Well over 10 years ago while vacationing in Florida, I was given an offer that I could not refuse. “Come to this free 2-hour seminar and you’ll get 2 free tickets to Disney World and 2 free tickets to Universal Studios.” Back then tickets to both Disney World and Universal Studios were approximately $60 per ticket. I’m a sucker for free stuff. I was one of the first people in line at the seminar. It turned out that this was no seminar. It was a high-pressure sales environment for timeshares. At the time, I had no earthly idea what a timeshare was. All I knew was that the sell representative wanted me to pay $15,000 for the right to have access to a condo for one week out of the year, every year. Even back then with absolutely no knowledge of timeshares, I thought this was one of the silliest concepts ever conceived. Today, I know it is.
A timeshare is the name given to piece of real estate where a number of individuals share ownership in the subject property. A timeshare is a right to use or occupy one or more units on a periodic basis usually one or two weeks out of the year. Timeshares can often be found in destinations where people like to vacation.
A timeshare is the worst real estate purchase you can ever make. They’re overpriced. The interest rates on these deals are as high as credit cards (17 percent). Unlike most real estate purchases which go up in value, the value on timeshares decreases. There are maintenance fees, property taxes and other hidden fees associated with owning timeshares. To make matters worse, once you figure out you’ve made a bad purchase, they’re extremely difficult to get rid of. Timeshares have gotten such negative press over the years shrewd marketers of timeshares are selling them under different names such as vacation clubs. With industry giants such as Disney, Hilton, and Marriott now in the business of selling timeshares, timeshare ownership is growing rapidly. More than 4 million people around the world own timeshares. Timeshares is the fastest growing segment of the travel industry.
Below is what savvy marketer’s pitch to unsuspecting buyers of timeshares and the truth about timeshares:
The Pitch: You can vacation at your home resort or exchange your weeks for time at another resort.
The Truth: Sooner or later, you’ll get tired of going to the same destination year after year for vacation. Trading spaces can be a real headache. There are membership fees averaging about $100 per year for the privilege to swap resorts. There’s another $150 trading fee per trade. Trying to line up a free week at a resort to match your vacation schedule is often difficult because the more desirable resorts are generally booked.
The Pitch: As opposed to being a hotel room renter, enjoy the status and fine treatment as a condo owner. Condos are spacious, have kitchens and private bedrooms. You can sleep up to 10 persons, which provides a perfect family setting.
The Truth: You don’t have to own a timeshare to have access to a condo or a well equipped hotel room while on vacation. There is an abundance of property owners seeking to rent out their properties, particularly in areas where people frequently travel. There are also several plush hotels that you can reserve with space and amenities similar to condos. Expensive? Maybe, but you avoid the high purchase price, high interest rates and other fees and expenses associated with timeshares. If you’re traveling with a party of ten, the adults can split the tab.
The Pitch: Owners can sell their timeshare whenever they want. Hotels obviously give none of your rent money back.
The Truth: You may be able to list the timeshare for sell whenever you want but actually selling the timeshare whenever you want is a different story. Timeshares are overpriced to begin with due to the sales prices being inflated to account for marketing cost. They decrease in value similar to that of a car. Lastly, it’s difficult for prospective buyers to secure financing. It’s extremely difficult to sell timeshares. When and if you do resell a timeshare, you’ll be lucky to get 30 to 50 percent of what you paid for it.
The Pitch: Deeded timeshare owners can will their timeshare to their loved ones.
The Truth: Your loved ones would rather have the small fortune you paid for the timeshare.
(Mortgage and Personal Finance Expert Damon Carr is the owner of ACE Financial. Damon can be reached at 412-856-1183.)