It's become a cliché that time shares aren't all they're cracked up to be. In a lot of ways the stereotype is unfair. A time share can be a perfect solution for the right people. You get a week or more in a place that you love at a set time every year and you can save money over a yearly ad hoc annual vacation.
But there are pitfalls to watch out for to make sure your little piece of paradise doesn't become a financial nightmare. Attorney Loni Coombs has some advice so you know exactly what you're signing up for when you purchase a time share.
You don't pay once, you pay forever
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Time shares typically have an up-front fee, the current average is about $20,000. That sounds pretty reasonable compared to year after year of hotel bookings for vacations. "You're in vacation mode, you see these beautiful pictures of this vacation resort and you're thinking 'we should be doing this every year,'" Coombs said. People are often surprised to learn they have to also pay a fee every year for as long as they own the time share. Also, those fees can go up each year with little warning.
You're buying real estate
In a lot of ways, buying a time share can feel like booking a rental property or resort for a week. But they are very different. When you buy a time share, you're making a real estate purchase. Just like a buying a house, it's a commitment you can't just walk away from. "If you decide that you're done paying, and you stop paying for the purchase or you stop paying your fees, you're going to get a foreclosure," Coombs said. "And foreclosure is a big F-word in your credit score."
Time shares are not an investment
If a time share is real estate, it's a good investment, just like other real estate, right? Wrong. "That purchase price when you buy it from the manufacturers is essentially like buying a car on a car lot, as soon as you drive it off, the value depreciates." Coombs said. The expenses of the property managers are built into the purchase price a lot of the time, meaning the value of the actual property can be quite a bit lower than you pay up front. There is a way to take advantage of this, however. "If you want to buy a time share, think about buying it from another owner," Coombs said.
Watch out for scams
Time shares are a notorious industry for scammers. But it's not just at the initial purchase that you can get taken advantage of. If you ever choose to sell your time share, you can also be a a victim. "Beware because there's a lot of scams out there." Coombs said. "They call themselves timeshare brokers or specialists. They take your money and then they never sell the time share. So you're still stuck."