Timeshare Ownership

Timeshares can be appealing to some who travel often. Some timeshare owners benefit from saving money on hotel rooms because of their consistent use of their vacation ownership. Others, however, end up regretting the decision to buy into a timeshare unit. A timeshare ownership model comes with lots of fine print.

What Is a Timeshare?

A traditional timeshare ownership interest is not exactly the same as vacation home ownership. Timeshare contracts grant benefits in fractional ownership properties. Under this model, developers purchase or build one or more condominium-type units. Then they complete the required legal steps in order to sell brief stays, usually lasting a week, in these units. All types of timeshares involve fractional owners who have property access for a designated period of time.

The timeshare industry isn't for buyers who want a second home. Timeshare buyers are not homeowners, as the entire attraction is avoiding the day-to-day hassles of home upkeep. Still, some states consider some timeshares to be actual pieces of real estate, making certain real estate laws applicable to timeshare agreements.

Deeded Timeshares

A deeded timeshare allows you to buy a fraction of a vacation property through a deed. You will share this piece of real estate with a number of other people. Buyers are part of a fractional ownership with other owners. For example, each deeded ownership may give an owner one-tenth interest in a private residence club. Though that might sound minimal, it can still be legitimate ownership. For some, that is important.

Leased Timeshares

A leased timeshare arrangement differs from a deeded timeshare. Here, one entity owns the real estate property and is renting it out to those who buy into the timeshare arrangement. Fractional ownership isn't tied to a deed. Instead, this type of vacation club ownership is based on contract alone. Owners have a right to limited weekly stays in the property over a specified number of years.

Buyers are simply renting vacation time. The purchase price, comprising of a point system, usually covers a set week or two annually. In truth, you're not earning anything tangible besides the vacation and memories made. This may be okay, depending on why you are purchasing a timeshare. Just note the FTC warning that "the value of a timeshare is in its use as a vacation destination, not as an investment." In other words, this is not an investment in the same way as buying traditional real estate can be.

The Risks of Timeshares

Timeshares can have a bit of a bad reputation. That is not to say all timeshares are a bad idea, but you should consider several factors prior to purchasing a timeshare. These include:

• The background of the seller, developer, and property management company
• The current maintenance budget. In some cases, annual maintenance fees can increase significantly over time. Make sure you know if there are limits on maintenance fees.
• The purchase arrangement (deeded or leased), purchase price, and applicable interest rates
• Options to get out of a timeshare, such as the timeshare resale market where ownership might have exchange or resale value

Many travelers succumb to the temptation of the high-pressure timeshare pitch. Some might simply listen to the charming marketing of a development's representative, as it might get them a free night at a hotel. Not all move forward with buying in or renting into the vacation option. Others do — almost 10 million, according to the American Resort Development Association (ARDA).

Millions enjoy the financial, personal decision to go in on a timeshare, but others end up needing or wanting to find a way out of their timeshare agreements. Maybe it was too difficult to travel the way they'd hoped or had been promised, or perhaps they ran into financial hardship. In states such as Florida, you have a limited time for rescission or cancellation of a timeshare agreement.

How To Try To Get Out of a Timeshare

Getting out of a timeshare arrangement is not always an easy option. Timeshare companies have a financial interest in keeping people in their contracts. However, that doesn't mean there's no way out.

Some timeshare developers offer options to get out of your contract. This can come at a cost but it tends to be more of a short-term versus long-term cost. Someone interested in a timeshare should ask about options for getting out before committing. Those who are already in their contract but want out can still reach out to a developer to see what help they might be willing to offer.

Other relief options exist. For example, you can rent out or exchange your timeshare. This is unlikely to get you to come out ahead or even cover your costs, but renting can offer some financial relief while allowing others to enjoy the vacation. Exchanging might allow you to enjoy more variety in your vacation experience.

Most states now regulate time-sharing, either under:

• Existing state land sale laws,
• Laws that were specifically enacted for time-sharing

Many state laws on timeshares carry specific protections for buyers with rights to the cancellation of the purchase. The regulating authority is usually the Real Estate Commission in the state where the timeshare property is located.

Have an Attorney Guide Your Steps

If you have found yourself in an unwanted timeshare situation, you might feel scammed. Just keep in mind that there are some scams out there that target people desperate to get out of their timeshare agreements. It is wise to not make any more contract decisions before talking to a real estate attorney experienced with timeshare matters. Getting legal advice from an experienced attorney can be more helpful than consulting with a real estate agent.