On the surface, timeshares seem like a wonderful idea. It's a way for average people to lock in a condo or house in a desirable vacation location without having to fork out $500,000 to a million in purchase costs. People who own timeshares can often stay at their properties for less than it would cost to stay at a nice hotel.
As I understand it, there are basically two types of timeshares.
One type of timeshare is the fee simple plan or timeshare estate. These offer the benefits of joint ownership. Owners are also stuck with maintenance costs, taxes, and other expenses. Amazingly enough, the developers pass on the marketed costs for their timeshares to the timeshare owners. It is estimated that as much as 50% of a timeshare's value is actually a mark up from marketing costs.
Right-to-use timeshare or vacation intervals are another form of timeshare. Members do not own the property but reserve the right to use it at specified times. Ownership remains with the developer. The unit in question may be "fixed" or "floating." A fixed right to use timeshare means you get use of the property at specific intervals. A "floating" share means you're entitled to a similar unit but not necessarily the same unit each time you visit.
Timeshares are generally sold in one week increments. Cost will vary depending upon the size, amenities, location, and time of year.
Problems that may occur with timeshares include the following:
1) The developer may go bankrupt. Under a right-to-use agreement, time share holders would lose their money since they don't own a share of the title.
2) Does Mexico have the same level of consumer protection laws that the United States has? In the U.S. most states have a ten day cooling off period that allows the timeshare buyer an opportunity to change his or her mind following a high pressure sales tactic.
3) It's easy to buy a timeshare. It's very hard to sell one. A survey taken by the Resort Property Owners Association found that 58% of all respondents had been trying to sell their share for an average of over 4 years. Only 3% of these people reported eventually being successful. Part of the difficulty with selling your timeshare is that you're competing against the developer. The sales price most owners are looking for is usually excessive. Insofar as marketing costs account for about 50% of the value of your timeshare, the actual value of your share of the property drops from the moment you sign the closing agreement.
4) People's schedules change. The vacation schedule you get as a timeshare owner may be ideal for you now ... but what about two years from now? Will your vacation plans be exactly the same year after year? Remember also that timeshare expenses don't include the cost of traveling to and from your home location to your vacation destination.
5) Think about the sheer number of people who will tramping in and out of your timeshare. The property will be heavily used and heavy usage brings wear and tear which will ultimately be reflected in increased maintenance costs.
For suggestions regarding the common sense things you should do before committing yourself to the purchase of a timeshare, visit:
Timeshare Sales and Resales
For more information about timeshares, visit CNN Money.com: