March 8, 1996

TIMESHARE VACATION BUYS NOT ALL SUN AND FUN

If vacation desperation has set in and you simply can't wait to sip your morning coffee from underneath a beach umbrella, try to leave any thought of ownership at home.

Many people buy vacation property based on its first taste of pleasure. That's why so much money is spent on the promotion of free, or heavily discounted weekend getaways. In fact, an average of one in every five persons who attends a timeshare presentation ends up buying. Very few people can now own a vacation home by themselves so the drive to cultivate the very human desires to relax and enjoy is understandably being sold in pieces.

As I mentioned last week, timesharing apparently makes a lot of sense to some people. There are an estimated 50,000 timeshare owners in this state who probably get a great deal of enjoyment from their timeshare and view it as a built-in, prepaid vacation.

It did not work out for us. We bought an $11,000 timeshare four years ago and after not using it a single day finally sold it after a frustrating and anxious year on the market for $9,000. I genuinely believe it's better than we pick a location and rent, but others with greater flexibility in their work and school schedules swear by timeshare.

If you are headed to a timeshare presentation, here are five questions to consider:

• Ask if the resort is linked to a major exchange network. This option typically allows you to swap your time - for a fee - and occupy another property. The two leading exchange networks - Resort Condominiums International or Interval International - have properties all over the world. Not all resorts are interchangeable.

• Will the costs equal what you would normally spend for a week of lodging? The average one-week, perpetual timeshare in the United States costs about $10,000 - which appears reasonable. Add an annual fee of about $300 for your timeshare, plus at least $65 a year to belong to the exchange company, plus $95 to exchange your week for another in the exchange bank on to your initial investment. That's $460 a year before any travel costs. That sum alone will rent you five nights in a three-bedroom condo in Whistler's summer season (given the favorable Canadian exchange rate).

• Is the unit size and the season you want available? It's best to shop for unit size and season because the average person will return to the same location no more than about four times. Size and season usually are more important than a specific resort. People change, bringing along alterations in health, wealth and wants.

• Are you buying a piece of the rock? If you are considering a timeshare, make sure you are buying under a fee-simple plan, which gives you title to a fraction of the unit or company, or under a right-to-use plan, which entitles the buyer to use the unit for a specific period of time but does not grant any ownership rights. Potential tax advantages come only with fee-simple ownership.

• Does the company offer a resale program? Many timeshare companies say they will "help you sell" your property, but that can mean handing you a list of timeshare companies who specialize in that market. Do not view your cash spent as an investment - it is vacation time purchased and typically will not appreciate. Real estate agents in resort communities are skittish about taking timeshare listings because they take as much time and advertising as a single-family home or condominium listing yet the commission is a fraction of a conventional sale. Agents often require higher than normal commissions and longer listing times to market a timeshare.

I can tell you through personal experience that resale timeshare are definitely a buyer's market. Many wholesales attempt to buy the timeshare at 20-30 cents on the dollar and sell them at twice that price. Prices vary according to location, amenities and season and can be found in newspaper advertising sections under timeshare property or club memberships.

If you're headed to a timeshare presentation, keep in mind there's a good chance you will love the deal. Research has indicated that you probably will. Promoters will attempt to show you how it makes financial sense and will offer you a variety of incentives along the way. However, they don't make sense for everybody.

Previous columns:

• TIMESHARE PITCH: THERE'S NO FREE LUNCH, 03-01-1996
• LENDERS GETTING MORE FLEXIBLE, 02-23-1996
• WHAT CAN YOU AFFORD TO PAY FOR A HOME?, 02-16-1996
• HIGH TECHNOLOGY AND THE HOME LOAN, 02-02-1996
• GOVERNMENT SHUTDOWN HITS HUD, 01-19-1996
• THE REFINANCE QUESTION -- AGAIN, 01-12-1996
• CAPITAL GAINS CUT: WHEN, HOW MUCH?, 01-05-1996
• NEW LENDING LAW TOUGHENS LOAN DISCLOSURE REQUIREMENTS, 12-15-1995