advertised time allotted for their presentation and are not responsive if you complain.
Of course…the idea behind a timeshare is simple: for a one-time price plus an annual maintenance fee, you can buy the right to use a given vacation property for a certain amount of time (typically one week) each year. What you may not be told is the extent to which the annual maintenance fee will increase over time. For example, one timeshare owner in Hawaii saw her annual maintenance fees climb 76% in six years. Timeshare operators also may force owners to pay unexpected special assessment fees, sometimes as high as $1,000. (In Mexico reports of up to $3,000 per year!) While a timeshare has the potential to be a satisfactory arrangement, it often yields a variety of pitfalls and frustrations for the unwary purchaser.
If you own a vacation timeshare be cautious about people offering to help you resell it for a fee. Most of these sales programs are bogus. The market for resales is poor. One recent US survey found that only 3.3 percent of owners reported reselling their timeshares during the last 20 years. Still, desperate to sell, many owners have been taken in by timeshare resale scams. The secondary market operates usually at less than 50% of original value paid; carrying costs can be substantial, often more than renting a holiday suite. In fact, most resale Real Estate companies, want you to pay ‘up front’ for the privilege of listing their unit with them. There are hundreds of scams working trying to get re-sale owners to pay up to 500 up front to resell. There are dozen of Government sites in the US warning about timeshare and timeshare re-sales (type in “Time share travel scams, holiday scams, legal scams, resale scams and find dozens of sites” at www.google.com and read and weep…such as at http://timeshareresources.com/
Or read the latest abs news story at http://abcnews.go.com/.
The ‘mix and match’ approach of trading spaces also does not work well. Usually resorts reserve the best timeslots for paying guests rather than trade with you. Almost always the resort is still in competition with you, offers free dinners, can show their units at any time. Think about it, a 200-suite development selling at 50 weeks (assuming 2 weeks for maintenance) each needs to find 10,000 buyers! They will be selling units against you forever.
I am sure that of the 3 million plus owners of time share units there are some happy people. But these people understood that they were buying a holiday. Yes, a holiday, not real estate. So, if you buy the rights to use a unit for a week, make sure you like to take a holiday in that unit (used by 49 other couples and their friends every year) in that town, in that development. Work out whether the cost of the week ‘holiday rental’ in your unit is better than just taking a holiday when and if you feel like it. The Disney ‘point system’ Vacation Club is much clearer as to what you are buying ( you are not getting a set week slot, but an ‘ annual allotment of points that you can use all year long space permitting and can be exchanged.) And as a holiday that can make sense…but UNDERSTAND what you are buying. It will NOT go up in value. If you absolutely need to buy one, get a used one. Chances are you get it at half price. Better yet, don’t buy it at all.
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