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Be careful the next time you go to a resort and are offered a free dinner or a massage or tickets to Disney World if you’re going to attend a 90-minute vacation seminar.
Help For Timeshare Owners
Millions of people will tell you to hurry up and get your checkbook. A million other people will advise you to take the nearest exit while you still have your bag.
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If you are buying as an investment the answer is B-A-D. But if you hate planning a vacation and want a place to relax, the answer is M-A-Y-B-E.
It can certainly reduce planning problems. But you may find it hard to keep calm when the total cost starts to drop.
Basically, you are paying for the vacation rental in advance. But it’s like the old Roach Motel commercial – the bugs come but they can never check out.
Consumerism began to catch on in the United States 50 years ago. Instead of building resorts and selling condos to single buyers, developers began selling to multiple sugar, err, buyers.
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Those people don’t have to pay for the condominium alone. They can easily buy a one-week condo each year—essentially sharing the cost and ownership with 51 other buyers.
The industry boomed when companies like Marriott, Hilton, Wyndham and Westgate Resorts entered. Some companies now sell points that can be used for a week or more at resorts around the world.
It is still a growing industry. According to the 2018 United States Vacation Shared Owners Report, 7.1% of American households currently own a timeshare of one or more weeks. That’s about 9.6 million owners or ownership groups.
According to the American Tourism Development Association, the average sales price for a one-week period in 2018 was $20,940, with an average annual maintenance cost of $880.
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All of this adds up to a roughly $10-billion-a-year business, so timesharers are clearly doing something right. A survey conducted by ARDA found that 85% of owners are happy with their purchase.
Every case is different, but here are some things to consider if you’re thinking about buying stocks.
Both types are technically “fractional,” since you own a portion of the product. The difference is the size of the week/fraction you purchased.
Most timeshares have 52 fractions – one for each week of the year. That means about 52 different owners.
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Fractions typically have two to 12 owners. They are usually larger than watches and have more features.
Fractures receive more user traffic, so they suffer less wear and tear and are generally better maintained. The larger the owner’s stake in the property, the more they will take care of it.
Operates like a fractional owner association. Owners retain management and control of the property and hire a manager to run the day-to-day operations.
Timeshares are controlled by the hotel or developer, and customers are more like guests than actual owners. They only bought the house for time, not the property itself.
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Ownership is with the developer, so the buyer’s equity does not go up or down in the housing market.
Timeshare owners have less control, but they also have less liability than fractional owners. They don’t have to pay taxes or insurance, although those costs are often covered by maintenance costs.
Consumer confusion has given the industry a bad name. You often don’t know what you’re getting into until it’s too late.
The timeshare industry targets vacationers who have their guard down. While on vacation, potential buyers are lured by sales pitches for “prepaid vacations” or something that sounds appealing.
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Most people believe that this deal can’t be lost. Just sit there for 90 minutes and pick up that free dinner or Epcot tickets.
Then the soft selling phase begins. Before they say “Do I really want to pay $880 for maintenance for a week in Pago-Pago?” The holiday was a surprise and left the time-share owners proud.
Then the magic disappears. About 95% of customers return to a travel sales office looking for more information, according to a UCF study. But, like marriage, you don’t understand the full impact of a timeshare relationship until you live it.
Many feel that an “extended vacation” is difficult to schedule, has less than standard amenities, and is a bad financial investment.
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If they invest $20,000 (time value averaging) and earn a 5% annual return, they will have $32,578 after 10 years.
Instead, they have an overpriced condo that no one wants to buy. Of course, you have to balance that with the annual cost of staying at a regular hotel or vacation rental.
But you can get a nice hotel for $200 a night. It’s probably cheaper than what you’d pay for a timeshare, and you’ll have the flexibility to vacation whenever and wherever you want.
For millions of consumers, it’s not as important as happiness and peace of mind. If they think they’ve won a deal, they have.
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The real winner is the developer when he convinces 52 buyers to put down $20,000. That adds up to $1,040,000 for a home that might be worth $250,000 on the open market.
Let’s just say it’s a lot easier to get in than out. Timeshares usually come with permanency clauses, meaning they are yours forever.
And after your death, it belongs to the heirs. It continues until the sun burns out in 4 billion years, at which point the developer can let the heirs off the hook.
Most timeshare contracts do not allow for “voluntary surrender.” That means if the owner gets tired of it or their heirs don’t want it, they can’t even give it back to the developer for free.
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Even if the timeshare is paid, the developers want to continue charging hefty annual maintenance fees. They also know that the chances of finding another buyer are slim.
When it comes to the market, it’s best to try reselling Christmas vegetables instead of timeshare. It’s not uncommon to find them listed on eBay for $1, which shows how desperate some owners are to survive their paid vacations.
You can play hardball, stop paying maintenance and go into foreclosure. That means the developer’s legal fees, so there’s a chance they’ll let you out of your contract.
There’s also a chance they won’t turn your account over to a collection agency. It will hurt the score
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If you hate confrontation, you can hire a lawyer. But basically you’re paying someone to do the dirty work that you can do.
There is such a need to escape timeshares that an entire sub-industry of “exit companies” has sprung up. Some are reputable but many are time-sharing scams. Florida’s attorney general received 450 lawsuits against the companies in 2018, according to the Orlando Sentinel.
Red flags to watch for are large upfront fees (sometimes over $15,000) and guarantees that you’ll get out of your contract.
On the positive side, the rise of exiting companies has helped developers force owners to be willing to let go.
Benefits Of Timeshare Ownership
In general, though, many timeshare owners talk like boat buyers. The second happiest day of their life is when they shop. The happiest day is when they sell.
If you don’t plan on vacationing in the same place, buying a vacation home or condo is a better investment of time.
The waste there is able to pay for such sales. If that’s not in your budget, resort memberships and condo hotels can work for you.
Tour membership requires a one-time payment to enter the tour. Upfront fees vary, but you can get a five-year membership for as little as $2,000 or a lifetime membership for $3,000.
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You will not be responsible for maintenance fees or taxes, although some members have annual fees. Members can also choose other vacation destinations from the tour company’s website and dates are more flexible than timeshares.
In a condo hotel, you are buying a unit in a luxury hotel. It’s different from buying a condo in that the developer is responsible for the rent and a cut of the income when you’re not there.
A condo unit costs as much or more than buying a condo. The upside is that there is a constant flow of condominiums in the market, while condominium hotels are a relatively new concept.
Most of them are run by big name companies like Ritz-Carlton, Hilton and yes,
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