Buying a Timeshare or Fractional Ownership
Without doubt, timeshare can be an economical way of enjoying good and high quality self catering accommodation worldwide. Making the right purchase decision, a consumer can look forward to years of excellent holidays. In the event, however, you make the wrong decision, and it does not accord with your needs, that decision could prove to be a costly disaster. If you are new to timeshare, please read our section What is Timeshare.
Before considering any acquisition of a timeshare please read our report on the costs of using timeshare accommodation. Renting timeshare accommodation, for a short period or time, is now cheaper and safer than buying timeshare. The exception to this is if you require holidays in school holiday periods when owning a specific week of timeshare is still the best option.
Firstly – consider why you want a timeshare or fractional.
1. Do you want to go to the same place every year because you like the area and the resort – then you should buy the exact week, in the exact apartment or lodge in your chosen resort. If you cannot get the exact unit and week, you may be able to upgrade later when another owner wants to sell, as existing owners are generally the first to hear about a resale.
2. Or do you want to make use of an exchange organisation facility to visit different resorts and countries each year. There are over 5,000 resorts worldwide to choose from.
3. Do you want to get the best possible choices for places to exchange into? You need (from the outset) maximum ‘bargaining power’. This bargaining power comes from the demand for the week which you own in relation to the demand for the week you want to exchange into – the greater the demand for the week you own, the better your choice. If buying more than one week try and balance the values or a two week exchange can be dragged down to the lower value.
The best weeks to own for maximum ‘bargaining power’ in weeks are:- in a Gold Crown/Five Star resort. These are the resorts rated highest by the exchange companies, in the Red Period – the most popular time of the year for that specific resort. School holidays are usually better still (often dubbed “Deep Red”). In a 2 bedroom or larger unit.
Don’t forget you will also have to join an exchange organisation – for a fee – and pay an exchange fee each time you exchange. Management fees can also become a factor if they are too high – they have to be paid every year whether you use your week or not. Again, all consumers are advised to take their time in considering these factors in embarking on an acquisition of a timeshare. At all material times, the consumer ought to give just consideration to the reselling of timeshare, as at some stage, it will be a requirement to dispose of it due to either circumstantial changes or incapacities.
If you are considering acquiring timeshare weeks solely with a view to reselling them at a profit, DON’T. You will find that they are impossible, or virtually impossible, to sell on, and you will be required to pay annual charges on weeks which you most probably cannot even use, perhaps for years. Do not be misled by salesmen’s figures and projections. It simply just does not work.
ALL Timeshares sold as an “investment” are fraudulent.
How to buy:
You can buy a ‘resale’ Timeshare for less than 1/10th of the resort price. Talk to an honest resale broker. In some circumstances, there are Reverse Premium Brokers who will offer you money to take on other people’s Timeshare. This practice is completely safe in the event that the transaction is done with the use of Solicitors. By using Solicitors, they are in a position to assure each party the transaction has been correctly transferred.
In almost every case, new consumers will be able to buy the week(s) you want from an existing owner at less than half the price charged by the developer through an onsite sales operation. Buying from an existing owner means getting the same quality and standards the original owner had when they bought from new, often with a full lifetime of use still available. With a large number of owners wanting to sell, it is a buyers market where many bargains are there to be had.
The buying choices are:
1. From a professional reseller. By far the easiest method, provided you take a few precautions.
Deal only with a reseller who:
• Gives you not less than 14 days cooling-off period;
• Places buyer’s money (and sellers Ownership Certificate) in an independent stakeholder account;
• Certifies to the buyer that the week being purchased is free of all debt;
• Confirms whether the week has been banked with an exchange Company, and whether this banking is available to the buyer.
Resellers should search out a specific week for a buyer if they do not already have it in their inventory. You should only deal with resellers who are recommended by the TCA.
2. From the Owners Club, Management Company or a contracted agent
Many owners ask their club (or Management Company) to sell their week. At resorts where the developer has finished selling ‘new’ weeks this is a convenient way for owners to sell and has the benefit of allowing the buyer to see the resort on a try before buy basis before committing themselves.
Contact the resort and ask if they have an owner’s resale program.
3. Directly from an owner.
This can be the cheapest option, but there are pitfalls for the unwise. Buying on eBay can be very cheap with many weeks only costing 99 pence as owners try to get out of their timeshare obligations.
Points to keep in mind:
In the event the buyer chooses to pay the seller for their timeshare, the seller should establish an escrow arrangement with their Solicitor/Accountant into which:
Both parties should place their Ownership Certificate and money until such time as the transaction has been completed. The TCA have an escrow service for members.
Check that the owner actually owns the week and that the management fees are up to date by contacting the management company (and the exchange company if you are offered a banked week). The seller should give you the contact information. Make sure the exchange company is informed of change of ownership before transfer as the owner can still use the week.
Agree with the seller which of you pays the cost of transferring the ownership name, for a “Right of Use” ownership this will vary from £70 to £850 but for a “Deeded” ownership the charge could be £1,500.
4. From a developer (or his marketing company).
Only buy from a developer if you cannot find the week you want from one of the above options. Be prepared to pay, (sometimes substantially) higher prices.
Consumers should be aware that the rule in dealing with a developer is to negotiate, negotiate, negotiate.
Timeshare can be forever. Most owners on average want to sell after 9 years, so the price at which the consumer buys timeshare is critical so as not to make a major loss when the time comes to sell. Historically, guide prices have been given by the Timeshare Association, however, the market is heavily controlled by the willing buyer/willing seller principle. This being so, to give guide prices to sellers or buyers could lead them into a falsehood, into an expectation. It is simply a case of supply and demand and at present the demand to acquire timeshare is very weak. Therefore the only advice the Association can give to sellers of timeshare is to create a demand for your particular timeshare in the best way that you can.
And, finally, some DON’Ts
Never buy into an apartment which is not yet constructed or into a resort with partly complete leisure facilities, even when they are “promised”. Timeshare promises have a habit of failing to materialise. If you feel the need to buy into incomplete accommodation ensure that:
- all your money is secured by an independent stakeholder.
- all your money is returned to you if the resort fails to allow you to use the accommodation within the time stated on the agreement.
Never acquire Timeshare in a resort which fails to have an Owners Club or Association. You could be at the mercy of the developer or management company forever. Avoid any resort which has an owners “Action Group”, they know something you don’t!
Don’t buy if you think the management fees are too high or have risen historically at high increments. They are unlikely to go down. Watch out for levies against your timeshare accommodation.
As purely a guide, management fees should be around £250/week in warmer climes and £330 in cooler climes. If there is a large variance you could have problems in the future. It is absolutely essential that there is a contribution to a ‘sinking fund’, perhaps around 10% of the fee.
Don’t sprint into your buying decision. Take time out to choose what you want and where. Resist buying at a presentation. Always consider you are making a decision to part with a large sum of money within only a few hours of first seeing the product. Take weeks, even months on your decision/consideration and push the boundaries so as you know you are getting the best deal, then you can feel at ease about your purchase for years in the future. Remember a hasty and rash decision is often regretted.
Never, never consider timeshare as a “financial” investment. Consider that if you originally bought from a developer, it is likely you have paid more if you bought from a resale agent.
Last modified: March 11, 2016