According to the American Resort Development Association. the US vacation timeshare industry contributes more than 90 billion dollars to our economy. Timeshares generate over $10 billion in annual sales revenues. There are more than 600,000 full and part-time jobs in this industry.
Are you thinking of investing in vacation timeshares? If this is you, then you’re in the right place. Check out our helpful guide and you’ll learn everything you need before you decide to invest.
What You Should Know Before Investing in Vacation Timeshares
If you’re ready to move forward with this investment option, brush up on these vacation timeshare basics. Know these elements ahead of time before you invest a single dollar.
Definition of a Timeshare
A timeshare isn’t like a regular real estate transaction with many owners. Timeshare investments involve multiple investors that own a period of time of a single vacation property like a condo or a cabin.
Timeshare investors will jointly pay for property-related expenses. This applies whether or not they are staying on the property.
For example, these expenses can include repair costs or monthly maintenance fees for the property. A vacation timeshare investor also pays for a portion of the property taxes and utility fees as well.
What Are The Different Timeshare Investment Forms?
A timeshare investment form comes in three unique models. These models include vacation club options, right-to-use agreements, and fee simple agreements. Here’s a summary of all three forms:
Vacation Club Point System
A timeshare investor can purchase points through vacation club systems. Investors use their accumulated points to travel to vacation timeshare rentals within an individual club network.
Sometimes timeshare vacation packages let you use your points for other vacation-related expenses like rental cars or airline tickets.
Right-to-Use
A right-to-use contract lets an investor buy rights to occupy a property during a specific time of the year. A right-to-use owner usually doesn’t own the physical structure themselves. A management company or resort developer owns the property’s title themselves.
Fee Simple
Fee simple contracts provide investors with the title as well as ownership rights to a specific property along with the other investors. An investor with a fee simple timeshare arrangement can rent, sell or loan their property share at their convenience.
Fee simple timeshare ownership continues indefinitely. The property can also be left to a surviving heir.
How Do I Buy a Timeshare?
You’ll see more than enough “timeshare for sale” advertisements at real estate offices. Zillow.com and Trulia.com are two online companies that can provide data on the current market’s price range.
You can also find many free, online buyer’s checklists that can help prepare a buyer for their timeshare purchase. You’ll also find advice on how to calculate total timeshare expenses and how to compare these fees with other properties.
One way to avoid the added stress of purchasing a timeshare is to visit more than one listed property in person. That way you can evaluate the building’s condition and talk to the neighbors to hear more about their personal experiences.
You can also hire a real estate agent to negotiate your offer for you. You’ll find qualified agents with real estate agencies from the Better Business Bureau.
When you sit down to talk to your agent, make sure you have in writing what their fees will be and the services they can provide you during your transaction.
What Do The Different Timeshare Contract Terms Mean?
Timeshare contracts are an important aspect of any successful timeshare ownership. They’re also some of the most misunderstood components in the industry. Here’s a summary of three common contract terms used often:
Rights of Refusal
Rights of refusal are contract provisions that allow an interested party the right to buy a specific timeshare property before the seller looks at other offers. Sellers will prepare their own right of refusal clause before they place the property on the market.
This provision also allows the seller some flexibility to market their property. If a seller receives more than one offer, they must notify the first interested buyer.
Once they’ve been notified, the first interested buyer can then decide if they want to change or rescind their original offer.
Rights of Rescission
Rights of rescission is another term for “opt-out clauses.” Buyers can decide to rescind their timeshare sales offer a week after they submitted it. Any funds paid as a down payment must be refunded back to the buyer within a specified number of days after the seller receives their cancellation notice.
Rights of rescission laws differ amongst US states. Some states have stronger laws than others.
Laws in Florida, for example, state that buyers can rescind their offer within 10 days after they submit their offer. Their funds need to be returned to them within 20 days after the seller receives the cancellation notice.
Right of Renter’s Cancellation
Most timeshare vacation deals include cancellation policies that both renters and owners need to honor.
It’s natural for unplanned situations to arise that might result in canceling a vacation.
That’s why clear cancellation instructions can protect both the renter’s and the owner’s interests. Both sides just need to be aware of the details to cancel.
Timeshare owners ultimately decide what the details are of the cancellation policy for their rentals. You can see an example of these kinds of details here at the HGVC cancellation policy.
A cancellation policy typically requires a renter to send a written cancellation notice to the timeshare owner within an expressed amount of time before their check-in date.
The policy can also outline how much of a refund the renter should expect and what currency they’ll receive it in.
What Are Timeshare Maintenance Fees?
A timeshare maintenance fee covers those everyday costs for maintaining a timeshare community. A timeshare company regularly collects maintenance fees to cover expenses for property-related costs like:
- Security or office staff salaries
- Landscape costs
- Property liability insurance or
- Swimming pool maintenance or onsite gym
Make sure you familiarize yourself with any current and previous maintenance cost trends at the properties you’re interested in. Do these costs remain stable or rise significantly? Knowing these details will give you an idea of what you can expect your ongoing costs to be.
What Does Timeshare Occupancy Rate Mean?
Timeshare occupancy rates refer to how occupied a timeshare community is compared to the maximum number of units it has available.
A timeshare that maintains its maximum occupancy rate is a positive sign. It means that owners are actively using their site and are happy with it.
What’s The Timeshare Exchange Process?
A timeshare exchange process means timeshare owners can exchange their previously scheduled timeshare vacations with other timeshare owners.
A timeshare owner can also request to trade their stay period to another property somewhere else. Only members in an exchange network can participate in timeshare exchanges.
An exchange network will collect a list of available timeshare units and the time slots available to trade for. A timeshare owner pays a membership fee to join an exchange network.
These networks will also charge fees to both “seller” and “owner” when the exchange is complete.
Are Timeshares Prone to Scams?
Unfortunately, the timeshare industry has seen its share of rip-offs. Both timeshare buyer and seller might find themselves at risk of unscrupulous or unethical practices such as timeshare resale scams.
For example, some timeshare sellers will send phony offers and then ask buyers to remit broker sales fees. Once those fees are paid, the offer suddenly and “mysteriously” disappears.
A broker’s fee is non-returnable so buyers can’t recover these lost payments. A timeshare buyer can hire a consumer advocate or other resale company to represent them if this occurs.
These third-party advocates will negotiate the owner’s release from any contractual obligations that take place within these deceitful conditions.
Sometimes timeshare buyers also face aggressive sales tactics from agents who bombard them with unsolicited phone calls or sales marketing brochures.
These agents often promise a buyer discount or other prize that will never materialize.
As a buyer, you can protect yourself by carefully reviewing your sales contract. Don’t ever sign a contract on the spot and don’t hesitate to ask a real estate lawyer to evaluate your contract.
Don’t forget to ask for the agent’s name and phone number so that you can contact them if you have follow-up questions.
What Are Your Next Steps?
If you’re ready to invest in vacation timeshares, it’s best that you do your research well in advance. Download and print out a buyer’s checklist to have in hand when you’re ready to look for appealing properties to buy.
Do a site visit to the property and ask any of the residents you see to share their opinions with you.
Don’t hesitate to ask them if they know their site’s occupancy rate. You should also ask if they’re satisfied with any improvements made to the site.
Be sure to visit our website for more helpful advice on vacation timeshares. We’re a centralized magazine dedicated to giving our readers insights on business, lifestyle, and living. Let us know if you have any questions.
