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Sheryl Garrett is a successful financial planner and somewhat red-faced owner of two time shares.Garrett, 49, of Eureka Springs, Ark., bought a time share 20 years ago from a company that stopped her in the lobby of the Florida hotel she was visiting on vacation. If she listened to an hour and a half sales presentation, she’d get a free week’s vacation and passes to Universal Studios.
She even borrowed money — at 14 per cent interest — to buy it, falling for the claims that she owed it to herself and her family to have a set yearly vacation.
“I’m a sucker for a good sales pitch,” says the founder of the Garrett Planning Network.
When Garrett used her free vacation week, she was sold on yet another time share. Now, she’s paying about $2,000 a year in combined maintenance fees. She’s tried unsuccessfully to sell them, but learned “there is no market for time shares.” The best she could hope for is to give it as a gift or sell it for a dollar “just to stop having to pay the annual expense,” she says.
Time share owners buy the right to use a specific unit, sometimes at a certain time every year, and can rent, sell, exchange or bequeath it. Time share owners collectively own the property — and are required to pay annual fees that cover maintenance costs.
It may sound like an inexpensive way to live a little large once a year, but it will cost you for years to come unless you find someone to buy it. And watch out for the growing number of time share reselling scam artists who are cold calling owners, the Federal Trade Commission warns.
Other types of time shares include plans that you buy as “intervals” and are loosely divided into points or weeks. A week can be a set week (or weeks) or a floating time period in a season. Floating weeks are becoming the norm, says Howard Nusbaum, CEO of the American Resort Development Association, which represents the time share industry. Points can be used toward a vacation. In these cases, a developer owns the resort, which is made up of condominiums or units. Owners can use an interval at the resort for a set period — typically between 10 and 50 years, the FTC says.
Though she calls her time share purchases about the worst financial decisions she’s ever made, Garrett can at least afford the fees and has found some good uses for the weeks. These include giving weeks as gifts and trading her weeks through the exchange company RCI for use in other places she needed or wanted to go. So, “It hasn’t been a complete lemon,” she says.
Time shares have their share of pitfalls, but Garrett says they can work well for retired people and others with flexible schedules, especially if they switch their weeks through an exchange company to go somewhere else. But if you like going to the same place each year, she recommends renting because you can still “change your mind and go elsewhere.”
What to watch out for:
– Questionable sales claims.(AT) Overzealous salespeople will say all sorts of things to get people to buy. Research any claims about the value of the property and whether it’s a cost-effective way to vacation, the FTC says.
– Difficulty getting reservations.(AT) San Francisco attorney Jonathan Levine, who has represented time share owners in class-action lawsuits, warns that time share buyers should check when other people tend to go to the resort they’re interested in so they know whether they will likely get the week they want.
– Hefty maintenance fees.(AT) The FTC warns that time shares sold as “vacation intervals” have annual maintenance fees that are likely to increase each year. Diamond Resorts International, which bought the time share resort Poipu Point in Kauai, Hawaii, charged time share owners a special assessment of $66 million for water damage, according to a lawsuit seeking class-action status filed in April on behalf of the time share owners. Single-week owners were charged nearly $6,000, the lawsuit says. Levine, the case’s lead counsel, says some owners were charged far more. DRI did not respond to a request for comment.