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10 Tips: Avoid traps when buying a time share

Have you been intrigued with buying a time-share unit? This vacation method is becoming more popular, but avoid the pitfalls:

By Laura T. Coffey, Times Correspondent
Published December 9, 2007

Have you been intrigued with buying a time-share unit? This vacation method is becoming more popular, but avoid the pitfalls:

1 Don't go to that presentation. You don't have to attend a notorious sales pitch to learn about time shares. You may be enticed to attend such a presentation to get a free trip, TV or meals with alcohol. Instead, do your research at home.

2 Know the difference. Consumers essentially have two kinds of time shares from which to choose. With a conventional time share, you pay a price and ongoing maintenance fees for the right to use a unit in a development at specific times. With a vacation interval plan or a vacation club, you use points to book stays at locations around the country or world. Marriott, Hilton, Hyatt and other hotel chains operate such clubs.

3 Know yourself. How likely are you to use a time share year after year? Are your vacation plans sometimes subject to last-minute changes? How much do you genuinely love the place or places where the units are based? You'll be responsible for the costs of your time share whether you use it or not.

4 Don't view this as an investment. Like new cars, time shares tend to depreciate quickly - and they're typically very difficult to resell. Research recent resale values on similar properties to see the lay of the land. View this for what it is: an investment in vacations with your family.

5 Beware of resale scams. Stay away from people who offer to help you resell your time share for an up-front listing fee. Such sales programs often are fraudulent. Instead, try to sell your time share by listing it with a licensed real estate broker or agent, or by placing an ad in a newsletter or magazine. Or, seek the services of a company that allows you to exchange your time share for a unit in a different area.

6 Say no to financing. If you're sure you want to pay for a time share, do so with cash. Interest rates are often high. Expect to pay about $15,000 to $20,000 for about 20 years of use.

7 Don't get gouged. Annual maintenance fees can range from $300 to $500 and can rise at rates that equal or exceed inflation. Find out whether your plan has a fee cap or an inflation-protection plan.

8 Assess your priorities. How would a purchase affect or hinder your financial goals? Are you on track to save enough for your children's education and your retirement?

9 Know the drill with unfinished and foreign properties. Put your money in an escrow account. If you sign a contract outside the United States for a time share in another country, you probably will not be protected by U.S. or state laws.

10 Do your homework. Research the reputations of the seller, developer and management company through the Better Business Bureau (www.bbb.org, the Federal Trade Commission (www.ftc.gov, toll-free 1-877-382-4357), and the American Resort Development Association (www.arda.org, (202) 371-6700). Ask for a copy of the property's maintenance budget, and find out what's done to manage and repair the property. Visit the resort and ask owners about their experiences.

Laura T. Coffey (laura@tentips.org

Sources: Federal Trade Commission (www.ftc.gov); Financial Planning Association (www.FPAnet.org); Bankrate.com.

[Last modified December 7, 2007, 21:54:33]