Trading May Not Be Easy
Points-based systems come with no guarantees. Just because the salesperson tells you it’s easy to trade your week for another week or your property for another property, doesn’t mean it really will be easy. If you own a week in Hawaii, would you be willing to trade it for a trip to the blistering hot Las Vegas desert in August? If you wouldn’t, chances are no one else will either. It’s also important to remember that everybody wants to travel to the same places and in the same weeks that you do. The desirability factor aside, trading often results in an additional fee.
How Do I Get Rid Of My Timeshare Without Ruining My Credit
If you simply stop paying your timeshare fees and charges, they can report this delinquency to credit agencies and you can see a ding to your credit score. If you can no longer afford the timeshare, you should sell it or renegotiate your contract with the timeshare company in order to preserve your credit.
What Is A Timeshare And How Does It Work
16 Min Read | Oct 28, 2022
At some point or another, youve probably heard about the dreaded presentation. You know the one. You and your family just checked into your hotel for spring break, and some smooth-talking salesperson approaches you about a fancy room upgrade. The next thing you know, youre sitting through a three-hour timeshare presentation while snacking on stale pretzels and signing your name on the dotted line of a brand-new timeshare contract. Ouch. If that hasnt happened to you, chances are, its happened to someone you know.
Did you know the timeshare industry is anticipated to be a $17.3 billion-dollar industry this year?1 Theres a lot at stake, and they really want your money!
So, what is a timeshare anyway? Well break down everything you need to know so you can still enjoy your hard-earned money and vacation timewithout the high-pressure sales tactics.
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The Better Alternative To A Timeshare
In my opinion, you’re better off staying at a local hotel than buying into a timeshare. Take my parents’ timeshare as an example. They paid $10,000 for the initial purchase, and if you add the $750-per-year maintenance fee paid over a 10-year timeframe, there is a total investment of $17,500 in that timeshare.
Over the last 10 years, their timeshare provided a stay of one week each year seven days and six nights for a total of 60 nights, which averages out to $291 per night to vacation in the same unit each year. If you were to rent a decent-quality hotel room at about $175 per night, the total price paid for the timeshare would buy you 100 nights of hotel stays. Not only does it cost less per night to stay in a hotel, but you would also be able to add variety to your vacation by staying at hotels located in different destinations.
And you would also be able to take advantage of frequent user rewards programs and other discount pricing being offered by the hotels. Chances are there are easy ways you can get a whole lot more than 100 nights of hotel stays.
Best of all, youd have sunk no capital in the timeshare, and the money to pay for the timeshare could be invested to earn a return on your investment. At a conservative 5% return compounded annually , youd be sitting on more than $26,000 right now. Thats a much better deal from where I sit.
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Help Im Tempted To Say Yes
If youre sitting in a presentation with a sudden urge to buy, do this: Pull out your smartphone and run a search on the timeshare along with the keyword complaints or scam and see what pops up. Thats usually enough to give you second thoughts. Check out the Timeshare Users Group and see if there are any resales on the same unit youre considering. Its not unusual to find units that cost $1 . If that doesnt convince you to walk away, chances are nothing will.
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Whats Included In Timeshare Costs
Turns out, purchasing a timeshare involves a boatload of costs. First, youll have the upfront purchase price that averages over $24,140.2 If you dont have that money saved already, youll probably be looking for a loan .
If you cant front the cash for that timeshare, the sales folks will talk you into financing with a personal loan. And on average, those interest rates will land somewhere around 8.73% over the course of two years.3
And if you dont go the personal loan route, your new friends at the timeshare company will come to the rescue with a convenient way to finance your epic purchase! Since they know you have so few options for financing, they can charge outrageous interest rates.
What tends to sneak up on you after that are the extra fees after your initial purchase. Uncontrollable maintenance fees run an average of $1,120 annually and go up around 2% each year.4 But thats not always the case! From 2018 to 2021, there was a 12% hike in timeshare maintenance feesouch.5,6 With those kinds of numbers, youd actually be coughing up $1,250 just in maintenance fees by 2024.
And if thats not enough, throw in HOA dues, exchange fees , and the special assessments for any repairs made to your unit. With all those extras, the total cost can drain your bank account quicker than that Nigerian prince emailing you for money!
Now that youve gotten the overview, lets break the costs down one by one.
Are Timeshare Contracts Fair
How did it even come to this? Who allowed these contracts that keep timeshare owners tied to a property they dont want or cant afford? And is there a way to make these agreements fairer to owners, particularly at a time like this?
Short of federal legislation to correct the problem and override the state timeshare laws, which were heavily influenced by timeshare lobbyists theres no way to fix this problem. A federal law would also need to address the contracts retroactively, allowing owners a fair and reasonable way to exit. Thats highly unlikely.
Indeed, timeshare contracts are profoundly unfair to most customers. All the more reason to think twice before signing one.
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Timeshares Vs Club Memberships
The past few years, companies have started advertising vacation clubs and travel clubs as alternatives to timeshares. Theyre appealing because the club makes travel arrangements for you, saving you the stress of planning a vacation.
Unfortunately, these clubs are just timeshares in disguise. To help you avoid them, weve broken down why you should avoid these clubs and what you can do instead.
Avoid These Pandemic Timeshare Exit Mistakes
One thing about getting rid of a timeshare hasnt changed. There are some ways you should not try to exit. The Federal Trade Commission issued a recent warning against timeshare resellers, noting that some prey on seniors by taking money up front and then failing to sell the timeshare.
The situation has gotten worse during the pandemic. There are so many new entrants in the timeshare exit space, and many are not reputable, according to experts.
How do you know if a timeshare exit company is legit? You should ask three questions about any company youre thinking of hiring:
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Wesley Financial Group Is Aleader In The Timeshare Exit Industry
Our one of a kind process enables you to end your relationship with the timeshare company and all associated mortgage debt and fees forever. If we take you on as a client we will terminate your timeshare, or youll pay nothing.
Wesley is the leader in the timeshare cancellation space. Thousands of distressed timeshare owners reach out to us for help each and every week. Unfortunately, we have to turn down over 40% of them. We have a unique and distinct qualification process that allows us to weed out people we dont think we can help.
Rest assured, if we take you on as a client well get you out of your timeshare or youll pay nothing. We have over 3,000 reviews.
The Total Cost Of Timeshare Ownership
Are you thinking of buying a timeshare? Its a good idea to calculate the long-term cost of the timeshare before making your purchase. Add up all the costs associated with the timeshare and divide it by the number of nights you buy. This will give you the actual cost per night.
Heres how it works.
Lets say you want to buy a timeshare with the following details.
Upfront cost: $15,000
Total cost of timeshare purchase: $15,000 + $30,000 + $500 = $45,500
Total vacation nights: 7 x 30 = 210
Total cost per vacation night: $45,500 / 210 = $216.67
Look at the total timeshare cost. Is it something you can afford?
Compare the total cost per vacation night to your typical budget for a hotel room. A timeshare may be a good option for you if it comes in at or below that.
*Annual fees. Every timeshare comes with annual maintenance fees, or dues, in addition to the purchase price of the timeshare. These dues typically cover maintenance fees, homeowner association fees, property taxes, property insurance, and day-to-day property management. ARDA reports that the average annual fee for timeshares in 2018 was $1,000.
*Number of years. Leased timeshares give purchasers the right to use the property for a specific week for a specific number of years. This can range from 20 to 80 years, with 30 years being the most common.
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Would A Timeshare Exchange Program Give Me More Flexibility In Where I Vacation
With either a leased or deeded type of timeshare structure, the owner buys the right to use one particular property. This can be limiting to someone who prefers to vacation in a variety of places.
To offer greater flexibility, many resort developments participate in exchange programs. These enable timeshare owners to trade time in their property for time in another participating property. For example, the owner of a week in January at a condominium unit in a beach resort might trade the property for a week in a condo at a ski resort this year, and for a week in a New York City accommodation the next.
Exchange clubs can involve challenges, however. Usually, owners are limited to choosing another property classified as similar to their own. Plus, additional fees are common, and popular properties might be tricky to get.
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About me
I founded Money Talks News in 1991. Im a CPA, and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.
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Investing In A Timeshare
Posted by Michael Harter | Jul 31, 2018 | Individuals, Our Two Cents Newsletter
A timeshare is a property with restricted usage rights that is commonly used for vacationing. Typically, timeshares are shared by many different individuals or families who use it at specific, non-conflicting times of the year.
Instead of planning a new vacation every year, some families opt to buy a timeshare. In fact, according to a 2014 study from the American Resort Development Association, 7.9 percent of American households own a timeshare. The appeal of timeshares comes with the consistency of visiting a city that a family enjoys, staying at a place that typically offers more amenities than a standard hotel, as well as taking the guesswork out of planning a vacation.
How Do I Get Out Of My Timeshare During A Pandemic
After the COVID-19 outbreak, many timeshare owners couldnt pay their monthly maintenance fees or mortgage. They needed to get out of their timeshare quickly.
Unfortunately, you cant just walk away from a timeshare. Thats because it often comes with an obligation to pay maintenance fees for as long as you own it. If you dont stay current on your maintenance fees or your loan payment, the timeshare company or timeshare association could report you to a collection agency and ding your credit score.
Even in good times, owners sometimes struggle with being on the hook for a timeshare. They wonder how the contracts that bind them to a timeshare for life are even legal.
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Are Timeshares Worth It
Owning a piece of a vacation home sounds perfect, doesnt it? A place to call home and visit again and again. And you might think about buying a timeshare to make this dream a reality.
Press pause on that purchase for a moment. Maybe youre wondering to yourself, are timeshares worth it?Is this contract a good idea? Well, weve got six very good reasons to avoid this real estate trap.
The Fees May Become Unaffordable
To understand how annual dues might increase over time, itâs helpful to look at the timeshareâs historical dues.
For Disney Vacation Club , for example, annual dues per vacation point ranged from $4 to $7 in 2010. That range jumped to $7-$10 for the same resorts in 2020, according to DVC member Tim Krasniewskiâs website, DVC News.
Similar to owning a condo, timeshare ownership can require you to pay a special assessment if the property needs upgrades or repairs that canât be covered by the reserve funds from timeshare ownersâ annual dues. Higher assessments can lead to a downward spiral of owners not being able to afford their dues, and then the resort quality declining.
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Buy Smart From The Start
While there are a number of variables to consider when buying a timeshare, there are essential areas to analyze before entering into the process:
- Know who you’re looking for – list the brands that you have vacationed with in the past and determine the style and feel of the vacation that your favorite brand provides. Marriott, Disney, Hilton, Hyatt, Wyndham, Bluegreen whichever one it is, everyone has their preferences.
- Determine your vacation needs – Understanding how and when you vacation can make all the difference. Do you vacation in the summer, winter, spring or fall? This can have a significant impact on the price of a timeshare due to high or low demand times. Many timeshare resorts still use a color-coded system to rank seasonality:
Red = High demand White or Yellow = Moderate demand Blue or Green = Low demand
If you’re not locked into a particular time of year, you may want to consider a floating time frame over a fixed time frame. Fixed will give you the same week each year, while floating allows for more flexibility. More timeshare companies are using points programs now as vacation currency, so you may want to check about the use of points and how that can impact your ability to vacation, as some programs allow owners to split their points allotments into smaller quantities to take shorter, more frequent vacations.
Buying A Timeshare On The Secondary Market
It may be frowned upon at the presentations, but buying a resale account can afford you great vacations at cheap prices. If you are thinking about investing in a timeshare ownership on the resale market, you have many factors to consider during the course of your purchase. You can spend a lot of time on deciding which club or size of ownership is best to suit your needs, but it doesnt have to be a difficult experience.
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How Do You Pay For A Timeshare
Homeowners looking to buy a timeshare can use a home equity loan, which gives homeowners the difference between their propertys assessed value and the balance on their mortgage, up to a certain point. For example, a homeowner with $60,000 remaining on the mortgage of a $100,000 home can receive a $20,000 home equity loan. Yet theres risk inherent in home equity loans: the bank can foreclose on your home if you default on your timeshare agreement.
Borrowing from a 401 plan is another way to pay for a timeshare. Most people with 401 retirement plans can borrow up to 50 percent of their vested balance. If you have a $150,000 401, you can take a loan out against your plan for up to $75,000. But borrowing from your 401 means less money invested in your retirement savings. Plus, the IRS requires you to pay back the loan within five years.
Should You Invest In A Vacation Rental Or A Timeshare
Not much can beat vacationing in a place thats yours. The big question, thoughif you want to own vacation property, should you invest in a vacation rental or a timeshare?
While both options have unique perks, both financial and real estate experts overwhelmingly agree youre better off investing your money in a vacation rental. Two massive benefits vacation rentals offer investors that timeshares cant:
Here, well look at the differences, risks, and rewards associated with both options so you can make the best decision that meets your financial and travel goals.
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