8 Timeshare Gotchas (and Where to Get Solid Advice)

Timeshares Are Not Real Estate

Even though timeshares involve real property, most are not technically real estate. Yes, some are deeded, meaning you're actually an owner, but many are simply right-to-use arrangements. Either way, unlike conventional real estate, ownership isn't an asset; you can't mortgage or borrow against it. It will not appreciate over the years.

Only a few very high-end clubs provide fractional ownership of a marketable property, almost always called a "villa," and guarantee a buy-back. But the buy-in price of those programs usually starts at around $300,000.

Obviously, then, buying a timeshare is not an investment. Instead, it's an up-front expense for gaining access to desirable accommodations over a period of many years.

Timeshare 'Promotions' Are Not Really Great Deals

Yes, if you accept a timeshare promotion, you will get that weekend getaway or whatever else you're promised. But you do pay a price: up to an entire day of sitting through aggressive high-pressure sales pitches, and the risk that, no matter your attitude, you may wind up buying. A few years ago, an industry source noted that getting a qualified buyer on the premises was worth $200 to a timeshare promoter. That figure probably hasn't gone down much.

Sales Pitches Are Deceptive and Hard to Resist

Mexican Timeshare Solutions notes on its website, "Timeshare presentations are high-pressure, long lasting and deceitful," and warns you not to believe any promises the salesperson might make.

Salespeople will say: "You can always resell it. If you can't occupy it, we'll rent it out for you. If you buy this new timeshare, we'll sell your old one for you." Yeah, and if you believe that, we've got a bridge…

Don't go into a presentation thinking, "I've got plenty of sales resistance." Those sales pitches are carefully choreographed and fine-tuned, based on what works even on skeptics. Regardless of how resistant you may think you are, enough people actually buy to generate a tidy profit for the seller.

Paying for Bloated Developer's Costs

When you buy a timeshare from a developer or promoter, a large share of what you pay goes into covering high sales expenses (those free weekends) and profit. According to Mexican Timeshare Solutions, a timeshare bought from a developer or promoter loses 70 percent of its initial price immediately—worse even than when you first drive a new car off the dealer's floor.

The obvious corollary to this is that the best way to buy a timeshare is to buy a resale. But you have to beware even of resale purchases: Many operators place restrictions on resales to make them unattractive.

Buy Once, Pay Forever

Your out-of-pocket expenses don't end with the first purchase. Instead, once you buy, you're on the hook for maintenance fees and special assessments to cover unexpected contingencies. Developers and operators set maintenance fees and assess owners, and they can increase those fees and impose assessments without your consent. Furthermore, in many cases, you're on the hook for those fees for an indefinite period, regardless of how you use the timeshare. And your heirs may be on the hook even after they've inherited the interval.

Getting Out is Harder Than Getting In

If, for any reason, you want out of a timeshare commitment, you may find it tough. Even if you just want to walk away from it, you're still on the hook for the fees and assessments. If it's not a prime property or interval, you may find selling it is tough. Currently, eBay lists dozens of "Buy It Now" timeshare resales at $20 or less, and many more at less than $100. Most of those sellers even agree to cover closing costs; they just want out of the expense and aggravation. And it may come as no surprise that those eBay postings never disclose the maintenance fees.

Resale Deals

For several years now, the biggest scam in the timeshare marketplace is the offer to sell your unwanted timeshare—for a fee. The scammer makes all sorts of crazy claims and promises, such as, "We have access to thousands of Chinese travelers who want to invest in timeshares. Pay us $400 and we promise to sell it." The sad fact is that all they intend to do is collect the fee; no matter what they say, if nobody wants your timeshare, a $400 fee isn't going to help.

According to the Federal Trade Commission's Acting Director of the Bureau of Consumer Protection, Charles A. Harwood, "Con artists take advantage of timeshare owners who have been in tough financial straits and are desperate to sell their timeshares. They persuade owners to pay fat up-front fees by saying they have someone ready to buy the property, but that's a lie. Our message to timeshare owners is simple: Never pay for a promise, get everything in writing first, and pay only after your unit is sold."

You Can't Even Give It Away

Several organizations pitch that if you can't sell your timeshare or get much out of it, you can donate it and write it off your income tax as a deduction. Unfortunately, some of those self-styled charities are scams, and like the phony brokers, they ask for a stiff fee to cover the "expenses" of the donation.

Yes, some charities legitimately accept timeshare donations. But they're pretty picky, and they accept only those that they believe they can actually sell and use to generate some cash. The IRS is onto the game and allows donation deductions only at the market price for comparable resales, not the purchase price or even a depreciated purchase price.

Where to Get Help

For more information, check out these helpful resources: Timeshare Users Group posts lots of useful information and also operates a buy/sell bulletin board with nominal listing fees. It's a good place to get a feel for market prices—including the number of timeshares that owners are basically giving away for $1. The National Timeshare Owners Association and Timeshare Insights post lots of information on their websites. U.K.-based Timeshare.org.uk is also useful to North American travelers.

The bottom line: A timeshare can be a great way to enjoy a stay in a destination. But you need to understand all the ramifications before you buy. If you decide to buy, look first for an attractive resale, and consider the end game. Make sure the interval you buy is attractive enough that you'll be able to get out without a problem when the time comes.

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