Don’t just take my word on the subject of timeshare resale. Read what this Certified Financial Planner has to say.
I couldn’t have said it better myself.
I was reading the North Carolina-based online news edition of The News & Observer, and found a reader who had written with a question for Holly Nicholson, CFP, JD, who writes a financial advice column in the publication. I thought her answer looked so candidly at the topic of timeshares sales presentations and buying new or resale timeshares, that I requested permission to reprint it for you here.
The Q & A that follows is Ms. Nichoson’s March 18, 2007, column (http://www.newsobserver.com/1445/story/554780.html). This article is the copyrighted property (© 2007) of: Holly Nicholson, CFP, JD, and we thank her for permission to reprint it here.
Take Your Time with Time-Share Pitches
by Holly Nicholson, CFP, JD
Q: I have always read and heard from financial professionals that purchasing a time share is one of the stupidest financial moves a person can make. But every time I listen to a presentation, I’m tempted to buy.
The last one we attended sounded so good that I completed the paperwork, even though my wife and I had agreed that we would just go for the free incentives and wouldn’t buy. On the way out, we tore up the contract, but we still feel like it would have been a nice way to commit to a vacation place we liked with the opportunity to trade off locations and weeks in the future.
Do you have an opinion about time shares as either an investment or a relatively inexpensive vacation rental?
A: Thanks for the “free” lift tickets. I received your question a few days before my husband and I were heading off to Utah for a ski vacation. A young man approached us as we were having lunch on the slopes. He was extremely friendly and helped us figure out which trails we could take and avoid injury at our age and skill level. He confirmed that we were married and then launched into the wonderful opportunity his company had for a ski-in, ski-out condo. We could have a free lift ticket at a nearby ski resort just by attending a no-obligation presentation that evening, guaranteed not to exceed 1 1/2 hours.
When my husband and I were dating, we naively found ourselves in a hard-sell time-share presentation in Miami. I thought my now-husband would kill someone if they didn’t let us out of the building immediately, and we agreed to swear off freebie offers for the rest of our time together.
Thanks to you, I convinced him it was a research opportunity and he agreed to attend; that we had nothing planned until dinner and were exhausted from our first day of skiing didn’t hurt, either!
We attended and got our free lift tickets. You are right, it sounded great. We could buy a prime time or “red” week for $67,400 or a nonprime “silver” week for $10,900. Both allowed reward point accumulation, exchange rights to other weeks and other resort properties worldwide (with a membership fee to an exchange club).
Carlos, our sales associate, could not have been more professional; he was very low-key and answered all our questions. He even shared a secret. If we bought two less expensive silver weeks, we could switch off exchange and point accumulation years and would have the ability to reserve a week 13 months in advance versus 12 months if we only owned one red week. Sounded smart to us: a $21,800 investment versus $67,400 allowing the same exchange opportunity with an earlier reservation date. We were actually interested! Carlos then showed us that if we bought two weeks it would only cost us $330 a month for 10 years plus annual maintenance fees that, if we wished, could also be financed. I’m not a whiz without my calculator but that sounded like a lot of money to me so I asked for details. If you select the financing option, you are charged a 13 percent interest rate. We said we’d pay cash or finance elsewhere.
Next we wanted more detail about the maintenance fees. The silver week was $700 a year, the red week was $950. Owning two silver weeks would cost us $1,400 a year in maintenance fees. Suddenly it didn’t seem like such a no-brainer to own two “less expensive” weeks versus a prime-time red week.
We wanted to know the history and annual caps on increases to the maintenance fees. There was no historical information available, and no annual caps were in place. We were assured that they had and always would be reasonable, whatever that means.
It may have been the lack of oxygen at the high altitude but we were still interested and asked for some literature to take home and think about it. Carlos said he wasn’t sure he could do that and made the big mistake of bringing in his boss, Tom.
Tom basically told us we were stupid for not buying now and showed us two letters from satisfied customers. He then told us we couldn’t have any information to take with us with the rationale that only 0.50 percent of people who left came back to buy.
We failed to see how that was our problem and escaped back to our hotel with half an hour before our dinner reservation.
A quick Google search on the computer brought up two time shares in the exact same resort selling for less than $5,000. You’d get the deed and take over the maintenance obligation.
Thanks to the research initiated by your question, my husband and I now think the time share concept is interesting. But we are going to take our time and review what’s on sale on the secondary market and stick with our pact of no freebie offers!
Holly Nicholson, CFP, JD, is a financial planner in Raleigh. You may send questions via her Web site, www.askholly.com, or by mail, P.O. Box 99466, Raleigh, NC 27624.
