There is a certainty that if you are considering buying a timeshare then the resale market is the place to look. Many developers will put reasons as to why buying direct from them has advantages, inferring that buying second hand has disadvantages. In a number of cases this is true, however because of the enormous financial savings gained by using the resale market the “restrictions” are not really worth worrying about. According to an article published by Koala, here is a list of some of the restrictions imposed by four of the largest developers:
- Marriott Vacations Worldwide resale owners who buy from a third party cannot enrol in the Destinations Club points-based timeshare internal exchange system, or trade it for Marriott Reward Points to use for hotels. You can still exchange through Interval International (II).
- Diamond Resorts timeshares bought via resale do not include membership in THE Club, Diamond’s internal exchange system. Points also cannot be exchanged through RCI or II, and have very limited usability. Resale deeded weeks can still be exchanged through RCI or II. However, by excluding membership in THE Club, you save an annual fee of $299 a year.
- Travellers who buy Disney Vacation Club resales are excluded from using certain portions of the Member Getaways Program like extra hours at the parks, dining discounts, and access to Disney Cruises or international resorts.
- Hilton Grand Vacations owners cannot qualify for Elite, Elite Plus or Elite Premier Status using points purchased on the resale market. This would curtail the possibility of certain perks like a lifetime Gold or Diamond VIP Status within Hilton Honours, their hotel loyalty rewards program.
As may be demonstrated, whilst there are certainly losses buying on the resale market they are not really deal breakers.
Why are resale deals seemingly so good?
To answer this we have to take a quick look at what drives a market. Put simply, any market requires both buyers and sellers and for a market to succeed both have to be in some sort of parity. Too many buyers and not enough sellers then prices will rise. In the reverse, too many sellers and not enough buyers, the price will fall.
As an example take high end watch manufacturer Rolex. As a company all their watches are handmade thus limiting the number that can be produced. As a desirable timepiece Rolex are in the enviable position of having more customers requiring to buy than production can cover, result, Rolex prices remain high and can often sell for more on the second hand market than the new cost from the manufacturer.
Timeshare follows the same market driving force, there is however one major difference. Timeshare is rarely purchased; it has to be sold, unlike the desire to buy a new watch, very few people set out with a desire to purchase a timeshare. If this is correct, and we know for a fact it is, then the market is out of balance simply because there are more sellers than buyers. As covered above, more sellers than buyers causes prices to fall, for this reason alone this is why resale deals are so good.
To buy or not to buy? That is the question
A quick trip to EBay, especially in the USA, will reveal some amazing deals for scooping up a timeshare so the question is not so much whether to buy or not to buy but rather “why on average is it so cheap?” or even more importantly “why are there so many sellers trying to dump their ownership?” There are various answers to these questions, none good were afraid. Using the Rolex analogy above, a top end luxury wrist watch will not only hold its value but over time may actually increase, this is because it is a tangible and desirable product, and it’s real.
Timeshare on the other hand as a product doesn’t really exist, in its basic form it’s nothing more than a promissory note that offers the possibility of a holiday for a certain period over the coming years. Unlike the watch, timeshare value drops to almost zero on the day of purchase. Another factor is that again, unlike the watch, timeshare requires a contractual agreement to pay a not inconsiderable sum each year in maintenance fees. Just because the resale deal seems excellent value on the surface, it must be remembered that whatever the deal, the product has no intrinsic investment value. On average, timeshare is an intangible non desirable product.
Cost analysis
In both Europe and the USA new entry level timeshare is heading towards the 20,000 cost in both Dollars and Euros. For this you may get a one week allocation or points equivalent. If you were to throw the same 20,000 at the resale market you could probably spend 26 weeks on holiday each year, but there is a catch. Just because you pick up a purchase deal at bargain basement prices there is no discount on maintenance fees. The more weeks/points you buy, the more the maintenance. In the extreme you may pay £1,000 for a two week timeshare on the resale market and let yourself in for £2,000 per annum in contractual maintenance payments, that would kind of sour the deal.
There may be other costs such as fees charged for the transfer of ownership and because a number of developers will not allow you into their in house exchange club with a resale purchase, if you wish to exchange there are fees payable to external providers such as RCI.
TCA comment
For sure there are some splendid deals to be had in the timeshare resale market but at the end of the day, whatever you pay will be dead money. With any timeshare purchase you should never enter a contract in the belief that you are making an investment. At best you could say it’s an investment in future holidays and that’s it.
With a market where there are more sellers than buyers and a market that doesn’t look any time soon of a reversal in that trend, you need to set value expectations low, bear in mind what you are asked to pay then that should be the level you expect to get back should you wish to sell.
Above all, the low sale prices expected are an indication of a saturated market and that there are likely more problems with owning timeshare than not. Getting in is comparatively easy, getting out is another story. Maybe these facts tell the story as to why second hand timeshare is both in abundance and cheap as well…..initially!
For more information regarding this article or assistance in any other timeshare related issues please contact the TCA on 01908 881058 or email: info@TimeshareConsumerAssociation.org.uk