A timeshare, or vacation ownership, is a property with a divided form of ownership or usage rights. Typically, timeshares are resort condo units where multiple people or families hold rights to use the property, with each owner allotted a time period for visits. In theory, timeshares sound great.
It’s estimated that more than 10 million households in the U.S. own a timeshare, and the average price of a timeshare property is more than $24,000 (plus fees). There are two general ownership models. A deeded ownership means you purchase ownership interest in the property. A non-deeded ownership is where you lease the right to use the property for a specific amount of time each year for a preset number of years.
TOP TIMESHARE SCAMS
Time and time again, consumers attend timeshare presentations with the promise of a free weekend getaway or other trip, and many times, deals are made. Unfortunately, timeshare properties come with many restrictions, and in general, aren’t a good investment. Here are the top timeshare scams.
SCAM: A GOOD FINANCIAL INVESTMENT
Someone may try to convince you to purchase a timeshare by telling you it’s a great investment and that you’ll make huge profits. However, timeshares should not be considered an investment. An investment is designed to appreciate in value, generate income, or do both, but a timeshare is unlikely to do either. In fact, the vast majority of timeshare contracts lose value in the secondary market.
SCAM: EASY TO RESELL
You may consider purchasing a timeshare with the thought that if you don’t use it or don’t want it anymore, you can just resell it. However, there’s a huge volume of used timeshares on the market. Plus, profiting from a timeshare sale is a major uphill battle. Besides convincing someone to purchase a used unit, you also need to factor in recouping all the fees you paid over the years. Because timeshares typically lose value over time, you’re probably going to lose money.
Salespeople often tell potential timeshare buyers that they will buy your timeshare or sell it down the road. In most cases, this never happens.
SCAM: BOOK ANYTIME, ANYWHERE
Another common ploy is being told you can book a trip to your timeshare anytime, anywhere. However, the availability of specific locations and times is often limited by factors like popularity, peak travel seasons, maintenance schedules, and more. Many timeshare agreements have blackout dates or restrictions on when and where you can book. Plus, timeshare companies often require you to book through their booking system, which may have further restrictions, ultimately taking away the freedom to go when and where you want.
SCAM: SAVE MONEY ON BOOKING VACATIONS
Timeshare salespeople often tell potential buyers that owning a timeshare will enable them to save money on vacations. These savings are virtually nonexistent, and the opposite can actually happen, because booking a trip to your timeshare may cost you much more than just booking a trip online.
Timeshare owners typically have to pay high-interest mortgages, along with maintenance fees and other ongoing costs that add up quickly, depleting any potential savings. In the end, you’re apt to pay significantly more than you would have for comparable vacation accommodations.
SCAM: RENT YOUR TIMESHARE FOR A PROFIT
You may be told that timeshare rental profits can help pay for the mortgage, maintenance, and other costs, plus you can make hundreds or thousands in profits. Many consumers are lured by the promise of regular income from rental profits. While a timeshare can be rented, you’ll have to rent it out for weeks or even months to make any type of profit.
Because you typically own a portion of the timeshare, renting for long periods of time may not be possible. The cost of owning and using the timeshare is probably going to outweigh any profits you may make.
Salespeople will often exaggerate the benefits of owning a timeshare to help close the sale, including explaining how they can get you discounts on cruises, airfare, hotels, car rentals, or other travel-related amenities. You may even be told that you can get 50% – 75% off when booking your next trip. However, there are often unclear rules and restrictions on when and where you can get these discounts. In many cases, these savings are already available elsewhere online.
SCAM: TAX ADVANTAGES
Often equated to the mortgage interest deduction consumers get for their primary residence, salespeople may make claims about the tax benefits of timeshares. However, tax advantages for purchasing a timeshare do not exist.
HOW TO AVOID TIMESHARE SCAMS
There are many ways to avoid falling victim to a timeshare scam:
- Be suspicious of any uninvited offers regarding your current timeshare or purchasing a timeshare, especially ones that seem too good to be true.
- Be cautious of anyone who requests you pay money up front.
- Be wary of high-pressure demands and tactics.
- Trust your instincts. If something sounds too good to be true, not right, or makes you feel uncomfortable, do not continue communicating with the person.
Sometimes when you go on vacation to a resort, you’re invited to a special meeting or presentation where you’re offered free nights or a free trip, just for listening to the presentation. In many cases, these are sales tactics to convince you to buy a timeshare. You'll waste many hours of your vacation listening to these pitches, and in the end, you may feel pressured to purchase a timeshare.
HOW TO GET OUT OF A TIMESHARE
If you’ve purchased a timeshare but want to get out of it, you have a few options:
- Use the rescission period. If you’ve recently purchased your timeshare, you might be able to back out of the deal using the rescission period, which is a window of time during which you can cancel your ownership.
Note that this period could be as short as three days, so you must act fast. You must write a timeshare cancellation letter that ends your relationship with the resort and mail it to their cancellation address.
If you’ve missed the rescission period:
- Ask the resort to take it back. Look through your timeshare’s paperwork to see if a timeshare deed-back or similar action is permitted.
- Sell your timeshare. Work with a reputable real estate agent or a timeshare resale website.
- Use an attorney. You may want to call in professional help to assist you in getting out of the timeshare. Hire someone who specializes in contract law, and it’s even better if they have experience in getting people out of timeshares.
- Use a timeshare exit company. Make sure the company has a proven track record, is reputable, doesn’t ask you to pay up front, and doesn’t suggest illegal or unethical actions.
Note that it may cost you money to get out of a timeshare, and you’ll likely lose money through a sale. However, it may be worth it to eliminate the hassle and long-term costs associated with ownership.