Should you buy a timeshare now?

Should you buy a timeshare now?
By Chuck Green

Like all real estate, vacation timeshares have taken a beating in this recession. For the first time since sales have been tracked, the timeshare industry experienced a decline in annual sales volume in 2008, according to the American Resort Development Association, or ARDA, an industry group. It reported that sales were down 8 percent from 2007.

So it looks like it's a great time to buy a timeshare. Before you purchase one, though, there are a number of questions you need to answer. Are you going to use the timeshare or is it an investment? What other costs are associated with it? Will you be able to trade it? Can you get financing?

"A timeshare should only be thought of as an investment in your future vacations," says Lisa Ann Schreier, founder of Timeshare Insights in Clermont, Fla. "Timeshare isn't a business for consumers; it's a vacation alternative."

A timeshare has a value proposition that comes from using it, says Howard Nusbaum, president and CEO of ARDA. Buy where you love to go, he says, because in years that you don't want to exchange, you always have your home resort.

Brian Rogers, owner of TUG2.net, a timeshare-owners users group based in Orange Park, Fla., also advises against purchasing a timeshare as an investment. "The overwhelming majority of owners encounter the staggering depreciation of a product unlike any other I can think of," he says.

"Only those who want to use the timeshare should get into the market," says Judi Kozlowski, a broker with Re/Max Properties SW in Orlando, Fla. "Timeshare is an investment in your time and family, not a financial investment." Kozlowksi says that if an investor can find an exceptionally good deal in a high-demand timeshare, it should be considered. Overall, however, it's not for the investor, she says.

Potential buyers should base their offering price on breaking even after 10 years, and consider all costs associated with owning versus renting, including the availability of "renting what you want," says Mario Collura, president of TRI West, a timeshare resale broker in Los Angeles.

The costs associated with any timeshare include interval cost, closing costs, annual maintenance fees, real estate taxes, the exchange or usage fee and special assessments, says Schreier. Ask about the history of the annual maintenance fees, special assessments and how much they can go up, she says. "Make certain that after all is said and done, you're spending what you would have spent anyway on vacation accommodations," Schreier says.

Additionally, research the prices of similar properties before you make a purchase, says Rogers. "You'll eventually encounter what all other timeshare sellers do: the extremely difficult resale market." A timeshare is not something you can "flip" easily, he says, should the need arise.

If you still think a timeshare is right for you, now may be a good time to buy. "Prices have never been lower," says Rogers.

Kozlowski says she's seen more buyers than usual because of price reductions. Consequently, it's currently a buyer's market. "Sellers are seeing reality."

The best buys are in the resale market, and many can be found on eBay, Timeshare Users Group, or TUG, and Redweek.com, says Rogers. There are hundreds of resale sites, he says, filled with listings from people who want to get rid of their timeshares at bargain prices. "I've never seen prices on the resale market where they are now," he says, noting that timeshares currently are listed at 75 percent to 99 percent off what the owner paid for the timeshare new from the developer. "It's almost not possible to go any lower."

In some cases, though, purchasing a timeshare for even $1 might not be a good deal, he says. "Remember, you're buying something for life."

Buying a property on the Internet will take some work. Collura cautions that while there are many seemingly "good deals" on the Internet, buyers should make sure they understand exactly what they're getting and be able to "match apples to apples." A good timeshare real estate broker can guide you in making the proper comparisons, he adds.

Schreier also recommends that individuals work with an independent consultant in the same way they work with an agent when purchasing a house.

However, if you choose to go it alone, she says, do "lots of comparison shopping." Also, think about how you'll use it, she says: "Do you plan on using this timeshare more as the home resort or more to exchange?" For example, if you purchase a timeshare in Alabama, it will have far less trading power than one in, say, Las Vegas, or Christmas week in Vail, Colo., she explains. Location is the key to trading power.

When it comes to financing a timeshare, loans are available, says Collura, but most are personal loans and a buyer needs a good credit rating.

Almost every timeshare developer will offer "convenient" financing for a period of seven to 10 years, says Schreier. That convenience comes at a price, normally 15 percent to 19 percent interest, she says. Years ago, consumers could get a home equity loan to cover the timeshare, she says. "Those days are over."

Ultimately, she says, if consumers can't afford timeshares, they shouldn't be buying them.




Source: Bankrate.com