Most people have heard of timeshare, but not everyone knows exactly what it is. Many people only know it's the thing when they take you to a sales room and for two hours someone tries to convince you to buy a vacation system.
During a recent search, I saw a number of people who bought timeshares in Orlando, and upon trying to cancel the contract, ran into several barriers, sometimes almost insurmountable, and ended up just abandoning the product leaving a debt in the US.
In this research I read that 90% of people said they regretted having entered into the "trap" and they did not know how to get out of such "scam".
What I saw is that in these 90% of cases, the whole problem faced was people having signed a contract under pressure, on the same day, and when got back home home, after the excitement subsided, found out that they either might not be able to use the property, or could not really afford it, or maybe the product was too much for the family budget.
All the decisions we make are made in an emotional state, while the justification is always with logic. Not only with timeshare, but in everything in life. So it's always important to have a better rationale before making a decision.
These people then began to badmouth the "trap" or the "scam". So, other people wrote in that same forum: "I am glad that I found this forum. I have just bought my timeshare, and now I will cancel it as well". I saw many examples just like that. Actually there were dozens and dozens more.
What do these people have in common? None of them were speaking bad of timeshare, or that it does not work, or that it is not financially advantageous, or that hotels are not of good quality. Many of them did not even know what they had bought.
What these people were talking about is that the timeshare was sold in an aggressive manner, that many of the resorts hinder the cancellation, especially to foreigners who do not know the law or do not speak English well enough to understand the contract.
Thus, for many people today timeshare became synonymous with "scam".
But stop to think for a second: more than 8 million are active owners. Only in Orlando, more than 1.5 million people own one or more timeshare weeks. Companies like Disney World, Hyatt, Marriott and Ritz Carlton developed timeshare resorts.
So, does it work? Is it a "scam"?
When you buy a timeshare you:
- Freeze hotel prices.
- Will have access to hotels with a vacation home setting, such as living room, kitchen, several bedrooms rooms.
- Will have access to resorts with infrastructure that of country or beach clubs, with leisure, relaxing and sport activities.
- You get to travel to places where hotels are very expensive without having to pay for a hotel.
- Will travel more, thereby improving your quality of life and family interaction.
- Depending on how you use your timeshare, the property pays for itself in two to three times you use it.
Is this a bad thing?
Of course it is not. I will not go into all the details on all timeshare advantages, as this would be subject for another post.
The goal is to show you what you should look for when thinking to buy a timeshare, or holiday ownership. or vacation ownership, or whatever name you resort calls its system.
What are then the 10 points that we should consider before buying a timeshare?
Depending on the country where your timeshare is located, the developer, and subsequently the management company, should follow certain laws, rules and regulations.
The greatest fear of buying a timeshare is whether in the future the facility will be maintained in the same way as when the property was purchased.
In countries like the US, the management companies are required by law to maintain reserve accounts for future expenses. In Orlando, Florida, for example, these accounts have to be audited. Thus, the client knows that there will be enough reserves for remodeling, changes and replacements. This is the guarantee that the project will be always new.
Some countries, as is the case of the US, stipulate a period of repentance after purchase. Within this cool off period the contract may be canceled without penalty, and all moneys are returned. In Florida this period is of 10 days.
Evaluate the research the country's laws and seek one that offers consumer protection and guarantees for the future of the property.
2. Ownership Type
In some countries it is more usual to buy a fractional deed, while in others a license, or right of use
Both forms have advantages and disadvantages.
The fractional deed gives you a real sense of ownership, while the license is a right of use by contract, for a limited time.
The problem of the deed, which occurs frequently in the US, is that the moment you stop paying the maintenance fees, or even the installments of your contract, you can face a foreclosure process. Just as it happens with an apartment when you stop paying the condominium assessments. This will appear on your credit history and make it difficult to obtain credit or loans in the US for a period of at least seven years.
Another problem with the deed is in relation to sale, transfer and inheritance. Some countries impose high taxes on real estate transactions. In the US, foreign nationals inheritance taxes can reach up to 40% of the property value. With the license this type of tax does not exist.
The issue of the license is that because it is not a property ownership per se, one can not obtain a mortgage or long term financing.
Check which one is more beneficial for your dream vacation plan. Weight the pros and cons and draw your own conclusions.
3. Trading Power
Many people have the impression that the timeshare exchange system does not work.
Exchange systems do work, and are always evolving.
Obviously for the system to work, owners of each project have to want to make the exchange too and deposit their weeks, thus opening space at the resort you want to go to. In addition to the space deposited by the owners, exchange companies require that each member resort reserve an X number of weeks that can not be sold and must be the given to the exchange company in order to accommodate more requests. It helps to better equalize the program.
Until recently, little it was clear with what happened to those who tried to exchange a week from a mid-level resort for a high-end resort. It is obvious that there not not much fairness when you buy a property in a low demand area, in a resort with less than sophisticated facilities, that may have cost a few thousand bucks, and every year you want to use a Disney or Marriott 3 bedroom, 5 star resort, with impeccable recreational facilities, that has a tag price of $ 30,000. The owner of the mid level resort could use a 5-star one time or another, but not as a rule. Not year after year. It does not make sense. It's not fair.
To give more transparency and fairness to the system, RCI created the Trading Power tool. This way, when you deposit your week, you know how much it is worth and what you can do with it. The good thing about this tool is that you can combine weeks, or use less or more days. For example, let's suppose that your week at the mid level resort is worth 12 points, and the week of a 5 star resort you want is worth 24 points: you can deposit and combine two weeks to use one at the 5 stars, or you can deposit one week and use 3 or 4 days in the 5 stars. Similarly, the owner at the 5 stars can exchange his week for two at a lower level of resort.
This brought more fairness and transparency to the whole exchange program.
So when buying your timeshare week, check with the developer what is the average Trading Power of the resort. These numbers are dynamic and change frequently. But, can you have a basic idea of the project's weight. Usually the smaller resorts with lower Trading Power should obviously have a lower purchase price and maintenance fees than the resorts with greater power. And even with less Power Trading you will be able to use more upscale properties by giving more space from your home property.
RCI Trading Power ranges from 0 to 60. The average is 14 points.
4. A Place That You Want to Return to Frequency
Not always you will want to exchange your property. So, look to buy your timeshare in the place where you would buy your holiday home and use it frequently. Do not buy a timeshare only for the exchange.
The advantage is that in addition to not needing to wait for exchange confirmations, you can develop a relationship with the resort, and in many cases can accumulate weeks from one year to another and have longer vacations, or rent extra units at lower prices and travel more family members or larger groups of friends.
In doing that you will really treat your timeshare as your holiday home, not only as a pre paid hotel.
5. Maintenance Fee
The maintenance fee is your guarantee that the resort will be clean, new and working for a long time.
But should it not be abusive. And it can not be for the developer to make money out of it.
Thus, completing item 1 above, it is important to understand the laws of the country and whether the maintenance fee is controlled and audited by the state.
Most important is whether there are reserve accounts. Just like in a condo, if there are no reserves and time comes time to make major remodeling, management will have to collect special assessments. If it is difficult to make everyone pay in a condo with few units, imagine in a resort with thousands of owners. And the condo may be the owner's primary residence, whereas the timeshare is not, therefore not a priority.
So, it's much better to pay a little in more maintenance fees in order to have these reserve accounts in place. Thus, when it's time to paint, renovate, replace home appliances, replace elevator, replace furniture, there will be funds available.
Research the legislation and ask the resort for a copy of the budget. See what's covered and how remodeling and replacements are made.
6. Customer Service
Search for other owners of the resort and check how the customers are treated.
From depositing weeks right away. to helping with RCI or Interval International requests and exchanges.
If you are buying a vacation property in another country, check whether there is service in your language if you do not master the language of the country.
Remember that these people are your voice present in the property. When you develop a relationship with the resort they can receive packages for you, or can prepare the unit with special requests that you may have.
So, ask and make sure of the importance the company gives to customer service. Unfortunately in some companies everything is nice until you sign the contract. After that things may change for the worse.
7. Program Flexibility
If you need unit size flexibility, combining weeks, rent extra days, and so on, make sure the resort offers these programs.
See what is important in your own traveler profile and search for a holiday ownership resort that will fit you.
Before signing the contract, think about how would your ideal travel be, and see if you can have it all at this resort.
Many people see their timeshare as a hotel, property while others as a holiday home. The hotel tends to give more options to break weeks, use different sizes of units, use only days at a time, use only a hotel room, use it for business.
Others use more as holiday homes, always traveling with more people in vacation houses with complete infrastructure and leisure and tending to stay for longer periods.
8. Developer's Background
It is important to check what the company has done.
See how are hotels and resorts of that company being operated and maintained.
Do your homework and research extensively.
Of course, filter out those ridiculous comments for absurd reasons that are a part of the internet today. Try to see serious and reasonable comments. Always try to see the physical part of the resort and how owners are treated.
Of course when developers turn over control to homeowners associations (in countries with this type of structure) developers no longer can exercise much influence. But the way the condominium declarations were drawn can influence a lot the future of the property.
Completing items 1 and 2 above, ask how is the cancellation, both during cool off and after.
Do they foreclosure? Do they harass you?
Ask before signing any contract. Require in written any promise made in this regard.
Nobody buys anything thinking on canceling it. But life can take unexpected turns. Buying a Vacation Property is a long-term commitment, which does require serious responsibility. Reason why it's always good to have flexibility.
10. Research Other Owners
Most important of all is whether the current owners are satisfied.
Do a research, visit the Facebook and Twitter pages of the company. If these pages show customers, try and contact them. Ask about the resort and the facilities. Ask about the how easy it is to exchange.
Timeshare is a great product. But as with all industries, there are good and bad companies.
Not because you stayed at a bad hotel that you will no longer stay in hotels. Not because you ate bad food at a restaurant that you will stop going to restaurants. No. You will not go again to that particular hotel, and will not eat again at that particular restaurant.
Why would it be different with timeshares? If a resort pressured too much or made cancellation difficult, it does not mean that everyone is like that. The industry today is large enough, mature enough and diverse enough so that companies can be judged individually, not as a group.
Using these 10 points, you will buy the right holiday ownership for you, and your life will change for the better, with more quality, more travel, more family fun!
Have a good trip!