Personal Business: REAL ESTATE: TIMESHARES
TIMESHARES: THEIR TIME HAS COME
Talk about a loser reputation. For years, timeshares, in which people typically bought the right to stay at a ho-hum resort for the same week every year, were hustled by small independent developers. These outfits would often lure prospective buyers with gifts and arm-twisting sales pitches. Many customers, expecting their equity to appreciate like other real estate, got burned.
Today, thanks in part to the increasing presence of bigger players such as Walt Disney and Marriott International, the timeshare industry is shedding its unsavory image and even its name--it's now called "vacation ownership." With sale prices ranging from $4,000 for a one-bedroom Ramada suite off season to $60,000 for a three-bedroom villa at Disney World over the Christmas holiday, these brand-name companies are now selling real vacation packages, not just real estate.
SOUPED-UP. This new strategy is helping to revitalize an industry that has increased in size to 3.5 million households worldwide, up from 1.8 million in 1990, according to the American Resort Development Assn., a Washington (202 371-6700) trade group. Part of the appeal is the souped-up quality and the more desirable locations. Gone are many of the old, cramped hotel-unit conversions and onetime condominium complexes that lack pools and other resort amenities. A two-bedroom villa at Marriott's Manor Club (757 258-5500) in Williamsburg, Va., for instance, costs $8,500 to $16,200 a week, depending upon the season, and sports a whirlpool tub, a fireplace, a utility room with washer and dryer, and three television sets. The residents at Westgate Vacation Villas (800 846-4253) in Kissimmee, Fla., may use any of the facility's 10 pools, 10 whirlpools, and 10 kiddie pools.
The accommodations are intended to shed that "hotel" feel, however. Few of the places offer room service. Instead, linens and cutlery are on hand. A maid will generally clean up only at the end of your stay--in preparation for the next owner's arrival. The one hotel mainstay may be the phone bill. In some cases, you'll have to use a calling card, or else pay jacked-up prices, especially for long-distance calls.
Timesharing used to mean taking all the spontaneity out of a vacation because you had to spend the same week at the same resort, year after year. This is no longer the case. Using an exchange network--the two biggest are Interval International (800 622-1861) and Resort Condominiums International (800 481-5738)--you can swap your timeshare rights for someone else's unit at a different resort anywhere in the world. You'll pay an exchange fee--about $100 for domestic trades and up to $133 for international trades--for the privilege, on top of an annual membership fee of about $70. But whether you can actually swap for the luxury condo in Vail, Colo., that you've been eyeing depends largely upon what other timeshare owners have put in the exchange "bank"--and the value of your particular unit.
Some timeshares still conduct business the old-fashioned way. Vistana (407 239-3000), for example, offers a fixed week at three different resorts in Florida. But, like many other operators, it also offers the more popular "floating time" option. Under this arrangement, which is built into the purchase price, you buy a week within a three-to-four-month season. Each year, you can reserve whatever week you prefer within that period. (Reservations are granted on a first-come, first-served basis, so it's possible you won't get the exact week you would like.)
Suppose you don't feel like vacationing at a resort next year. That may not present a problem if your timeshare developer offers a vacation club or a points-based program. Instead of using your week's stay at a Hilton Hotels resort, you can convert your allotted time into points, which may be used, every other year, toward the purchase of airline tickets, a Cunard Line cruise, car rentals, even gaming chips at a Hilton casino. Disney and Marriott offer similar deals. Of course, this extra flexibility may cost you more. You must be a member of Hilton Grand Vacations Club ($85 annually) to take advantage of the points system.
SALES PITCH. Whether your timeshare developer employs a points system or not, you'll still have to pay an annual maintenance fee to cover the property taxes, upkeep, and housekeeping--even when you don't show up. The average yearly payments range from $200 to $350, while the fees at high-end properties may reach $900. All may rise over time.
Despite the industry's improved reputation, you still might have to sit through a heavy-duty sales pitch. If the meeting is off-site, be sure to check out the resort in person. Some developers offer "mini-vacs," promotions that let you stay at the resort (if there's room) or a nearby accommodation for a cut-rate price in return for attending their 90-minute sales presentation. Should you succumb to the pressure, you'll generally have 10 days to change your mind.
Most developers offer financing. Generally, the buyer will be expected to put 10% of the price down and to pay off the loan in seven years at an interest rate of some 12% to 16%, says Frank Mahan, assistant vice-president at Litchfield Financial, a Stamford (Vt.) lender, most of whose clients are timeshare developers. Depending on the purchase price, you may want to finance it yourself with a home-equity loan.
Before you sign, make sure that you know what you're buying. Most domestic timeshares nowadays give you a deed to the property. That means you own it and can bequeath it to your heirs. But anywhere outside the U.S., you may simply get a right-to-use certificate, because foreigners are generally not allowed to hold deeded ownership. In Aruba, for instance, Marriott timeshare owners have 60 years in which to "use" their purchased vacation before the agreement expires. Similarly, Disney gives all timeshare buyers a deeded real estate interest that expires in 2042.
If you've outgrown the timeshare, your only recourse may be to sell. Unfortunately, as much as timeshares have changed, the resale market has not matured yet, says Mario Collura, president of TRI West, a Los Angeles real estate brokerage specializing in timeshare resales. Generally, you can expect to get about half of your purchase price, he says. More upscale properties, however, may garner more.
Many developers won't get involved in the resale aspect until they have first sold all of their units, which may mean that you'll have to try to dump the place yourself. That can be difficult because you're usually selling an out-of-state property, so it's not as simple as planting a For Sale sign on the front lawn and waiting for buyers to knock on the door. Licensed brokers do handle resales, but some of them charge an up-front fee of $300 or more just to list your property. You might be better off working with commission-only brokers--even though they may charge a hefty 30%. Presumably, such brokers will work harder to sell your timeshare because they won't get paid otherwise.
OVER THE INTERNET. Collura's firm runs an annual auction that accepts bids by phone or mail. These are usually distress sales, in which properties go for 75% off the original price. That's a bargain, but don't expect to make a killing on a future sale. You might get back what you paid.
One of the best places to sell or shop for a used timeshare may be over the Internet. Timeshare Users Group (www.timeshare-users-group.com) offers resort reviews and classified ads to its members for $15 per year. TimeSharing Today, a bimonthly newsletter ($18 for a two-year subscription; 800 342-7311), provides tips on buying and selling, industry news, and resort report cards. Its classified ads are also posted free on a Web site (www.timesharing-today.com).
Keep in mind that a timeshare vacation will cost a bit more than appears on paper: For one thing, you have to fork over the airfare every year to reach your destination. This could be a smart purchase, however, if you plan on using the timeshare--or some aspect of the points/exchange system--every year, and don't plan on selling it off for at least a decade. The advantage is that you're locking in your vacations 10 years hence at today's prices. That may not be a bad deal once you realize that even rest and relaxation have their price.By Barbara Hetzer EDITED BY EDWARD C. BAIGReturn to top