Shopping for a time-share

It’s a buyer’s market, but you should still do some homework to ensure you get a good deal.

Now’s a good time to be in the market for a time-share. There are more time-shares available than purchasers right now, so it’s easier to negotiate a good deal. But it’s wise to get a handle on this method of property ownership before signing anything.

How much will it cost?
If you’re at all interested in a time-share, you must prepare for the pitch about the financial benefits. Remember: typically, the time-share vs. hotel price comparisons used in these pitches leave some big costs out of the equation (like annual maintenance fees and interest on the time-share loan).

Time-shares are often not stellar financial investments. Buying one is like buying a new car: the minute you pull out of the lot, its value diminishes appreciably. In fact, industry experts estimate that the majority of new time-shares depreciate immediately after purchase by at least 20 to 30 percent.

Accurately analyzing the long-term cost of a time-share can be complicated. You have to employ the same kind of discounted cash flow analysis that commercial real estate brokers use. You are smart to get advice from a financial advisor of your own choosing (not one provided by the time-share company). You can also find timeshare cost calculators online.

Where to buy
The Internet is full of sites advertising time share sales. A Google search of the words “time-share for sale” brings up almost 500,000 responses. Indeed, options are so plentiful that it’s critical for buyers to take a deliberate and methodical approach to researching their purchase.

You can purchase a time-share new, from a developer, or used, from a prior owner. There are pros and cons to each option.

Buying from a developer
A developer is able to offer more assurances and guarantees than a reseller and may also be able to arrange financing. The downside of buying from a developer is that the first owner is often the one who takes the biggest depreciation hit.

Buying resale
The advantage of buying resale is the lower cost: you can save as much as 70 percent. But because the time-share has had previous owners, there are more questions and more potential for trouble around unpaid maintenance fees, other assessments and liens. Again, it’s smart to use an advisor to vet any deal you’re considering.

What to buy
Consider your plans for the time-share. Do you want a family getaway, or collateral you can trade for holidays at other time-shares (some time-share owners can work through an exchange network to exchange the points assigned their property for stays in other spots). If you intend to swap even occasionally, you need to investigate the exchange value of the time-share you’re considering to make sure it is attractive to other vacationers.

Before you buy …

• acquaint yourself with the market value of your time-share.
• examine the prices of similar time-shares.
• join a support group to meet time-share owners and learn more about the concept.
• compare the annual price of the condo to traditional vacation packages in the same area.
• investigate any development activity at the resort.
• visit the resort. Hang out at the pool, and talk to other time-share owners about their experiences. Find out what the management company is like.
• Ask the developer for a history of the fees it has charged, and documents about repair funds.
• Ask the seller why he or she wants to sell. The answer, especially if you give him or her a chance to ramble, might be very revealing.

Related Topics:

• Ask an Expert - Buying and selling a home
• Finding a listing agent
• Investment properties
• New homes
• Preparing to sell