NEW YORK (MainStreet) — Suddenly there is a stampede as developers are busily putting together vacation timeshare plays to entice buyers to take the plunge on owning a week in paradise. The math gets compelling. Zillow pegs the price of the average Hawaii home at $546,100, for instance. The asking price for a timeshare week at the Kahana Beach Resort is $8,000 for a studio apartment (one bedroom units run maybe twice that).
Except know three blunt things. Around seven years ago timeshare sales cratered, foreclosures skyrocketed and the industry was awash in bad press.
Another fact: even industry supporters admit that the business still has plenty of creepy, sleazy sales tactics.
But - just maybe - now may be the time to take a fresh look at partial ownership of a vacation property. Buyers are in the driver’s seat. In 2007, industry sales hit $2.3 billion, according to Ragatz Associates. In 2008 sales plunged to $1.473 billion. Worse was coming. By 2014, sales reached just $516 million. Experts expect an uptick in 2015 but not by much.
Which may make this an ideal time to buy. “Timeshares are for sale for $1 on eBay,” said Lisa Ann Schreier, an industry expert who blogs at thetimesharecrusader. That is fact. The reason is that timeshares typically involve annual maintenance fees -- $1,000 per year is a not uncommon rate for a week or two in a prime destination. Some buyers want out, period, and they will dump their week to do it.
Schreier adds that, at many timeshare operations, marketing costs represent perhaps 50% of the unit cost - meaning that $15,000 Maui timeshare involves perhaps $7,500 in underlying real estate value and the rest is sales and marketing overhead. An upshot: in resale markets, timeshares do not sell for anything near the original retail price. “A timeshare is not a financial investment,” said Schreier. In a handful of cases, some lucky owners may have flipped their shares at a profit but in the vast majority of cases timeshares are difficult to sell and usually go at a significant loss. Still, “they make sense for some people,” said Schreier.
A baseline building block: only deal with organizations whose names you know. Marriott, Hilton, and the other big hotel operators are in this and savvy experts say such developers are where to start.
Next step: go into the transaction fully informed, said Schreier, who added that many people who sign on the dotted line do so in ignorance. They don’t understand maintenance fees or the how-to of swapping weeks at another location. “Uninformed consumers are being taken advantage of,” she said. If the sales rep tells you that of course you can swap your August week in Phoenix for Christmas in Miami, flee.
Third step: start with a focus on resale shares, that is, ones for sale at big discounts in secondary markets - but understand there are sharpies in this marketplace and caveat emptor definitely is needed. Do that, and you probably will save money. “Timeshares are great especially if you purchase a resale,” said Isaac Gabriel, CEO OF EZ Resort Vacations, who said he personally has bought three resale shares, “thus realizing substantial discounts.”
Some even bought directly from the original seller and still say they got a deal. Frank Scafidi from Sacramento told Mainstreet he paid $18,000 for a week at the Marriott Newport Coast Villas in Orange County in 2003 and, said Scafidi, “I’ve heard all the horror stories and disappointments, etc. with timeshares.” But he continued: “My wife and I -- and our kids -- have enjoyed every week we’ve spent at the property and we’re heading there again next month for a week. We are very happy with how it’s worked out for us, but then again, we live in Sacramento, so getting to the property is only a five hour drive. We’d never be able to afford a similar week’s vacation annually as we have since purchasing this timeshare, so for us, it’s been a very satisfying experience.”
Similar is heard from Roger Gross, buyer of a 1/8th ownership in a condo a few blocks from the Plaza in Santa Fe. He originally bought a smaller unit and after a few years, he upgraded and paid $185,000. He said he loves the carefree visits it permits him.
Gross and his wife live an hour away in Albuquerque, but, to them, Santa Fe is a different world. They also have swapped weeks for stays in Florida and in San Francisco.
“There are millions of happy timeshare owners,” said Schreier,” who added that the path to happy timeshare purchase is through lots of research. Do that and - just maybe - a timeshare won’t be another curse word in your personal vocabulary.
—Written by Robert McGarvey for MainStreet