Planning your next vacation? You may have considered "vacation
timesharing," the use of a vacation home for a limited, pre-planned
time. It has become a popular way to take vacations. Sales in 1985
exceeded $1.5 billion. Many timeshare programs are highly regarded,
but problems occasionally occur. You should consider the risks as
well as the benefits before signing a contract or a check.
There are two main types of timesharing plans: deeded and non-deeded.
With the deeded type, you buy an ownership interest in a piece of
real estate. In the non-deeded plan, you buy a lease, license, or
club membership that lets you use the property for a specific amount
of time each year for a stated number of years. With both types, the
cost of your unit is proportionate to the season and the length of
time you want to buy. Obviously, a winter week in a warm climate is
worth more than a summer week.
As with any purchase that costs thousands of dollars, you should
understand what you are getting before you sign any papers or pay any
fees. The general information here should be accompanied by careful
analysis and possibly professional advice concerning all aspects of a
particular timeshare purchase.
The Federal Trade Commission suggests that you consider the following
points before you purchase any type of timeshare.
* Practical Factors. A major reason people buy timeshares is for the
convenience of having pre-arranged vacation facilities. You might
consider whether you will be able to use a timeshare facility
regularly. For example, are your vacation plans sometimes subject to
last-minute changes, or do they vary in length and season from year
to year? Check to see if the properties have flexible use plans that
you may consider. If you are evaluating a timeshare plan with units
in several locations, also consider whether the club has sufficient
units at the sites you prefer to give you the opportunity to use
* Investment Potential. Question any investment claims made by the
seller. The future value of a timeshare depends on many factors.
Resales of the timeshare may be difficult. You may face competition
from the firm that sold you the timeshare, or from local real estate
brokers who may not want to include the timeshare unit in their
listings. Closing costs, broker commissions, and financing charges
also should be considered as part of your investment costs.
* Total Costs. The total cost of your timeshare includes mortgage
payments and expenses, such as travel costs and annual maintenance
fees. The maintenance fees may rise at rates that equal or exceed
inflation. Annual maintenance and exchange fees can add $300 to $500
to the purchase price. You may want to ask if limits exist on
maintenance increases at the project. To help evaluate the purchase,
compare your total timeshare costs with rental costs for similar
accommodations and amenities for the same time and in the same
* Document Review. Do not act on impulse or under pressure. Review
all documents or have someone familiar with timesharing review them
before you make a purchase. Find out if the contract provides a
"cooling-off" period during which you can cancel the contract and get
a refund. The majority of states where timeshares are located require
such a cooling-off period. If there is such a provision, you can use
that time to reconsider your decision. If there is no cooling-off
period, be sure you understand all aspects of the purchase and review
all materials before you sign.
* Oral Promises. Be sure everything the salesperson promised orally
is written into the contract. Be especially cautious and question any
verbal claims that contradict the contract.
* Exchange Programs. Remember that exchange programs, which offer
the opportunity to arrange trades with other resort units in
different locations, usually cannot be guaranteed. There also may be
some limits on exchange opportunities. You may need to request the
use of another facility far in advance. Or, even at additional cost,
you may not be able to "trade up" to a larger, better unit at a
popular time of the year in an exotic location. When you trade your
vacation unit for another, expect one of approximately the same
* Gift Giveaways. Many sellers offer gifts to potential buyers who
will listen to a timeshare sales presentation. Consider the value of
these "gifts" and "prizes." If the only reason you are going to a
sales presentation is to receive a gift, then be aware that common
promotional giveaways include gems with little or no value as jewels;
"gold" ingots, with minimal gold content and worth no more than a few
dollars; or "vacation awards," which do not cover major costs such as
travel and food. It may be to your advantage to attend a sales
presentation only if your are interested in the program.
* Reputation Research. Your resort will be a good place to vacation
only if it runs properly. Therefore, you should consider researching
the track record of the seller, developer, and management company
before you make your purchase. Visit the facilities and, if possible,
talk to other owners. Ask for a copy of the current maintenance
budget. Learn what will be done to manage and repair the property,
replace furnishings as needed, and give you the promised services.
Will these arrangements be adequate? If so, will these arrangements
extend over a long period of time, or just for the near future? Local
real estate agents, Better Business Bureaus, and consumer protection
offices are often good sources of additional information.
* Unfinished Facilities. If you are considering buying a timeshare
on property where the facilities have not been completed, get a
written commitment from the sellers that the facilities will be
finished as promised. One way to protect your financial investment
during this waiting period is to require that a certain amount of
your money be held in escrow. This may provide some protection for
your funds if the developer defaults.
* Default protection. Find out what your rights are if the builder
or management company has financial problems or in some way defaults.
See if your contract includes two clauses concerning "non-
disturbance" and "non-performance." A non-disturbance provision
should ensure that you will continue to have the use of your
timeshare unit in the event of default and subsequent third party
claims against the developer or management firm. A non-performance
protection clause should allow you to keep all your ownership rights,
even if a third party, such as a bank, is required to buy out your
contract. An attorney can provide you with more information about
* State Protection. Most states now regulate timesharing, either
under existing state landsale laws or under laws that were
specifically enacted for timesharing. The regulating authority is
usually the Real Estate Commission in the state where your timeshare
property is located. Contact that office if you have questions.
If you have questions or complaints about vacation timesharing, write
to: Correspondence Branch, Federal Trade Commission, Washington, D.C.
20580. While the FTC cannot resolve individual complaints, the agency
can take action against a company if it finds evidence of a pattern
of deceptive or unfair practices.
To learn about reselling timeshares, send for a free copy of
Timeshare Resales. Write to: Public Reference, Federal Trade
Commission, Washington, D.C. 20580.
Facts for Consumers from the Federal Trade Commission
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