They say the two happiest days in a boat owner’s life are the day he buys it and the day he sells it.
By ELLIOT RAPHAELSON
Tribune Media Services
The same may be true of timeshares. Many people buy into these vacation schemes and discover later that they are poor investments. Moreover, they can be very hard to get rid of, at any selling price.
A timeshare generally is the right to vacation in the same unit at the same specified time each year, or to exchange it for another week at the same location. Some vacation plans are structured such that you receive points that you apply toward vacation time at any of a company’s many locations. You can also pay an exchange company for other options at other locations.
Timeshares are poor investments because their value depreciates quickly. They can rarely be sold profitably, or, in fact, anywhere close to the initial purchase price. Unless you purchase an upscale unit, it is unlikely you will not be able to make a good swap.
Think about it this way: If you pay $20,000 for a place where you spend one week a year, multiply that by 50 to see what you’d pay for it to be your home year-round. Does the property warrant a price of $1 million?
While you own the timeshare, you will have ongoing maintenance costs and special assessments. If you finance your purchase, the interest charges may not be tax-deductible if you are deducting interest on another vacation property.
Timeshares are generally sold in a high-pressure environment, and most advantages the sales people tout are illusory. You are promised a cheap vacation for the family, but you probably can rent a similar unit for less. You are told you can swap your unit in other parts of the country for the same quality. However, you may not be able to arrange the place and time you want. By contrast, if you rent, you can select any location when you choose.
Buyers are often told that if they hold a unit for a long time, their vacations will be cheaper. Unfortunately, maintenance costs will rise over time, and it is unlikely that vacations will be cheaper after accounting for the base cost, finance costs, special assessments and increasing maintenance costs.
Before any purchase, read the recommendations of the Federal Trade Commission (FTC) at http://www.consumer.ftc.gov/articles/0073-timeshares-and-vacation-plans. It is likely you can purchase the unit cheaper from a current owner, or that you can rent it at more favorable terms.
An acquaintance of mine tried to give her unit back to the original seller, but the company had no interest in accepting it even free. This is not unusual. Unless she can find someone to take ownership, she will continue to owe fees. The sellers of timeshares, and the associations responsible for maintaining the units, generally have no interest in buying units back. The bottom line is that there is usually not a good market for selling units.
Maintenance fees are owed even if you no longer use the timeshare, and it is not a good idea to stop paying them. You can be sued, and your credit rating will be affected. You should make every effort to dispose of the unit so you are no longer responsible for fees.
Do not pay an upfront fee to anyone promising to sell your unit; pay only after the unit is sold. This field has attracted many scam artists, so do thorough research on any third party that offers to help.
The FTC webpage mentioned above provides guidelines for selling your unit. Another good resource is buying guide on eBay titled “The Everything Guide to Timeshares — Buying Guide.” (To find it, go to the Reviews and Guides section of eBay and type the title into the search field.) If you use a real estate broker, make sure he or she is licensed.
Some charities accept donated timeshares. However, be sure you understand the conditions and any associated fees. If the donation is accepted, you may be able to deduct the market value of the unit on your tax return.
Don’t be pressured into purchasing a timeshare. The odds of its being profitable investment are miniscule. If you have already purchased one and you don’t use it, dispose of it as soon as you can, even if you incur a loss. Procrastinating will not help.
Elliot Raphaelson welcomes your questions and comments at firstname.lastname@example.org.