Timeshares: Take Time before You Sign
At first, it may sound like a pretty good deal. You get a supposedly free trip to a beautiful destination, a valuable gift card or restaurant voucher, and all you have to do is sit through a sales presentation about a timeshare.
At the presentation, you learn the true definition of a high-pressure sales pitch that could involve an uncomfortably long presentation with aggressive sales people, property-to-property tour, and possibly extra costs and blackout dates.
A timeshare is the joint ownership or rental of vacation lodging, such as a house or condominium, with each owner occupying the unit for specific times of the year, which could be fixed or floating. Timeshare owners generally pay an initial fee, and then share costs of owning, furnishing and maintaining the property. While these fees and costs might be disclosed at the time of sale and seem affordable, they will increase as the years pass – and sometimes in leaps and bounds. So consider your present budget and expected future budget before you decide to buy.
A timeshare agreement is a significant legal and financial commitment that can last indefinitely, even if you don’t use the property. Review the paperwork carefully, and consider seeking advice from an attorney or real estate agent away from the presentation environment. Be sure to get everything in writing--oral statements made by the seller may not be legally binding.
Consider using an escrow account if you’re buying into an undeveloped timeshare project. That will help protect you if the project doesn’t go as planned or promised.
Easy to Join & Often Hard to Leave
Escaping from a timeshare is generally not easy. Most timeshare management companies treat a membership as an ownership interest, so you will have to pay annual fees and costs until you find somebody to buy your membership. Many management companies further declare that your heirs will automatically be responsible for the annual fees and costs after you die, regardless of whether they want the membership.
The resale market for timeshares is limited, if not nonexistent. Timeshare companies make much more money selling new timeshares rather than helping individual owners resell their timeshares. Consequently, most timeshare companies will not help timeshare owners sell their timeshares, and those that do usually require owners to pay hefty fees to leave.
Be warned: There are also third-party timeshare resale companies that claim they will find buyers for a fee. However, the majority of these resale companies do nothing more than post a listing on a website, or even less, while they keep charging fees. Very few of these companies actually locate buyers for their customers.
If the timeshare is marketed in Iowa, the developer or the developer’s agent must provide you with a current property report within ten days after you sign the purchase agreement. You have a right to cancel and receive a full deposit refund within five business days of receiving a property report.
The report must contain the following information and disclosures, among others, which also must include the name and business address of the developer and developer's agent:
- A general description of the timeshare project, units and amenities
- Any current budget and projected budget
- Your projected liability for common expenses, if any
- Any initial or special fee due from you at closing
- Any current or expected fees or charges that you must pay, including fees for amenities or facilities
- The extent to which a unit may become subject to a tax or other lien arising out of claims against other owners of the same unit
If you purchase a timeshare in another state, do some research about that state’s timeshare laws. If you purchase a timeshare in another country, be very careful—federal and state laws in the U.S. won’t protect you. If a seller mails a solicitation to your home in Iowa, then certain Iowa timeshare laws apply.
Bottom Line: Take Your Time
The bottom line is a timeshare agreement is a significant legal and financial commitment that you should never enter into lightly. Avoid the temptation to give into pressure to sign on the bottom line during a sales presentation. Research the property, the developer, and the management company. Check with other timeshare owners to see if they’re satisfied. Make sure all promises, commitments, obligations and terms are in writing. And walk away if it doesn't feel right.