Like all real estate, vacation time shares have taken a beating in this recession. For the first time since sales have been tracked, the time share industry experienced a decline in annual sales volume in 2008, according to the American Resort Development Association, or ARDA, an industry group. It reported that sales were down 8 percent from 2007.
So it looks like it's a great time to buy a time share. Before you purchase one, though, there are a number of questions you need to answer. Are you going to use the time share or is it an investment? What other costs are associated with it? Will you be able to trade it? Can you get financing?
"A time share should only be thought of as an investment in your future vacations," says Lisa Ann Schreier, founder of Timeshare Insights in Clermont, Fla. "Time share isn't a business for consumers; it's a vacation alternative."
A time share has a value proposition that comes from using it, says Howard Nusbaum, president and CEO of ARDA. Buy where you love to go, he says, because in years that you don't want to exchange, you always have your home resort.
Brian Rogers, owner of TUG2.net, a time share-owners users group based in Orange Park, Fla., also advises against purchasing a time share as an investment. "The overwhelming majority of owners encounter the staggering depreciation of a product unlike any other I can think of," he says.
"Only those who want to use the time share should get into the market," says Judi Kozlowski, a broker with Re/Max Properties SW in Orlando, Fla. "Time share is an investment in your time and family, not a financial investment." Kozlowksi says that if an investor can find an exceptionally good deal in a high-demand time share, it should be considered. Overall, however, it's not for the investor, she says.
Potential buyers should base their offering price on breaking even after 10 years, and consider all costs associated with owning versus renting, including the availability of "renting what you want," says Mario Collura, president of TRI West, a time share resale broker in Los Angeles.
The costs associated with any time share include interval cost, closing costs, annual maintenance fees, real estate taxes, the exchange or usage fee and special assessments, says Schreier. Ask about the history of the annual maintenance fees, special assessments and how much they can go up, she says. "Make certain that after all is said and done, you're spending what you would have spent anyway on vacation accommodations," Schreier says.
Additionally, research the prices of similar properties before you make a purchase, says Rogers. "You'll eventually encounter what all other time share sellers do: the extremely difficult resale market." A time share is not something you can "flip" easily, he says, should the need arise.