Are timeshares a scam? Not exactly. But they're also typically not a good deal. If you're considering buying a timeshare or plan on attending a sales presentation to get a free hotel stay or another gift, you should go into a sales presentation fully prepared so you can avoid timeshare scams.
And if you've already bought a timeshare and want to unload it, you need to protect yourself from the many timeshare resale scammers who will try to take advantage of your situation.
A "timeshare" is a form of shared property ownership where instead of owning a property outright, you share the ownership with others. Multiple owners have the right to use the property (at different times) for a limited amount of time during the year.
Timeshares come in various types and different forms of ownership.
With a deeded timeshare, you own an interest in the property, typically a percentage of a timeshare unit, along with other people who purchased interests. You'll get a deed that lays out your ownership rights, and your interest is legally considered real property.
If you take out a loan to buy a deeded timeshare, you'll ordinarily sign:
You'll have to make mortgage payments, typically monthly, until you repay the debt. In addition to making mortgage payments, you'll ordinarily have to pay annual maintenance fees, special assessments, utilities, and taxes.
You don't get a legal interest in real property if you purchase a right-to-use timeshare interest. Instead, as you might expect, you're buying the right to use the property. Right-to-use timeshares often expire after a certain number of years, like 20 or 99 years, and at the end of this time, your right to use the timeshare ends.
With deeded and right-to-use timeshares, weeks or points are commonly used to allocate the property's use.
Week-based system. In a week-based system, the timeshares (both deeded and right to use) are sold in one-week intervals, typically numbered 1 to 52 (because there are 52 weeks in a year). You can purchase as many weeks as you want, which are fixed, floating, or rotating.
Point-based system. Deeded and right-to-use timeshares are also sometimes point-based. A points-based timeshare generally appeals to purchasers interested in staying at the main property and other places. With a deeded points-based timeshare, you might get an ownership interest at one location, commonly called your "home resort," and a deed to that property. Your interest in the property is also worth a certain amount of points each year, which you may use to visit your home resort or a different resort associated with the same development. The number of different locations you can choose from varies widely among timeshare developments.
Sometimes, points-based plans don't have a home resort. Generally, rather than purchasing an ownership interest in a home resort, you buy into a timeshare trust. You won't receive a deed. Basically, you buy a certain number of points and exchange them for time at different resorts. The number of points you need to use to book a stay varies depending on factors such as how popular a resort is, the timing of your stay, and the size of the accommodation you want. The points might or might not expire.
These setups are sometimes called a "vacation club" or "vacation plan."
Timeshare sellers are notorious for offering a half-price parasail ride, a free day's rental car, a free hotel stay, or a free gourmet meal (you name it) to get you to attend a sales pitch. The presentations vary, but many include high-pressure sales pitches.
You'll likely hear about the money you'll save over the years by buying a timeshare or timeshare plan instead of paying for hotel rooms. The salesperson will probably downplay how much the timeshare will cost you, including the purchase price, special assessments, annual maintenance fees, and other fees that might and probably will go up.
In addition, a timeshare seller might say you'll have no trouble getting out of the timeshare deal or you can sell it for a profit if you don't like it.
Timeshares themselves aren't necessarily scams. But they're usually not a wise investment or a good deal.
Here's why timeshares typically aren't a good purchase.
Many people who attend timeshare sales presentations walk out as timeshare owners, whether they plan on buying one or not. To stop this from happening to you, go into a presentation fully informed about how timeshares work so that you can make a rational decision about purchasing one.
If you're considering buying a timeshare in a particular resort, evaluate the developer before entering the presentation. Even if you think you won't be tempted to purchase a timeshare, it's a good idea to investigate the developer or seller ahead of time so you'll know who you're dealing with and, perhaps, their tactics. Here's how to start:
Don't sign a contract at the initial presentation with the seller. Get a copy of the documents, such as the contract and public offering statement, and take them with you when you leave the meeting so you can read the fine print. (A public offering statement has information about the timeshare development.) Read the documentation thoroughly to ensure you understand all of the costs involved and the program offered—for example, whether it is a weeks-based program or points-based system. Talk to a trusted advisor, like an attorney, if you don't understand the paperwork.
If the salesperson says today is the only day the deal is available and you shouldn't delay by taking the documentation with you to review, that's not true. This statement should be a red flag that the salesperson doesn't want you to understand what you're signing up for.
Don't believe everything the salesperson tells you. You must be extremely wary of any deal that sounds too good to be true. Most timeshare contracts disclaim any statements or promises the salesperson made when selling you a timeshare. If a timeshare salesperson won't put something in writing, don't complete the sale.
Also, do your own due diligence. If the salesperson says you can sell the timeshare for a profit, research whether this statement is true. The resale value of most timeshares is minimal or nonexistent.
You might bring several types of claims against a slippery timeshare seller.
The first, breach of contract, involves promises explicitly made and set forth in the sales agreements. If the size, location, condition, or some other important fact about the timeshare is materially different from what you agreed to in the sales contract, you might have a basis for claiming a breach of the contract.
But beware: the timeshare sellers' attorneys carefully draw up these contracts and are likely to cover almost any contingency—scrutinize the contract carefully before signing.
You may also bring claims based on tactics used and promises made before you agreed to purchase your timeshare. These claims might be covered under state laws prohibiting unfair business practices or those designed to prevent fraudulent inducement.
In both cases, the idea is that the seller used unfair sales tactics or outright lies to get you to buy the timeshare. You will have to show:
Timeshare sales contracts usually include clauses that disclaim any promises made during the sales pitch. The contract you sign will ask you to agree that you are making the purchase only based on the representations in that contract.
Prospective purchasers who notice differences between what is in the contract and what was promised by the salesperson are likely to be told that the contract is only legal jargon, which isn't true. If a timeshare salesperson won't put a promise in writing, don't go through with the sale. Otherwise, you might have to argue afterward that you relied on that promise, even though you signed a contract that explicitly says you didn't rely on any promises.
Many people who buy timeshares regret their purchase. In some cases, a timeshare is more expensive than expected, both initially and over the long term. In other cases, it isn't as easy or convenient to book time at the timeshare as anticipated. Or a timeshare owner might have trouble exchanging their weeks or points.
If you buy a timeshare and regret it right away, most states have "cooling-off" laws. These laws let you get out of a timeshare contract if you act within a few days after signing, usually within three to ten days, depending on the state. In cases where state law doesn't provide a cooling-off period, or if you change your mind after the time has passed, your only recourse might be a formal lawsuit. Timeshare sellers are accustomed to handling claims from unhappy buyers and are unlikely to refund your money unless they're forced to do so.
As you can see, there aren't many options if you regret a timeshare purchase. So, to avoid regretting a timeshare purchase, be sure to consider your financial circumstances (which could change), weigh the pros and cons (especially the cons), and fully understand your timeshare works, including how and when you may use it and the overall cost of owning it.
If you take out a mortgage loan to buy a deeded timeshare and stop making the payments, the lender, usually the resort developer, will probably foreclose the timeshare. Also, in most cases, timeshare owners must pay annual maintenance fees and special assessments to an owners' association. If, as an owner, you don't pay the fees and assessments, the association may sue you for money or foreclose your timeshare.
Depending on the circumstances, going through a timeshare foreclosure could result in lower credit scores, difficulty is getting credit, a deficiency judgment, or tax consequences.
Unfortunately, if you get roped into buying a timeshare and your cancellation period has already expired, you'll probably have trouble unloading it. So, people who want to unload a timeshare (but don't have the option to cancel the contract or file a lawsuit against the seller) sometimes turn to resellers.
"Timeshare resellers" are companies or individuals that sell timeshares on the secondary market (where timeshare buyers purchase timeshares from owners, not from a resort), facilitating sales of timeshares from current owners to buyers. But you need to be careful to avoid resale scams.
Again, there's virtually no resale market for timeshares, and finding a buyer can be next to impossible. This is where the scammers come in.
Sample scam #1. In a common scam scenario, a timeshare reseller promises to set you up with a buyer, but first, you must pay an upfront fee. Timeshare scammers often convince owners to pay large upfront fees by saying they have someone ready and willing to buy the property or that the timeshares would be sold in a specified period of time. Once the timeshare owner pays the fees, the scammers either disappear or claim that they were simply offering to advertise the timeshare unit, and no buyer ever materializes.
Sample scam #2. In another common scam, the supposed reseller might or might not ask for an upfront fee to sell your timeshare to a new owner. You'll also have to pay "tax fees" (such as a "federal tax" or "state tax"), "insurance premiums," "gains taxes," "customs fees," "title fees," "transfer fees," or something similar—but fake—before the deal can happen. Fees will keep popping up for various hurdles that supposedly need to be overcome before you can sell the timeshare and collect your money. As long as you pay these fees, the scammer strings you along, maybe telling you that you'll get reimbursed or a refund. But no buyer exists, and you won't recoup your money. This scam might also involve fake lawyers and documents.
Many states have strict laws governing timeshare resales, including restrictions on collecting advance fees. Talk to an attorney in the state where the timeshare is located to learn about relevant laws.
Many timeshare exit companies that claim they can get you out of your timeshare are scammers. They'll take various types of upfront fees from you and then either stall while not resolving your timeshare problem or simply disappear with your money.
Don't sign up with a resale company right away. Read the contract carefully and make sure it includes the services the reseller will perform and the total cost to you. If specific promises are made, make sure those promises are covered in the contract. You should also consider reviewing the contract and documents with an attorney.
Only a scammer says they already have a buyer lined up for your timeshare or guarantees they'll be able to sell a timeshare. Once you pay, your money is gone, and there's no buyer. Along these lines, don't pay upfront fees. If you decide to use a reseller, only use a company that gets paid after it sells your timeshare.
If you decide to pay a fee to a timeshare resale service to help you sell your timeshare (even though you probably shouldn't), investigate it thoroughly before moving forward with the deal. Ask lots of questions and verify everything the company tells you.
If you think you've been a victim of a timeshare scam, contact:
Reporting unscrupulous timeshare schemes can help prevent others from becoming victims.
Before you buy a timeshare, consider talking to a local real estate attorney who can review the contract and go over your legal rights and obligations.
If you need more information about timeshare laws, how to cancel a timeshare purchase, whether you should sue a timeshare seller, or your options if you're facing a timeshare foreclosure, consider talking to a local consumer protection lawyer, foreclosure attorney, or timeshare attorney.
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