Chapter 15
To Buy or Not to Buy?

The ques­tion here is to buy or not to buy. This book extols the ben­e­fits of own­ing a time­share, and most peo­ple who want to trav­el at a bar­gain price can do so with a lit­tle bit of man­age­ment each year. Thus, a time­share is real­ly a no-brainer.

Nonethe­less, the low-cost fac­tor among time­share ben­e­fits is a very impor­tant one, and what you pay for a time­share deter­mines how much of a ben­e­fit it will be. Accord­ing­ly, the ques­tion here is, should I buy a time­share from a resort devel­op­er or in the resale mar­ket? This chap­ter pro­vides you with the pros and cons.

Resort Developer

By far the most effec­tive way to sell time­shares for large cor­po­rate time­share devel­op­ers is to have a sales staff meet with prospec­tive buy­ers onsite. There­fore, it’s a pop­u­lar sales strat­e­gy to invite peo­ple for a free or low-cost week­end on the con­di­tion that they sit through a sales pre­sen­ta­tion. Since this is the most effec­tive means time­share devel­op­ers use to sell time­shares, the sales pre­sen­ta­tion onsite is a real ben­e­fit to them.

This is also a ben­e­fit to you. You get to go and stay a week­end or some oth­er two-day peri­od free or for a very low cost. That is, you get to expe­ri­ence the prod­uct first­hand to deter­mine whether it’s some­thing enjoy­able and worth the mon­ey. In addi­tion, you wit­ness first­hand how well the time­share resort is man­aged, and you are also able to talk to own­ers who are present onsite.

If you are buy­ing a time­share strict­ly to trade, it is still a cau­tious prac­tice to vis­it the time­share resort before you buy. There’s no sub­sti­tute for vis­it­ing the premis­es. So even if you don’t spend a com­ple­men­tary week­end for free or for a reduced price, at least vis­it the time­share resort for an after­noon to see what’s going on.

What does a large cor­po­rate devel­op­er have to offer? It’s an oppor­tu­ni­ty to get in-depth infor­ma­tion about the time­share resort and the time­share inter­est you’re buy­ing. Most states have laws gov­ern­ing time­share sales that enti­tle you to get full and hon­est dis­clo­sure with an absence of fraud­u­lent infor­ma­tion. Cor­po­rate time­share devel­op­ers are like­ly to fol­low the laws.

If you buy a time­share, you also get a safe clos­ing. You don’t have to wor­ry about some­one defraud­ing you, run­ning off with the mon­ey, not deliv­er­ing the deed, not record­ing the deed, etc. Every­thing is like­ly to be in order.

Once you an own­er, you are like­ly to belong to a home­own­ers’ asso­ci­a­tion (HOA) which gov­erns the time­share resort. But that’s not like­ly to be the end of your rela­tion­ship with the resort devel­op­er. An HOA invari­ably con­tracts with the resort devel­op­er to man­age the resort long-term. Resort devel­op­ers typ­i­cal­ly pro­vide a sys­tem of ben­e­fits for own­ers as part of the man­age­ment of the resort. In effect, you are in a sys­tem of time­share resorts. The sys­tem pro­vides you with a bas­ket of benefits.

Limitation

To moti­vate poten­tial buy­ers to buy time­shares from the resort devel­op­er, the devel­op­er may restrict some of the ben­e­fits to only those own­ers who pur­chas­er time­share from the devel­op­er. Those own­ers who pur­chas­er time­shares on the resale mar­ket are not eli­gi­ble to receive some of the benefits.

Clear­ly it is in your best inter­est to do a care­ful review of all the ben­e­fits and deter­mine which ones will apply to you as an own­er who buys from the resort devel­op­er and which ben­e­fits don’t apply to you as an own­er who buys on the resale market.

Whether the extra ben­e­fits are worth the extra mon­ey you pay to resort devel­op­er will depend on how you use your time­share and what ben­e­fits you val­ue the most. What are the pros of buy­ing a time­share from a resort devel­op­er? A typ­i­cal ben­e­fit from the resort devel­op­er is ultra-spe­cial treat­ment (i.e., VIP treat­ment) if you own a cer­tain num­ber of timeshares.

The cons of buy­ing from a resort devel­op­er? Invari­ably prices for time­shares on the resale mar­ket are low­er than buy­ing from a resort devel­op­er. But for cer­tain resorts, there may be no time­shares avail­able in the resale markets.

You also need to sit through a sales pre­sen­ta­tion. Typ­i­cal­ly, the resort developer’s sales staff will not per­mit you to go through the sales pre­sen­ta­tion with­out your spouse so that they have both deci­sion-mak­ers in the room. A sales pre­sen­ta­tion pits you against a high­ly expe­ri­enced and effec­tive sales team and a high­ly tuned sales per­for­mance that is very con­vinc­ing. You can taste the pres­sure to buy even when it’s reput­ed to be a low-pres­sure sales pre­sen­ta­tion. Indeed, many sales pre­sen­ta­tions are low-pres­sure and quite friendly.

Keep in mind, how­ev­er, that sales teams make sales all day every day. If you are uncom­fort­able with mak­ing a buy-or-not-buy deci­sion at the pre­sen­ta­tion, you might think twice about expos­ing your­self this time-hon­ored sales sit­u­a­tion that favors the sell­er. As to my per­son­al expe­ri­ence, I have pur­chased about a dozen time­shares at one time or anoth­er. Nonethe­less, I say no at time­share sales pre­sen­ta­tions much more often than I say yes.

Resale Market

You pay less for a time­share on the resale mar­ket. Pay­ing less may be the dif­fer­ence between the time­share being a good deal or a bad deal. And it’s some­thing you should look at very close­ly. Once you look at the dif­fer­ence in price (between the resort devel­op­er and the resale mar­ket), you need to antic­i­pate how long you’re going to own the time­share. The price dif­fer­ence amor­tized over five years will be a big dif­fer­ence each year. The dif­fer­ence amor­tized over 40 years will be a nom­i­nal difference.

When you buy on the resale mar­ket, the orig­i­nal own­er may be ben­e­fit­ed in a way that does not pass on to you. It makes sense ask about resort ben­e­fits so you know what your rights are after hav­ing received a deed from orig­i­nal own­er rather than the resort developer.

A vis­it to the premis­es (to a sales meet­ing) is not part of the deal when you buy in a resale mar­ket. You will have to make the effort and incur the expense to vis­it the resort yourself.

The own­er may be unre­li­able thus caus­ing prob­lems with clos­ing the trans­ac­tion. Many peo­ple are very busy and tak­ing care of the details of sell­ing a time­share is not at the top of their pri­or­i­ty. If the trans­ac­tion does­n’t close on time, you may miss out on using your time­share the first year. Nonethe­less, this is not like­ly to be a prob­lem, as most peo­ple who sell a time­share are high­ly moti­vat­ed to take care of the details and get it off their hands.

You will have no assur­ance (with­out title insur­ance) that you will receive good title free & clear to the time­share, and you may need to insist on a pro­fes­sion­al clos­ing (if a bro­ker is not involved). In oth­er words, the clos­ing is arranged between the par­ties. Con­se­quent­ly, there seems to be more risk in buy­ing from an own­er rather than a resort devel­op­er; but it’s risk that you can over­come with ade­quate due dili­gence and a rep­utable, pro­fes­sion­al closer.

Of course, you can pur­chase from some­one who buys and sells time­shares for a prof­it and has a good rep­u­ta­tion either local­ly or on a web­site such as eBay. They han­dle trans­ac­tions in a pro­fes­sion­al man­ner so that you are assured that you will get free and clear title and that all fees are paid and trans­fer doc­u­ments han­dled properly.

Title Insurance

What about title insur­ance? Do you need it? Prob­a­bly not if you buy from a resort devel­op­er. If you get bad title, you can prob­a­bly get the devel­op­er to make good, even if you have to threat­en a law suit as moti­va­tion. They can’t afford bad publicity.

When you buy from a pri­vate par­ty, how­ev­er, your only real pro­tec­tion is to buy title insur­ance. That can increase the clos­ing costs by $200 to $800. That’s in addi­tion to the nor­mal clos­ing costs of $300 to $800. Con­se­quent­ly, title insur­ance is sel­dom pur­chased for trans­ac­tions in the resale mar­kets. Why? Buy­ers sim­ply decide that they can risk get­ting bad title if they pay only a small per­cent of the orig­i­nal pur­chase price. That is, it’s not worth $500 to make sure you have good title on a $2,500 purchase.

So what kind of assur­ance can you get in lieu of title insur­ance? First, you can ask the sell­er if the title is free and clear. You can con­tact the resort man­age­ment to see if it will pro­vide infor­ma­tion on a par­tic­u­lar time­share. And you can make sure the con­tract to pur­chase states that the time­share is free and clear.

Summary

With a lit­tle research, you can deter­mine the price you will have to pay a resort devel­op­er or pay on the resale mar­ket for a time­share. With a lit­tle more research, you can dis­cov­er what addi­tion­al ben­e­fits you will get if you pur­chase from the devel­op­er. The you can make a choice.