real estate

What is a timeshare and should you get one?

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?

When to buy time share

"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.

Making an offer

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.

Consider financing a refinancing a time share with a personal loan. Check your rate on Bankrate.

If you still think a time share is right for you, now may be a good time to buy. "Prices have never been lower," says Rogers.

Kozlowski says she's seen more buyers than usual because of price reductions. Consequently, it's currently a buyer's market. "Sellers are seeing reality."

The best buys are in the resale market, and many can be found on eBay, Timeshare Users Group, or TUG, and Redweek.com, says Rogers. There are hundreds of resale sites, he says, filled with listings from people who want to get rid of their time shares at bargain prices. "I've never seen prices on the resale market where they are now," he says, noting that time shares currently are listed at 75 percent to 99 percent off what the owner paid for the time share new from the developer. "It's almost not possible to go any lower."

In some cases, though, purchasing a time share for even $1 might not be a good deal, he says. "Remember, you're buying something for life."

Buying a property on the Internet will take some work. Collura cautions that while there are many seemingly "good deals" on the Internet, buyers should make sure they understand exactly what they're getting and be able to "match apples to apples." A good time share real estate broker can guide you in making the proper comparisons, he adds.

Schreier also recommends that individuals work with an independent consultant in the same way they work with an agent when purchasing a house.

However, if you choose to go it alone, she says, do "lots of comparison shopping." Also, think about how you'll use it, she says: "Do you plan on using this time share more as the home resort or more to exchange?" For example, if you purchase a time share in Alabama, it will have far less trading power than one in, say, Las Vegas, or Christmas week in Vail, Colo., she explains. Location is the key to trading power.

When it comes to financing a time share, loans are available, says Collura, but most are personal loans and a buyer needs a good credit rating.

Almost every time share developer will offer "convenient" financing for a period of seven to 10 years, says Schreier. That convenience comes at a price, normally 15 percent to 19 percent interest, she says. Years ago, consumers could get a home equity loan to cover the time share, she says. "Those days are over."

Ultimately, she says, if consumers can't afford time shares, they shouldn't be buying them.

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