By M. Beddingfield
It’s illegal in some states for a developer sales person to claim that a timeshare property will go up in value. It’s also considered unethical by industry standards.
When you purchase a timeshare it’s legally considered property. Everyone knows that property usually goes up in value, right? Not in this case. Think new cars and mobile homes, once you drive them off the parking lot; they lose up to half of their market value. It’s much the same scenario with timeshares.
Shortly after you purchase a timeshare from the developer, the resale value of that timeshare is cut in half or worse. If you find this statement hard to swallow, do a little research. You can go on Ebay, Craigslist or at least a dozen other sites and find timeshares selling for as little as .25 cents on the dollar.
Why do timeshares lose so much of their market value? When you purchase a timeshare from a developer, they have to cover their costs plus make a profit. They have to pay for the taxes, the building, the staff and don’t forget all those extra things they do just to make a sale. The extras include sales commissions, promotions, and all the cool stuff they do to lure in new buyers, like free lodging, trips, incentives and meals.
Sales people are trained to dance around the word, “investment”. They will tell you that the demand is going up and you better get on the train and ride before it leaves the station. They will say there are only so many units, implying that particular timeshare is somehow like a rare jewel which will only increase in value. Sales people of under-construction timeshares are the worst. They rationalize that you can get in on the ground floor while the prices are still reasonable. Surely, you know that when they finish building the price will go up? Sure their prices go up, but the resale values continue to go down.
Howard Nussbaum, the president and CEO of the American Resort Development Association (ARDA) says that no one should be selling a timeshare as a real estate investment. He says that timeshares should be viewed as a long-term usage product.
What does Nussbaum mean by long-term usage product? He means that if you use your timeshare every year for 12 to 15 years, you just might break even. The idea behind a timeshare is that you get to go to a higher-priced, upscale resort every year. If you take into consideration what it would cost you to book a hotel or resort room for vacation every year, a timeshare is supposed to save you money in the form of amenities and convenience. But what about the years you don’t use it, or simply can’t go on vacation? Then you have the additional headache of trying to rent out your time slot or just take a loss that year.
A timeshare is a commitment of money, time, energy and emotion. A timeshare is a responsibility and an obligation. A timeshare is not an investment. An investment is the outlay of money with the goal of making a profit. The only ones making a profit on timeshares are the developers and resellers.