Timeshares Resale for 50% below their Purchase Price
Timeshares are typically sold as vacation ownership. This is important because one of the selling points is their transferability to children and other loved ones. If they are so great, why is their resale value about the same as a new car? The answer lies in two areas: aggressive salespeople with questionable tactics and the ominous maintenance fee.
The most obvious reason for the oversupply of timeshares in the market is buyers’ remorse. Many buyers cave in to the pressure of hard, sometimes unscrupulous salespeople, only to realize later they really did not need or want a timeshare. About 1 in 5 people who attend a presentation end up making a purchase. Considering the average property brings in about 150 people a day, plus the fact that there are tens of thousands of timeshare properties out there, it’s no wonder there are so many in resale.
Timeshares are NOT Inflation Protected
The second piece of the timeshare equation is the harmless maintenance fee. In most presentations this is glossed over because it is really the Achilles Heel of timeshares. Consider what the maintenance fee is. The maintenance fee is used to keep the property up to a certain standard. People who live in condos pay similar fees to maintain the common areas of their property. Taking this logic one step further, if the price of building materials, labor wages, and consumer goods rise; the maintenance fee will have to increase to cover those inflated costs. This is the definition of inflation. Most timeshare owners are astounded at the rise in their maintenance fee or the number of “special assessments” that are levied on them to maintain their property.
People who are not in the hotel business are generally unfamiliar with the costs of maintaining a hotel. These costs differ drastically from the costs of maintaining a home because hotels must be fully refurbished every 3-5 years to stay modern and highly rated. As the cost of labor and materials rises, so will the cost of maintaining the timeshare.
Yearly Vacation Cost vs. Maintenance Fee
99% of the families that own timeshares would have been better off saving for vacations every year. Even some of the people who use their time every year could have saved more money by paying for their vacations yearly because of the significant rise in the cost of labor and materials. Hotels do not have the ability to pass all of their costs on to the consumer. They price based on the number of travelers to their destination because they would rather be full (or close to it) than charge higher prices and have large vacancy rates. During times when most consumers cannot afford vacations, hotels tend to be cheaper. Conversely, when the economy is good, hotels tend to raise their rates.
Maintenance fees do not have that same link; but rather, link to building materials and labor in that specific area. Any shock to the location of the timeshare or the price of materials will send maintenance fees and special assessments soaring.
Conclusion: Do Not Buy a Timeshare
Unless vacationing two months out of the year every year is in the cards, timeshares are not worth it. For many people the yearly maintenance fee may be greater than what they pay for their vacation. And if it is greater now, based on past indicators it will probably always be greater or very close. Putting that same money in savings will give people more flexibility and more money in the short and long run.