Ask Karen Gibbs

Veteran business correspondent Karen Gibbs answers your personal money questions and addresses current topics that affect YOUR finances on a daily basis. Karen is the financial expert in your corner--no question is too basic or too small. Karen boils down the issues simply: here's what you need to know, and here's what you need to do. Send your money questions to AskKaren@mpt.org and post your comments below.

8

July

The Truth about Time Shares

Karen Gibbs

Hi Karen, I keep getting offers to discover the joys of time share living.  What are some of the pros and cons of time share investing?

-Maria, Baltimore

 Time Share Resort with pool

Maria, time shares are once again getting attention as the economy recovers.  But first, let me caution you to not think of time shares as an investment.  Time shares are a purchase and depreciate dramatically.  Their average rate of return lags real estate and stocks and the resale market is practically non-existent.

Most time shares require a sizeable up-front payment in exchange for a specific property, available at the s

 special assessments.  The average up-front payment is $19,000 and average annual maintenance fees are $900.ame time every year for an agreed-upon length of time.  Time shares also charge annual maintenance fees and are subject to

As the time share industry has grown, so has flexibility with time, location and exchange.  If you like going to the same place every year for your vacation but don’t want to buy a condo with use limited by the tax code, then a time share may be for you.

Time shares are just like home – furnished with all the comforts.  It can be cheaper than a hotel if you have a large family.  You can also cut down on incidental vacation costs as most time shares offer a full kitchen and laundry appliances.  With a time share, you pay for only the time you use instead of the hassle of managing a vacation condo with limited use. 

However, the time share market has a terrible reputation of being rife with fraud.  The initial introductory offer may turn into the “hard sell” disguised as a free vacation.   Maintenance fees increase annually and other owners may fall behind, increasing the risk of foreclosure.

The large up-front outlay may be prohibitive and cost you other opportunities that may be more lucrative.  Can you afford to tie up a rather large sum of money for a long period of time or lose it entirely? 

It may be difficult to list and sell your time share.  You may end paying annual maintenance fees for something you no longer want, no longer use and can’t sub-let.  Hiring a transfer company to transfer the time share out of your name will cost you and there’s no guarantee you’ll be off the hook.

If you’re still considering a time share, think smart about your money and do your homework.   Think about how you live now and how you want to live ten years from now. Will the time share still fit with your lifestyle?  Will you still be able to travel?  Will the time share allow you to bring your pets?  Will you be able to stay for an extended period?  Are you able to substitute other properties around the world for your time share?

Contact travel agents, management companies, developers and owners.  Get as much information as you can and verify that information.  Before you pay anything, identify the time share you’re purchasing.  Go look at it.  Make sure it has been truthfully represented.  Ask if the time share is a member of an Owner’s Club or Association.  And make sure there is a contract grace period and cancellation clause. 

In the end, the decision is up to you.  Compare the convenience versus the cost.  Consider including your family in the discussion as it may be something you can leave as a legacy for your estate.

Good luck!

- Karen

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