If ever there was a time to reinforce whether a time share is an investment or simply the upfront price for a vacation spot, it's now.
Owners of time shares, fed up with a dearth of buyers and rising yearly maintenance fees, are giving up and offering their units for free or selling them for $1.
In a real estate market that is starting to see some signs of life, time shares remain comatose. Smart Money reported that during the first quarter of the year, the number of time shares for sale was double what it was during first quarter last year.
Time share owners don't own the property; they buy the right to use it, along with other owners. Typically, owners get a couple of weeks a year, for a specified number of years. They can sell the rights, but even when time shares were booming, most people didn't see a return on investment. The appeal of buying was the security of knowing there would always be a place to stay in a popular vacation spot, like Disney World for example, and that staying there could prove cheaper than a hotel.
The recession hit the industry hard, according to Smart Money, with 48 percent of owners unable to pay yearly maintenance fees, compared with 37 percent before the recession. That's made matters worse by forcing properties to raise maintenance rates to make up for the losses. In 2010, the average yearly maintenance fee was $731. And competition isn't helping: Sales of vacation homes rose 7 percent in 2010 compared with a year earlier, as buyers snapped up properties at reduced prices.
If you already own a time share and want to sell, experts recommend trying to wait out the abysmal market by renting your unit for enough to cover the yearly maintenance costs.
If you want to take advantage of the downturn and are in the market to buy a time share, the newer ones in resort areas seem to be holding their value better. Make sure you understand the yearly fees and also check out the number of units for sale. If there are a lot, you could be in for a hike in fees if other owners are defaulting on them. It's also a better bet if you understand that you're not buying an investment, but rather a unit to use. If the market recovers by the time you want to sell, you might make money, but don't count on it.
Marketers of time share properties are already tailoring their sales pitches to more affluent individuals who will be more likely to be able to afford a yearly vacation and who can purchase with cash rather than a mortgage.
Are you in the market to buy or sell a time share?
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