Timeshares can be a excellent way to vacation but have lost their luster as an investment opportunity. Their notoriety has resulted from unpopular surprises, limited flexibility, fees, and the difficulty to exit a contract.
The person that signed the contract is most often to blame. Often these sales pitches seem lucrative and the pressure of time is working against you. “Sign now and get this, this, and that for no additional charge and we’ll throw in a that, that, and that but you must sign before you leave“. The excitement and pressure can result in overlooking the fine print.
The primary fee that frustrates timeshare owners are non-negotiable Timeshare Maintenance (TM) fees. These are usually annual or monthly fees paid to management company intended for resort maintenance, utilities, and taxes.
It’s extremely difficult to impossible to get these reduced without exiting the contract. In just a few years the amount of TM fees can add up to exceed the cost of the timeshare. Pay particular attention to any reoccurring fees If you plan to own for the long run.
Look for a TM cap
The best way to to mitigate these fees is to conduct due diligence before signing a contract. Traditionally, TM fees are unbounded fees and increase faster than the standard rate of inflation.
If you’re in this type of contract, often the only option is to consult legal advice to help terminate the contract. Timeshares are becoming more savvy to curb this negative characteristic as they realize this popular fee has grown in notoriety. Therefore some will offer fix rates but rest assured, they will find another way to make up that money. Again, do your research, read the contract, and challenge the terms that seem flexible or unbound. Try to get fixed caps on this, and any, type of fee.
Special Assessment Fees
Another uncommon but infamous fee is the Special Assessment (SA) fee which is to cover unplanned fees which are in addition to TM fees.
If your resort is located in a higher risk area for natural disasters, such as a beach resort in a hurricane prone region, it’s likely the TM fees are higher or there may be this SA fee. Insurance policies for the management companies tend to be more expensive and those fees are passed onto the timeshare owners one way or another.
Educate yourself, research the topic and check your contract. Skipping these steps is a hefty risk to assume. Most larger timeshare management companies will not have SA fees but it’s too significant to ignore.
Selling a Timeshare
Timeshare management companies may also tack on a Transfer Fee or Recording Fee when the share is sold.
When it comes to selling your timeshare there will be rules to abide by. You may be able to “Sell by Owner” or you may have to use a broker.
Brokers have fees too. Be careful before committing any upfront fees to a broker. Read the brokerage contract to understand the pros and cons before signing. Don’t forget to try and negotiate these fees too…..keep the mindset that everything is negotiable.
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