Timeshare FAQ

Timeshare ownership might not be for everyone but it does serve a legitimate purpose. The problem has become the timeshare developers are so driven to sell more ownership that they forget or choose not to provide the pros and cons to prospective owners. Instead, they steer your focus towards all that is attractive and I dare say too-good-to-be-true while dismissing or outright deceiving you about the legitimate concerns. Hopefully this FAQ will provide some real answers and guidelines before you go into a timeshare presentation.

Full disclosure: I am a timeshare owner and rabidly enjoy my timeshare but I realize I am probably the exception and not the rule. Timeshare sales teams have a lot going on behind the scenes that they don’t want you to know so all I’m trying to do is pull back that curtain in order that you can go into the sales presentation well informed and fully armed.

1. Timeshare ownership is a property transaction. They may market it as a membership but the reality is you are entering into a mortgage transaction. It is not real ‘exclusively-yours’ property like your home but it is an interest in a real property or properties held in a trust. Because these timeshare interests are often financed through a subsidiary of the timeshare developer, the sales teams are less concerned about your credit score because they’ll sell to virtually anyone regardless of creditworthiness but as a result they are also charging exorbitant interest rates. The pitch is all about the experiences and amenities they offer but the paperwork is genuinely a mortgage transaction. As such, it is not easy to get out of it once you sign.

2. If you have already signed the paperwork, there is a potential loophole. Most timeshare developers are Incorporated in the state of Florida and Florida law provides a 3-day ‘out’ clause, meaning that within 3 days of the transaction you can opt out of the preceding transaction by submitting a letter in writing exercising your right to do so. Of course they don’t want you to do that so they often sell three day promotional packages and they get you into the sales presentation on the very first day to try to get you to sign and then you enjoy your 2-3 days of fun in the sun but by the time you get home and make time to read the fine print you already missed the window to exercise that clause and now you’re hooked. Sneaky, isn’t it?

3. If after buying a timeshare you have buyer’s remorse, beware of any company telling you that they can get you out of your commitment. A vast majority of these are going to be scam artists who will take money from you and their advice is to stop paying on your mortgage for the timeshare while they ‘work behind the scenes’. This will basically result in a default and the timeshare developer will send you to collections while thr scam artist has already spent your money leaving you in worse shape than before. Timeshares do have legitimate methods of offloading your commitments to them but it is also going to cost money because it is a financial transaction in which you basically sell your interest back to the developer. Either way it costs money but at least that method is legitimate. I’ve also heard plenty of horror stories about that process, even if it’s legitimate it’s still time consuming and fraught with disingenuousness so be diligent and detailed in your pursuit. Document every call and ask for specifics and follow up promptly in order to divest yourself of the timeshare legally and with minimal complications.

4. Because people do not understand many of the ins-and-outs of timeshares, the industry is rife with scam artists. Not only the timeshare-exit scams, but also the reseller scams and the rent-out-your-unused-timeshare scams. I would like to tell you that there is a surefire way of vetting these charlatans but unfortunately even the timeshare resort industry association itself cannot distinguish between legitimate and scam operators. A good rule of thumb is if it sounds too good to be true then it probably is.

5. Timeshare sales presentation is not a once-and-done activity. Essentially their goal is to get you coming back and getting you into a sales presentation every single visit in order to upsell you. Because the timeshare developer owns all the subsidiaries that do things like title services and financing, they make money on every transaction even if you only step up one tier or level. In actuality they probably make far more money on people who start at the bottom level and gradually work their way up versus someone who comes in and pays cash for a high membership tier which already meets all their expectations and future vacation needs. I can only imagine that’s exactly the customer they don’t want, like someone who walks in and pays cash for a new car. So much of the back-end profit is in the financing and add-ons.

6. If you have the opportunity, before you even go into the timeshare sales presentation check your availability for securing a timeshare mortgage loan. Many banks and financial institutions offer these and it should be a much lower interest rate the one offered by the timeshare developer. Because a financial institution unaffiliated with the timeshare developer will base their decision on your credit rating, they will have a much better idea of what you can actually afford. Armed with this information, you can go into the sales presentation with a ceiling for what you can reasonably afford and you can pay for the purchase with financing you secured in advance.

7. Never accept the first offer. Timeshare sales tactics involve wearing you down until you will basically sign anything just to get out of the meeting. If you understand this going in, use that strategy to your advantage. Express just enough interest that they produce an agreement with a price IN WRITING and then negotiate that price down until it is within your budget. The absolute last thing they want you to do is walk out of there without having sold you something so they have a lot more negotiating room than they make it seem – the way to get what you want for the price you want is to stand firm against the first offer. They will try to make you think that you are getting a good deal and they will often try to confuse you with some voodoo math about how the price relates to such an amazing value but the simple reality is that they are selling virtual real estate and they know it. If you have the perseverance and tenacity, the longer you keep the salesperson occupied and the lower the price gets the more desperate they get to close the deal. The worst outcome for them is if you don’t buy anything so you have more leverage in the negotiation than you realize.

8. Timeshares ARE virtual real estate. By that I mean that you do enter into a mortgage but you do not possess a physical piece of land that you can call your own. Most timeshare property is held in a trust and what you are buying is a share of that trust. Think of it more in terms of owning stock in a company – yes, you are an owner along with thousands of others but that does not mean that you can lay your hands on a tangible portion of the company and lay claim to it nor can you exercise rights of ownership beyond what is outlined in the shareholder agreement. Besides right of use, the only real rights and responsibilities of a timeshare trust shareholder is voting in an annual shareholder meeting and even this is usually done by proxy. Do not mistake owning a timeshare interest as a vacation home. It serves many of the same functions but it does not afford you the same rights of ownership.

9. There are a multitude of timeshare companies out there but a vast majority of people who purchase a timeshare buy from the first developer where they take the tour. The reason is because there’s no simple way to comparison shop the various brands. They all have their merits and their quirks but they all basically offer the same thing which is value for vacation planning. There are so many factors that go into a vacation though that it can be confusing trying to fit the square peg that is your typical vacation into the round hole that is their timeshare offering. Nevertheless, they don’t want you to go looking around and very often one of the first questions they will ask is whether you own at any other timeshare or vacation partnership club. This tells them a lot more about you than you may realize. Many of them work on a fixed week schedule which means that you purchase a specific week every year or alternate years and the price is therefore determined by how popular that week is. You may also be limited to a particular resort and perhaps even a particular size of villa. They will then make money every time you want to change any of these factors because it deviates from what you purchased initially. Because this has become one of the chief concerns and points of friction with timeshare ownership, many of thrse developers have begun to migrate to a points-based system which offers a lot more flexibility. Points can seem confusing because there’s no direct correlation between the price you pay and the points you receive but ultimately they have proven to be much more popular because you could travel when you want and where you want. You can take a weekend couples getaway this month and still have enough points for your family vacation week next summer. You can also often bank your points across years.

10. If you are not already familiar with the concept, the timeshare industry makes wide use of exchanges which is basically a marketplace for owners of one brand of timeshare to be able to utilize alternative brands by exchanging their timeshare for the other brand’s currency. This is probably another reason why points based timeshares have become more popular. These are useful if you want to visit an area and your timeshare brand does not have a resort nearby but there is another brand that you can use if you exchange part of your timeshare for the other brand. It is one more way that the timeshare industry utilizes their vacation offering as an opportunity to upsell or cross-sell you on other products and services. Exchanges do offer more flexibility but with that comes more fees and more sales tactics.

11. Timeshares are not appreciating assets. Unlike real estate, timeshares do not appreciate in value and you will NEVER EVER get back what you paid for it. Do not go into timeshare ownership thinking of it as a sound investment with a potential return. Most people either bail on their timeshare when times get tough or they can’t justify the expense if they’re not using it anymore or they simply die and the result is someone relinquishes the interest back to the developer or it passes back when the annual fees aren’t paid.

12. Yes, there are annual fees. Timeshares are full of fees and that’s probably where half the profit is made. The one they never divulge but you find out about a year after purchase is even though it’s virtual real estate it incurs real property taxes for which you are responsible. Those huge resorts with pools and golf courses are worth hundreds of millions of dollars and when the taxes are due each timeshare owner has to pay their portion. Even if you pay off your entire timeshare financing you’re still on the hook for property taxes forevermore. As mentioned earlier, this is where a lot of timeshares end up back in the hands of the developer, once the timeshare owner dies and no one else seeks to pay the taxes so the ownership interest reverts back to the developer who turns around and resells it again!

13. A lot of timeshare interests can be placed in a trust for future generations to enjoy IF you set it up that way. Knowing that the interest you bought forty years ago would cost so much more now than it did then, you could arrange for interested family members to chip in and pay the annual costs in return for access to those benefits.

14. The one unknown is who happens if a timeshare developer goes under. The timeshare industry is only about 50 years old and there’s been a lot of mergers and acquisitions but not a lot of defaults. From a business aspect it would seem that another developer would simply buy up the properties and interests for cheap and then have to realign those owners’ interests with whatever pricing strategy they use in order that those owners get equal value. Of course this isn’t certain and can be difficult to predict since it hasn’t happened enough for there to be a precedent.