Purchasing a Timeshare

Numerous factors should be taken into account prior to purchasing a timeshare. A review of the background of the seller, developer, and management company, along with a review of the current maintenance budget, will assist the prospective seller in making an informed decision. Local real estate agents, Better Business Bureaus, and consumer protection offices also are good sources of information. While many reputable builders do exist, purchasing an undeveloped property carries additional risks. One means of protection is to hold money in an escrow account in case the developer defaults. The commitment from the seller that the facilities will be finished as promised should be written into the purchase contract with a date certain.

Practical Factors

Timeshares provide the convenience of prearranged vacation facilities, but keep in mind that future circumstances may alter future planning ability. Timeshare plans typically do not include recession provisions for poor health or job loss. Vacationing tastes and favored activities may also change over time. These factors should be considered in evaluating a purchase.

Investment Potential

Timeshare resales usually are difficult and often sold at a loss to the seller. Therefore, timeshares are typically not considered an investment as a second or vacation home might be. There are many investment options in the property area, but investment should not be a major factor when purchasing a timeshare. Renting is also difficult and many time-share owners pay advance fees to rental agencies, which may not be able to find any renters for a given time frame.

Total Costs

Total costs include mortgage payments and expenses, as well as travel costs, annual maintenance fees and taxes, closing costs, broker commissions, and finance charges. Annual timeshare maintenance fees can be high depending on the amenities of the resort. The larger and more upscale the resort, the higher the fees. These fees cover all of the costs of operation but are typically several hundred dollars a year. These fees can and do rise over time. All of these expenses should be incorporated when determining the overall cost of purchasing a timeshare.

Document Review

Purchase documents for any type of real estate transaction are binding legal contracts and should be reviewed by an attorney. The contract may provide for -- and some states require -- a set "cooling-off" period during which the timeshare purchaser may cancel the contract and obtain a refund. The contract may include a non-disturbance clause and/or a non-performance clause. A non-disturbance provision ensures continued use of the unit in the event of default and subsequent third party claims against the developer or management firm. A non-performance protection clause allows the purchaser to retain ownership rights, even if a third party is required to buy out the contract. All promises made by the salesperson should be written into the contract. If not, such provisions will almost certainly be unenforceable in a court of law.

Foreign Properties

Timeshares and vacation club memberships in foreign countries are subject to the law of the jurisdiction in which the timeshare is located. A contract outside the United States for a timeshare located in another country will not be protected under U. S. (federal) or state contract property laws.

Next Steps

Contact a qualified real estate attorney to help you navigate issues relating to home ownership.

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