CURRENT ISSUES
Topics of Interest to Consumers

TIMESHARE TIPS 

Planning your next vacation?  You may have considered “vacation time sharing,” the use of a vacation home for a limited, pre-planned time.  According to the Federal Trade Commission, it has become an increasingly popular way to take vacations.  Many timeshare programs are highly regarded, but problems occasionally occur.  You should consider the risks as well as the benefits before signing a contract. 

There are two main types of timesharing plans:  deeded and non-deeded.  With the deeded type, you buy an ownership interest in a piece of real estate.  In the non-deeded plan, you buy a lease, license, or club membership that lets you use the property for a specific amount of time each year for a stated number of years.  With both types, the cost of your unit is proportionate to the season and the length of time you want to buy.  Obviously, a winter week in a warm climate is worth more than a summer week. 

As with any purchase that costs thousands of dollars, you should understand what you are getting before you sign any papers or pay any fees.  The general information included here should be accompanied by careful analysis and possibly professional advice concerning all aspects of a particular timeshare purchase. 

The Federal Trade Commission suggests that you consider the following points before you purchase any type of timeshare: 

°         Practical Factors.  A major reason people buy timeshares is for the convenience of having prearranged vacation facilities.  You might consider whether you will be able tot use a timeshare facility regularly.  For example, are your vacation plans sometimes subject to last-minute changes, or do they vary in length and season from year to year?  Check to see if the properties have flexible use plans that you may consider.  If you are evaluating a timeshare plan with until in several locations, also consider whether the club has sufficient units at the sites you prefer to give you the opportunity to use them. 

°         Investment Potential.  Question any investment claims made by the seller.  The future value of a timeshare depends on many factors.  Resale of the timeshare may be difficult.  You may fact competition from the firm that sold you the timeshare, or local real estate brokers may not want to include the timeshare unit in their listings.  Closing costs, broker commissions, and financing charges also should be considered as part of your investment costs. 

°         Total Costs.  The total cost of your timeshare includes mortgage payment and expenses such as travel costs and annual maintenance fees.  The maintenance fees may rise at rates that equal or exceed inflation.  You may want to ask if           limits exist on maintenance increases at the project.  To help evaluate the purchase, compare your total timeshare costs with rental costs for similar accommodations and amenities for the same time and in the same location. 

°         Document Review.  Do not act on impulse or under pressure.  Review all documents or have someone familiar with timesharing review them before you make a purchase.  Find out if the contract provides a “cooling-off” period during which you can cancel the contract and get a refund.  The majority of states where timeshares are located require such a cooling-off period.  If there is such a provision, you can use that time to reconsider your decision.  If there is no cooling-off period, be sure you understand all materials before you sign. 

°         Oral Promises.  Be sure everything the salesperson promised orally is written into the contract.  Be especially cautious and questions any verbal claims that contradict the contract. 

°      Exchange Programs.  Remember that exchange programs, which offer the opportunity to arrange trades with other resort units in different locations, usually cannot be guaranteed.  There may also be some limits on exchange opportunities.  You may need to request the use of another facility far in advance.  Or, even at additional cost, you may not be able to “trade up” to a larger, better unit at a popular time of the year in an exotic location.  When you trade your vacation unit for another, expect one of approximately the same value. 

°         Gift Giveaways.  Many sellers offer gifts to potential buyers who will listed to a timeshare sales presentation.  Consider the value of these “gifts” and “prizes.”  If the only reason you are going to a sales presentation is to receive a girt, then be aware that common promotional giveaways include gems with little or no value as jewels; “gold” ingots, with minimal gold content and worth no more than a few dollars; or “vacation awards,” which do not cover major costs such as travel and food.  It may be to your advantage to attend a sales presentation only if you are interested in the program. 

°         Reputation Research.  Your resort will be a good place to vacation only if it is run properly.  Therefore, you should consider researching the track record of the seller, developer, and management company before you make your purchase.  Visit the facilities and, if possible, talk to other owners.  Ask for a copy of the current maintenance budget.  Learn what will be done to manage and repair the property, replace furnishings as needed, and give you the promised services.  Will these arrangements be adequate?  If so, will these arrangements extend over a long period of time, or just for the near future?  Local real estate agents, Better Business Bureaus and Consumer Protection  Offices are often good sources of additional information. 

°         Unfinished Facilities.  If you are considering buying a timeshare on property where the facilities have not been completed, get a written commitment from the seller that the facilities will be finished as promised.  One way to protect your financial interest during this waiting period is to ask that a certain amount of your money be held in escrow.  This may provide some protection for your funds if the developer defaults. 

°         Default Protection.  Find out what your rights are if the builder or management company has financial problems or in some way defaults.  See if your contract includes two clauses concerning “non-disturbance” and “non-performance.”  A non-disturbance provision should ensure that your will continue to have the use of your timeshare unit in the event of default and subsequent third party claims against the developer or management firm.  A non-performance protection clause should allow you to keep all your ownership rights, even if a third party, such as a bank, is required to buy out your contract.  An attorney can provide you with more information about these provisions. 

°         State Protection.  Most states now regulate timesharing, either, under existing land-sale laws or under laws that were specifically enacted for timesharing.  The regulating authority is usually the Real Estate Commission in the state where your timeshare property is located.  Contact that office if you have questions.

  To report problems or to obtain more information about vacation timesharing, write:  Federal Trade Commission, Division of Marketing Practices, Washington D.C. 20580.

While the FTC cannot resolve individual complaints, the agency can take action against a company if it finds evidence of a pattern of deceptive or unfair practices.