People who have timeshares are often referred to as “timeshare owners,” but when people own a timeshare, what do they actually own? Is owning a timeshare like owning a piece of real estate – an investment that typically appreciates over time? A piece of property that can be sold? And if not, what does that mean for people who purchased timeshares?
Is owning a timeshare an asset or a liability?
We’re sad to report that unfortunately, in most circumstances, owning a timeshare is in fact a liability. Before we dig into why, let’s first look at the definition of an asset and a liability.
According to Merriam-Webster:
Definition | Asset: an item of value owned
Definition | Liability: 1. something for which one is liable, especially debt 2. one that acts as a disadvantage
Going by the definitions above, in order for a timeshare to be an asset, a timeshare would have to have value and be something that you physically owned. However, this is often not the case as timeshares can commonly be “right-to-use” contracts. In addition, timeshares can be very hard to sell. Due to this and a timeshare’s ever-increasing lifetime fees, a timeshare is usually a form of substantial debt. In fact, it’s typically cheaper to pay a timeshare cancellation company to cancel a timeshare than it is to keep a timeshare. Let’s dig into the details and walk you through why.
What Is a Timeshare Exactly?
Owning a timeshare isn’t usually like owning traditional property. For example, when purchasing a house, an owner gets a deed. While there are several types of timeshare contracts and some are deeded (i.e. fixed and floating week transactions), this isn’t the case most often. Currently, the majority of timeshare contracts are points-based. In points-based contracts, a timeshare purchaser buys points that can be exchanged for vacations. A timeshare purchaser is buying the ability the use a room at a single resort once a week per year. However, the value of points can vary and the number of points needed for a vacation can be based on the location and time of year. This kind of timeshare agreement is a right-to-use contract instead of traditional and deeded property ownership.
Because the vast majority of timeshare contracts provide purchasers with the right to use a timeshare as opposed to a deed, a timeshare can’t be classified as an asset in this instance. It’s because a timeshare purchaser doesn’t truly own the timeshare itself. It’s not a piece of property. Instead, it’s an opportunity to go on vacation.
Can You Sell a Timeshare?
When considering the definition of an asset above, the second qualification is that an asset must have value. While it’s not impossible, it can be very hard to sell a timeshare. In fact, a simple search on eBay shows timeshares being sold for as little as $0.99.
Generally, the demand for timeshares is very low. There are several contributing factors to this:
- Timeshare Loans Have High-Interest Rates
Timeshares tend to have higher interest rates than typical home loans. For example, at the time of writing this, timeshare loans have an average interest rate of 14%, while home loan interest rates are around 2-3%.
- Timeshare Have Lifetime Fees
Timeshare contracts contractually obligate a purchaser to pay various fees called maintenance and special assessment fees, even after the timeshare purchase price has been paid in full. A timeshare owner is responsible for these fees for the entirety of her/his life unless the contract is canceled (more on that below). In addition, the responsibility of paying these fees gets passed on to a timeshare owner’s children or other beneficiaries.
- Timeshare Maintenance Fees Are Ever-Increasing
Maintenances fees, one of the lifetime fees associated with owning a timeshare, tend to increase year after year. Owners typically see a 6-10% increase every year. While this may seem fairly manageable at first, over time, the increases can start to compound. For example, let’s use a fee of $1000 per year as a starting maintenance fee cost. If the fee increases 10% after the first year, the amount owned in the second year will be $1110. If it increases by 10% again the following year, the amount owed would be $1210. If this pattern continues, the amount owed could be $2357.95 in ten years and $6115.91 in twenty years. Maintenance fees can really add up the longer you own your timeshare.
- Timeshare Special Assessment Fees Are a Suprise
In addition to maintenance fees, a timeshare owner is also typically obligated to pay lifetime special assessments fees. Special assessment fees are usually for unforeseen expenses, such as a new roof, weather events, etc. Because these fees are for unforeseen expenses, they can take timeshare owners by surprise.
- Timeshare Resale Scams Exist
Another reason it can be hard to sell a timeshare is because of timeshare resale scams. In addition to the demand for timeshares being low, there are also resale scams that timeshare owners need to be careful to avoid. The Federal Trade Commission, Consumer Reports, and AARP have all issued warnings about these scams.
How a Timeshare Is a Liability
Now that we’ve covered how timeshares don’t typically align with the dictionary’s definition of an “asset”, let’s discuss how they do typically align with the definition of a “liability.” A timeshare is a lifetime financial obligation that can not be paid off. Its overall nature tends to be never-ending debt. Even though a timeshare loan itself can be paid off, a timeshare’s maintenance fees and special assessment fees persist and increase for the entirety of a timeshare owner’s life. In addition, they then get passed on to a timeshare owner’s beneficiaries. Because timeshares don’t typically appreciate, can be so hard to sell, and usually aren’t deeded properties (as discussed above), owning a timeshare is like having consistent debt and can put you at a huge disadvantage financially.
It’s Often Cheaper To Cancel a Timeshare Than to Keep It
In fact, owning a timeshare can be so expensive over the course of a lifetime, that it is often cheaper to can cancel a timeshare than to keep it. Even if your mortgage is not already paid off, canceling your timeshare can potentially save you tens of thousands to hundreds of thousands of dollars over the course of your lifetime. From higher than average interest rates and ever-increasing maintenance fees to surprise special assessment fees and a lifetime commitment, owning a timeshare can be extraordinarily expensive.
If you’d like to see a personalized assessment of how much your timeshare will cost you and your family over the course of your lifetime, schedule a free consultation with Timeshare Freedom Group. Timeshare Freedom Group, the leading timeshare cancellation company in the industry, can walk you through a full cost-benefit analysis with your specific and real numbers. This way, you’ll see a personalized comparison between how much it will cost you to cancel your timeshare versus how much it will cost you to keep your timeshare. To schedule a free consultation, reach out to us here or call us directly at (866) 668-6872.
How to Cancel Your Timeshare
If you’ve determined that keeping your timeshare is not the right decision for you and your family, it is possible to get out of your contract. The easy way to get out of your timeshare is through a process called timeshare cancellation. Timeshare cancellation is where a timeshare cancellation company negotiates with your timeshare resort to get you out of your timeshare contract.
If you’d like to learn more about timeshare cancellation and why it is the easy way to cancel your timeshare, we’ve written more about timeshare cancellation here.
Timeshare Freedom Group is the leading timeshare cancellation company in the industry. If you’re ready to get rid of your timeshare or have any questions about the process, schedule a free consultation with our timeshare cancellation experts. Reach out to us here or call us directly at (866) 668-6872.
In conclusion, owning a timeshare is, unfortunately, usually a liability. This is due to the significant amount of ever-increasing and lifetime debt that comes with owning a timeshare. A timeshare is typically not considered an asset due to the virtually nonexistent resale value of timeshares, the demand for them being uncommon, and the fact that most timeshare contracts are “right-to-use” and not “deeded” contracts.
However, the good news is that it is possible to get out. The easy way to get out of a timeshare is called timeshare cancellation, a process where a timeshare cancellation company negotiates with your timeshare resort to get you out of your contract – legally and permanently.
If you are ready to take the first step towards getting rid of your timeshare, schedule a free consultation with Timeshare Freedom Group. Timeshare Freedom Group is the leading timeshare cancellation company in the industry, has more than 15,650 satisfied customers, has ten years of experience, and offers a 100% money back guarantee. Schedule a free consultation with our timeshare cancellation experts by contacting us here or call us direct at (866) 668-6872.
Looking to Cancel Your Timeshare?
Timeshare Freedom Group is the leading timeshare exit company in the industry. Schedule a free consultation with one of our timeshare exit experts today to get started.