Headline: The Last Resort?

Date: 2/24/2021

Body:  I was listening to an excellent lecture on legal topics facing mostly older people. There was a surprisingly large section on timeshares.   So, I think it’s probably profitable to provide some background and context for learning.  (The particular lecture was one of The Great Courses, entitled Putting your Legal House in Order.   It is an excellent course.) 

What is a Timeshare?

A timeshare is an arrangement wherein you purchase the right to reside at a resort in a certain unit, usually for a week or 2 in a defined season.  Sometimes, depending upon the verbiage in the agreement, you can trade with a person (in a similar arrangement, who has a unit in a different location) and for an additional fee, enjoy your time in that new location.  This arrangement of having a unit you can depend upon, in one location, appeals to people who have identified their favorite vacation location, and appreciate the feeling of a home away from their permanent home.  But, the tricky thing is that to get this arrangement, there is a contract to sign, and that contract usually has enough strings to it to weave ropes  capable of tying up cruise ships.  And, these arrangements are epically difficult to sell, so, before one invests in one, one should think twice, perhaps 3-4 times.

OOPS!!  I used the wrong word.

I carelessly used the word “invest.”   This word intuitively appeals to me because the arrangement is long-term and you are likely to sink a lot of money into this arrangement.  I learned a lot in my research for this post, but the #1 thing that all of the articles agreed upon was, “A timeshare is NOT an investment.”   It will never earn you a monetary return, nor should you ever expect one.  What it will do is guarantee you a place to escape to, every year, for a very long time.

What are the potential problems with owning a timeshare?

1.  It can be very expensive.   You have a mortgage payment to make, and there is an annual maintenance fee that can be quite robust (and will ALWAYS increase.)  Don’t forget that you also might have property tax and/or real estate tax to pay.
2. Read your contract very carefully.   Often people don’t and get hit with gigantic “special assessments.”  Be sure to take your time and compare the contract you are considering with other similar timeshare arrangements within the area.   Be aware that there is usually some room for negotiation.
3. Sometimes, there are complaints about the timeshare company from former tenants.   Be sure to do research with the state’s Attorney General’s office to look for any complaints against the developer or Resort.
4. Often, the salesperson will promise you the moon and stars, but these promises are NOT within the written agreement.   If this happens, walk away.
5. Even if the site doesn’t change and the management doesn’t change, over time you probably will.  You might add human or non-human family members, or you might injure yourself.   Each of these life changes could make your ownership of the timeshare much less desirable. 

What can you do to ensure that you do get good value?

1.  Be sure to get plenty of contact information for all parties involved in the sale.  You want to ensure that you can contact all of them before, during and after the sale is complete.
2. Many states have a “right of recission” period where you can terminate the contract if you get buyers’ remorse.   This period varies from state to state, and some contracts are cleverly engineered to make this very difficult.   Make sure that you have this escape hatch, easily accessible.
3. Many people are trying desperately to get rid of their timeshares, so, there are some VERY GOOD DEALS out there to be had.   Just be sure to really take your time; Deals are for the taking, and you shouldn’t be.
4. Timeshares are like cruises.  Half the fun SHOULD BE the getting there.   If you are not enjoying the planning process that goes into purchasing the timeshare, one would be wise to consider walking away entirely.

At some point, you will probably want to sell

If a company approaches you, be VERY wary.  You can check out the company with the Attorney General’s office and you can get all promises in writing, and this will help, some.  Once you find a legitimate buyer, these sales are every bit as technical as selling a house, with the added caveat that the resort itself might have some restrictions on transfer.  That said, there are a couple of tips.

1.  Keep the pricing realisticà people who are looking to buy have MANY options to choose from, and if you are keeping your price high (ostensibly in an attempt to recoup some of your annual maintenance fees) your unit will NOT sell. 
2. In a related manner, keep in mind just how “hot” that property market is.  If you are looking to sell a timeshare in Miami, you can likely get a buyer.   If you are looking to sell a timeshare in a tiny town in New Mexico, you might have more difficulty.
3. Before you list your timeshare with an agent, gather up ALL documents related to your unit, including your deed, maintenance agreement, bills and receipts for repairs made and everything else that seems applicable.
4. You can find an agent either online or offline.  Regardless of the source, be sure to check the BBB and State Attorney General’s office for records of complaints against them.  Be sure to understand exactly how the agent is compensated (e.g. upfront fee AND/OR commission?)  and be sure to interview several agents.
5. Be aware that developers will sometimes have resale programs.   It might likely be a good idea to get an attorney who is really well-versed in timeshare law, if it comes to this.  Timeshares attract scam artists like a picnic attracts ants, be careful!!!

The Verdict

Often, when we take vacations, we want to travel on different time schedules to different locations, and this would seem to argue against timeshares.   But my aunt and uncle had a timeshare in Naples, FL for decades, and absolutely loved it.  At the end of the day, it can be the perfect idea for the right people (who love a location and are unlikely to want to go elsewhere for vacation) who have the resources (e.g. money, time and energy).   But, if you are unsure of either of the qualifications, it might be the wisest course to not drop your hard-earned cash here.

REFERENCES

https://www.consumer.ftc.gov/articles/0073-timeshares-and-vacation-plans

https://www.nolo.com/legal-encyclopedia/buying-timeshare-pros-cons-form-ownership.html

https://www.investopedia.com/articles/pf/08/timeshare.asp

https://www.nerdwallet.com/blog/finance/are-timeshares-worth-it/

How to Sell a Timeshare (thebalance.com)

 Editor’s Note: Please note that the information contained herein is meant only for general education: This should not be construed as Tax Advice.   Personal attributes could make a material difference in the advice given, so, before taking action, please consult your tax advisor or CPA.