Timeshares Are Not For Everyone

Winter is a time when consumers often daydream about getaways to warmer climates, perhaps even owning a time share in Florida or Hawaii. But buyer beware: Deciding whether a timeshare is right for you can be a complicated spending choice.

A timeshare is the right to use a vacation home, often during the same week each year. The pitch is that after the initial purchase, you go on vacation and pay nothing for a place to stay except the annual maintenance fees.

The accommodations, especially at resort time shares, can be more luxurious than a typical hotel room. Time shares often include two bedrooms, a kitchen and clothes washer and dryer. In that way, it's more akin to renting a nice condominium.

Those upsides are usually highlighted during lengthy, high-pressure pitches from timeshare representatives. And they seem to be effective. Timeshare sales rose 21 percent in 2004, to nearly $8 billion, according to the most recent figures from the American Resort Development Association. The number of time-share units is pushing 200,000 in the United States alone, with the average purchase price at nearly $16,000.

If you're considering buying a timeshare, here are 10 things the salesperson may not tell you:

"A timeshare is a lousy investment."

In fact, it's often not an investment at all, in terms of appreciation. Unlike other real estate investments, the timeshare is likely to lose money from the moment you buy it, similar to a new car losing thousands of dollars in value the moment you drive away from the dealership. If you pay $16,000 for a timeshare, you may be hard-pressed to sell it for half that, depending on its location.

"You're not going to get your money back, and shame on the salesperson who sells it to you as an investment," said Lisa Ann Schreier, a former timeshare saleswoman and author of "Surviving a Timeshare Presentation" and "Timeshare Vacations for Dummies."

-- "Our annual fees add up in a hurry."

The purchase price of the timeshare plus closing costs and commissions is just the beginning of its expense. You'll also have maintenance fees, averaging about $400 per year, which likely will rise annually. And you could have separate real estate taxes on top of membership fees, exchange-transaction fees and special assessments for unexpected costs at the resort. You pay these fees regardless of whether you use the unit.

-- "Don't forget about travel costs."

You still have to pay to travel to the time share every year. That's no small cost for someone living on the East Coast with a time share in Hawaii, for example.

-- "Timeshares are complicated."

Buying, owning and trading a timeshare require homework. You need to know the difference between fixed-week, floating-week and points-based systems, as well as leased versus deeded time shares and much more, including knowledge about the location of the time share. Ignorance will end up costing you.

"The timeshare industry prides itself on keeping consumers in the dark until they're in front of the salesperson," said Schreier, who added that time shares can be a good way to vacation for some people, but only if they know what they're doing.

-- "The break-even point is many years away."

One of the allures of a timeshare is that you pay up front and don't have to deal with hotel rate inflation. That's because you locked in the cost of your accommodations for your annual vacation. But do the math.

If you usually pay less than $100 per night for a hotel room on vacation, you'll be hard-pressed to justify a $16,000 time share and its ongoing fees, even assuming high inflation of hotel prices. But the break-even for timeshares shrinks quickly if you would otherwise rent two high-priced hotel rooms every year for your family.

-- "You'll lose vacation flexibility."

The timeshare salesperson will emphasize how easy it is to trade your unit for ones elsewhere. Experts say it's not hassle-free and could require vacation planning a year in advance. And trading costs paid to a timeshare-swap company involve an annual fee of about $100 and a per-transaction fee of up to about $150. Also, if you have a slow-season time share in Pennsylvania's Poconos, don't expect to trade for a prime week in Maui.

-- "Timeshare prices are very negotiable."

"A lot of times, the first price they show you on a time share isn't what they really expect you to pay," Schreier said.

-- "Don't buy the timeshare from me."

Buying a timeshare from a current owner will be far cheaper than buying from a developer's salesperson. At a discount of half price or more, it's a much better value.

-- "I'm offering you lousy financing."

Financing offered through timeshare companies typically has an interest rate of near 16 percent over seven to 10 years, Schreier said. That's higher than many credit cards. If you can't pay cash for the timeshare, it may be a sign you can't afford it.

-- "You'll have a hard time unloading this thing."

Timeshares are notoriously difficult to get rid of, even if you're willing to take a loss.

"If you decide to buy a timeshare or membership in a vacation club, be aware that resales are difficult, if not impossible, because there's no secondary market," the Federal Trade Commission says in a consumer advisory. See more advice and warnings online at www.ftc.gov.