What happens if you want to go out from timeshare?

1. What you get. You are purchasing the privilege to use a luxury accommodation in a resort or hotel, usually for one week per year. You get the comfort and convenience of a vacation home with the luxury of a resort, says Howard Nusbaum, president of the American Resort Development Asso¬ciation; see ARDA’s guide, “Understanding Vacation Ownership”). Most timeshares are developed or managed by big-name hospitality companies, such as Disney, Hyatt, Marriott and Wyndham. Urban timeshares are a new variation that have taken off in several cities, including New Orleans, New York City, San Francisco and Washington, D.C.

2. What you’ll pay. The upfront price is based on location, unit size (from a studio to three bedrooms), amenities and the season you select. A week in a new, upscale two-bedroom unit with a view averages about $20,000, although you could pay as much as $40,000 in New York City, says Nusbaum. Most buyers pay cash. Developers offer financing but charge a high rate of interest (typically 15%), says Judi Kozlowski, an agent in Orlando who specializes in timeshare resale. You’ll also pay an annual maintenance fee of $800 to $1,200, she says.

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3. Same time, same place? With fixed ownership, you’re locked in to a specific week each year. With floating ownership, which is more common, you can reserve your vacation time on a first-come, first-served basis. You gain flexibility, but popular destinations, such as Maui in winter, may be hard to get. Depending on the “exchange value” -- the desirability of your timeshare -- you may be able to switch to another venue within your home resort’s portfolio of properties, says Nusbaum. Or you may be able to trade through an exchange company, such as RCI or Interval International.

4. Buy for less. If you buy a timeshare from the resort, you may be offered incentives (say, free membership in an exchange company), and you may enjoy greater consumer protections. But if you buy from a current owner, you’ll likely pay one-third to half as much, or even less. In May, an owner at Marriott’s Cypress Harbour, in Orlando, listed a two-bedroom, two-bath unit for $3,000, with a $1,208 maintenance fee. To search resale listings, Timesharing Today and the Timeshare Users Group.


5. What happens if you want out? The industry is better regulated than it was, say, a decade ago. Most states allow you to cancel a timeshare contract, usually within five to seven days. To sell a timeshare, your best bet is to list it with a reputable resale broker (go to www.licensedtimeshareresalebrokers.org); brokers generally charge 10% to 30% commission. During the last recession, some owners who could no longer afford their units fell prey to scamsters who promised quick sales and collected upfront fees.

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6. Bottom line. Timesharing is almost certainly cheaper, with fewer hassles (in terms of property management) and more flexibility, than buying a vacation home or condo. But don’t think of it as an investment; a timeshare doesn’t appreciate. The value lies in using it, and if you’re lucky it may have some residual value when you sell it.
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.

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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 you’d get a whole lot more than 100 nights of hotel stays.

Best of all, you’d 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 (starting with $10,000 and adding $750 per year), you’d be sitting on more than $26,000 right now. That’s a much better deal from where I sit.