Buying A Timeshare: The Pros And Cons

By Ron Kelemen, Next Avenue Contributor

The purchase of a timeshare — a way to own a piece of a vacation property that you can use, generally, once a year — is often an emotional and impulsive decision.

At our wealth management and planning firm (The H Group), we occasionally get questions from clients about timeshares, most calling after the fact — fresh and tan from a vacation — wondering if they did the right thing. We’ve also had to deal with clients in financial distress wanting to get out of their timeshare units.

If you’re considering buying a timeshare, so you’ll have a place to vacation regularly, you’ll want to understand the different types and the pros and cons.

(MORE: Timely Timeshare Tips for Families)

4 Types of Timeshares

First, a little background about the four types of timeshares:

1. Fixed Week The buyer usually owns the rights to a specific unit in the same week, year in and year out, for as long as the contract stipulates. There is predictability, but also little flexibility and the potential for long-range boredom.

With a fixed-rate timeshare, the owner can rent out his block of time or trade with owners of other properties. This type of arrangement works best if you have a highly desirable location.

2. Floating The buyer can reserve his own time during a given period of the year. This option has more freedom than the fixed week version, but getting the exact time you want may be difficult when other shareholders snap up many of the prime periods.

3. Right-To-Use With this arrangement, the buyer leases the property for a given amount of time each year for a set amount of years. The developer maintains ownership of the property, however.

4. Points Club This is similar to the floating timeshare, but buyers can stay at various locales depending on the amount of points they’ve accumulated from buying into a specific property or purchasing points from the club. The points are used like currency and timeslots at the property are reserved on a first-come basis.

(MORE: Watch Out for Timeshare Scams)

5 Advantages of Timeshares

1. Unlike a vacation home which may be vacant part of the year, you only pay for what you use. Thus, the use of a very expensive property could be more affordable; for one thing you don’t need to worry about year-round maintenance.

2. If you like predictability, you have a guaranteed vacation destination.

3. You may be able to trade times and locations with other owners, allowing you to travel to new places.

4. You may be able to rent out your block of time if you can’t use it, although some timeshare contracts may not permit this and website exchange services may charge you to play matchmaker.

5. You might enjoy letting your friends or family use their timeshare for free or offer it at a charity auction.

4 Drawbacks of Timeshares

1. While you don’t need to worry about maintenance, you will need to worry about the annual fees and your lack of control over their annual increases. The average annual maintenance fee for a timeshare is $660, according to Howard Nusbaum, CEO and president of the American Resort Development Association. You pay that fee whether you use the property or not. In addition, you could be liable for special assessments.  If you don’t pay up, the developer can foreclose on your timeshare.

2. Timeshares are hard to sell, and used timeshare units are sold at a steep discount because there are so many on the market.  Thus, it might be a better deal to buy a used timeshare on the secondary market. Bear in mind that the Better Business Bureau has been warning about timeshare reselling schemes that defrauded victims out of thousands of dollars.

3. If you sell your timeshare at a loss, the Internal Revenue Service doesn’t let you claim a capital loss as you would with other investments and real property.

4. Buying a timeshare in a foreign country presents special challenges. In Mexico, for example, foreigners are not allowed to hold the direct title to property within 30 miles of the coast and 60 miles of international borders. They are limited to “right to use” timeshares.  (There is pending legislation in the Mexican Congress that may change that in the near future.) Also, consumer protection laws in some countries are more lax and lack enforcement.

Pointers for Potential Timeshare Buyers

Still interested in buying a timeshare? Here are a few pointers:

Think of a timeshare purchase as a lifestyle purchase, not an investment.  When you consider depreciation, travel costs and maintenance fees — on top of an uncertainty of use — the concept of “prepaying” for your vacations may not pencil out. Run the numbers.

Analyze your vacation patterns over the past few years. Do you really go to the same place at the same time every year? Or do you have a mix of activities and destinations, such as camping adventures, cruises, road trips or organized tours? If it’s the latter, a timeshare isn’t right for you.

If you must borrow to purchase a timeshare, you have no business buying one. Timeshares depreciate in value very quickly, so most banks will not lend you money to buy them. Often, the developer will arrange financing for you, but at a much higher interest rate than banks that do make the loans. What’s more, usually in a foreclosure, the outstanding mortgage balance and the unpaid maintenance fees are higher than the timeshare’s value, which creates what is called a deficiency. Then, lenders can go after your other assets.

Be wary of timeshare salespeople who answer your questions with a question and won’t be upfront about the purchase price. Another tip along these lines: it’s a good sign if you are offered a grace period allowing you to change your mind and cancel before committing to buying.

You will have more protections if your unit belongs to what is called an owners’ club or association. This is similar to a condominium board, giving the property’s owners a collective voice and strength in numbers. The owners’ club may also be helpful when you try to sell your unit.

Never pay an upfront deposit without having first identified and inspected the particular unit. You don’t want any unpleasant surprises when you show up for your vacation.

If you envision children or grandchildren vacationing with you, will they (or their parents) be able to afford the travel costs? If so, you may wind up not using your timeshare unit or points as much as you expect.

Ron Kelemen is the author of The Confident Retirement Journey and a certified financial planner with The H Group in Salem, Ore. His website is TheHGroup-Salem.com.

Article source: http://www.forbes.com/sites/nextavenue/2014/09/16/buying-a-timeshare-the-pros-and-cons/

Buying A Timeshare: The Pros And Cons

By Ron Kelemen, Next Avenue Contributor

The purchase of a timeshare — a way to own a piece of a vacation property that you can use, generally, once a year — is often an emotional and impulsive decision.

At our wealth management and planning firm (The H Group), we occasionally get questions from clients about timeshares, most calling after the fact — fresh and tan from a vacation — wondering if they did the right thing. We’ve also had to deal with clients in financial distress wanting to get out of their timeshare units.

If you’re considering buying a timeshare, so you’ll have a place to vacation regularly, you’ll want to understand the different types and the pros and cons.

(MORE: Timely Timeshare Tips for Families)

4 Types of Timeshares

First, a little background about the four types of timeshares:

1. Fixed Week The buyer usually owns the rights to a specific unit in the same week, year in and year out, for as long as the contract stipulates. There is predictability, but also little flexibility and the potential for long-range boredom.

With a fixed-rate timeshare, the owner can rent out his block of time or trade with owners of other properties. This type of arrangement works best if you have a highly desirable location.

2. Floating The buyer can reserve his own time during a given period of the year. This option has more freedom than the fixed week version, but getting the exact time you want may be difficult when other shareholders snap up many of the prime periods.

3. Right-To-Use With this arrangement, the buyer leases the property for a given amount of time each year for a set amount of years. The developer maintains ownership of the property, however.

4. Points Club This is similar to the floating timeshare, but buyers can stay at various locales depending on the amount of points they’ve accumulated from buying into a specific property or purchasing points from the club. The points are used like currency and timeslots at the property are reserved on a first-come basis.

(MORE: Watch Out for Timeshare Scams)

5 Advantages of Timeshares

1. Unlike a vacation home which may be vacant part of the year, you only pay for what you use. Thus, the use of a very expensive property could be more affordable; for one thing you don’t need to worry about year-round maintenance.

2. If you like predictability, you have a guaranteed vacation destination.

3. You may be able to trade times and locations with other owners, allowing you to travel to new places.

4. You may be able to rent out your block of time if you can’t use it, although some timeshare contracts may not permit this and website exchange services may charge you to play matchmaker.

5. You might enjoy letting your friends or family use their timeshare for free or offer it at a charity auction.

4 Drawbacks of Timeshares

1. While you don’t need to worry about maintenance, you will need to worry about the annual fees and your lack of control over their annual increases. The average annual maintenance fee for a timeshare is $660, according to Howard Nusbaum, CEO and president of the American Resort Development Association. You pay that fee whether you use the property or not. In addition, you could be liable for special assessments.  If you don’t pay up, the developer can foreclose on your timeshare.

2. Timeshares are hard to sell, and used timeshare units are sold at a steep discount because there are so many on the market.  Thus, it might be a better deal to buy a used timeshare on the secondary market. Bear in mind that the Better Business Bureau has been warning about timeshare reselling schemes that defrauded victims out of thousands of dollars.

3. If you sell your timeshare at a loss, the Internal Revenue Service doesn’t let you claim a capital loss as you would with other investments and real property.

4. Buying a timeshare in a foreign country presents special challenges. In Mexico, for example, foreigners are not allowed to hold the direct title to property within 30 miles of the coast and 60 miles of international borders. They are limited to “right to use” timeshares.  (There is pending legislation in the Mexican Congress that may change that in the near future.) Also, consumer protection laws in some countries are more lax and lack enforcement.

Pointers for Potential Timeshare Buyers

Still interested in buying a timeshare? Here are a few pointers:

Think of a timeshare purchase as a lifestyle purchase, not an investment.  When you consider depreciation, travel costs and maintenance fees — on top of an uncertainty of use — the concept of “prepaying” for your vacations may not pencil out. Run the numbers.

Analyze your vacation patterns over the past few years. Do you really go to the same place at the same time every year? Or do you have a mix of activities and destinations, such as camping adventures, cruises, road trips or organized tours? If it’s the latter, a timeshare isn’t right for you.

If you must borrow to purchase a timeshare, you have no business buying one. Timeshares depreciate in value very quickly, so most banks will not lend you money to buy them. Often, the developer will arrange financing for you, but at a much higher interest rate than banks that do make the loans. What’s more, usually in a foreclosure, the outstanding mortgage balance and the unpaid maintenance fees are higher than the timeshare’s value, which creates what is called a deficiency. Then, lenders can go after your other assets.

Be wary of timeshare salespeople who answer your questions with a question and won’t be upfront about the purchase price. Another tip along these lines: it’s a good sign if you are offered a grace period allowing you to change your mind and cancel before committing to buying.

You will have more protections if your unit belongs to what is called an owners’ club or association. This is similar to a condominium board, giving the property’s owners a collective voice and strength in numbers. The owners’ club may also be helpful when you try to sell your unit.

Never pay an upfront deposit without having first identified and inspected the particular unit. You don’t want any unpleasant surprises when you show up for your vacation.

If you envision children or grandchildren vacationing with you, will they (or their parents) be able to afford the travel costs? If so, you may wind up not using your timeshare unit or points as much as you expect.

Ron Kelemen is the author of The Confident Retirement Journey and a certified financial planner with The H Group in Salem, Ore. His website is TheHGroup-Salem.com.

Article source: http://www.forbes.com/sites/nextavenue/2014/09/16/buying-a-timeshare-the-pros-and-cons/

Buying A Timeshare: The Pros And Cons

By Ron Kelemen, Next Avenue Contributor

The purchase of a timeshare — a way to own a piece of a vacation property that you can use, generally, once a year — is often an emotional and impulsive decision.

At our wealth management and planning firm (The H Group), we occasionally get questions from clients about timeshares, most calling after the fact — fresh and tan from a vacation — wondering if they did the right thing. We’ve also had to deal with clients in financial distress wanting to get out of their timeshare units.

If you’re considering buying a timeshare, so you’ll have a place to vacation regularly, you’ll want to understand the different types and the pros and cons.

(MORE: Timely Timeshare Tips for Families)

4 Types of Timeshares

First, a little background about the four types of timeshares:

1. Fixed Week The buyer usually owns the rights to a specific unit in the same week, year in and year out, for as long as the contract stipulates. There is predictability, but also little flexibility and the potential for long-range boredom.

With a fixed-rate timeshare, the owner can rent out his block of time or trade with owners of other properties. This type of arrangement works best if you have a highly desirable location.

2. Floating The buyer can reserve his own time during a given period of the year. This option has more freedom than the fixed week version, but getting the exact time you want may be difficult when other shareholders snap up many of the prime periods.

3. Right-To-Use With this arrangement, the buyer leases the property for a given amount of time each year for a set amount of years. The developer maintains ownership of the property, however.

4. Points Club This is similar to the floating timeshare, but buyers can stay at various locales depending on the amount of points they’ve accumulated from buying into a specific property or purchasing points from the club. The points are used like currency and timeslots at the property are reserved on a first-come basis.

(MORE: Watch Out for Timeshare Scams)

5 Advantages of Timeshares

1. Unlike a vacation home which may be vacant part of the year, you only pay for what you use. Thus, the use of a very expensive property could be more affordable; for one thing you don’t need to worry about year-round maintenance.

2. If you like predictability, you have a guaranteed vacation destination.

3. You may be able to trade times and locations with other owners, allowing you to travel to new places.

4. You may be able to rent out your block of time if you can’t use it, although some timeshare contracts may not permit this and website exchange services may charge you to play matchmaker.

5. You might enjoy letting your friends or family use their timeshare for free or offer it at a charity auction.

4 Drawbacks of Timeshares

1. While you don’t need to worry about maintenance, you will need to worry about the annual fees and your lack of control over their annual increases. The average annual maintenance fee for a timeshare is $660, according to Howard Nusbaum, CEO and president of the American Resort Development Association. You pay that fee whether you use the property or not. In addition, you could be liable for special assessments.  If you don’t pay up, the developer can foreclose on your timeshare.

2. Timeshares are hard to sell, and used timeshare units are sold at a steep discount because there are so many on the market.  Thus, it might be a better deal to buy a used timeshare on the secondary market. Bear in mind that the Better Business Bureau has been warning about timeshare reselling schemes that defrauded victims out of thousands of dollars.

3. If you sell your timeshare at a loss, the Internal Revenue Service doesn’t let you claim a capital loss as you would with other investments and real property.

4. Buying a timeshare in a foreign country presents special challenges. In Mexico, for example, foreigners are not allowed to hold the direct title to property within 30 miles of the coast and 60 miles of international borders. They are limited to “right to use” timeshares.  (There is pending legislation in the Mexican Congress that may change that in the near future.) Also, consumer protection laws in some countries are more lax and lack enforcement.

Pointers for Potential Timeshare Buyers

Still interested in buying a timeshare? Here are a few pointers:

Think of a timeshare purchase as a lifestyle purchase, not an investment.  When you consider depreciation, travel costs and maintenance fees — on top of an uncertainty of use — the concept of “prepaying” for your vacations may not pencil out. Run the numbers.

Analyze your vacation patterns over the past few years. Do you really go to the same place at the same time every year? Or do you have a mix of activities and destinations, such as camping adventures, cruises, road trips or organized tours? If it’s the latter, a timeshare isn’t right for you.

If you must borrow to purchase a timeshare, you have no business buying one. Timeshares depreciate in value very quickly, so most banks will not lend you money to buy them. Often, the developer will arrange financing for you, but at a much higher interest rate than banks that do make the loans. What’s more, usually in a foreclosure, the outstanding mortgage balance and the unpaid maintenance fees are higher than the timeshare’s value, which creates what is called a deficiency. Then, lenders can go after your other assets.

Be wary of timeshare salespeople who answer your questions with a question and won’t be upfront about the purchase price. Another tip along these lines: it’s a good sign if you are offered a grace period allowing you to change your mind and cancel before committing to buying.

You will have more protections if your unit belongs to what is called an owners’ club or association. This is similar to a condominium board, giving the property’s owners a collective voice and strength in numbers. The owners’ club may also be helpful when you try to sell your unit.

Never pay an upfront deposit without having first identified and inspected the particular unit. You don’t want any unpleasant surprises when you show up for your vacation.

If you envision children or grandchildren vacationing with you, will they (or their parents) be able to afford the travel costs? If so, you may wind up not using your timeshare unit or points as much as you expect.

Ron Kelemen is the author of The Confident Retirement Journey and a certified financial planner with The H Group in Salem, Ore. His website is TheHGroup-Salem.com.

Article source: http://www.forbes.com/sites/nextavenue/2014/09/16/buying-a-timeshare-the-pros-and-cons/

Buying A Timeshare: The Pros And Cons

By Ron Kelemen, Next Avenue Contributor

The purchase of a timeshare — a way to own a piece of a vacation property that you can use, generally, once a year — is often an emotional and impulsive decision.

At our wealth management and planning firm (The H Group), we occasionally get questions from clients about timeshares, most calling after the fact — fresh and tan from a vacation — wondering if they did the right thing. We’ve also had to deal with clients in financial distress wanting to get out of their timeshare units.

If you’re considering buying a timeshare, so you’ll have a place to vacation regularly, you’ll want to understand the different types and the pros and cons.

(MORE: Timely Timeshare Tips for Families)

4 Types of Timeshares

First, a little background about the four types of timeshares:

1. Fixed Week The buyer usually owns the rights to a specific unit in the same week, year in and year out, for as long as the contract stipulates. There is predictability, but also little flexibility and the potential for long-range boredom.

With a fixed-rate timeshare, the owner can rent out his block of time or trade with owners of other properties. This type of arrangement works best if you have a highly desirable location.

2. Floating The buyer can reserve his own time during a given period of the year. This option has more freedom than the fixed week version, but getting the exact time you want may be difficult when other shareholders snap up many of the prime periods.

3. Right-To-Use With this arrangement, the buyer leases the property for a given amount of time each year for a set amount of years. The developer maintains ownership of the property, however.

4. Points Club This is similar to the floating timeshare, but buyers can stay at various locales depending on the amount of points they’ve accumulated from buying into a specific property or purchasing points from the club. The points are used like currency and timeslots at the property are reserved on a first-come basis.

(MORE: Watch Out for Timeshare Scams)

5 Advantages of Timeshares

1. Unlike a vacation home which may be vacant part of the year, you only pay for what you use. Thus, the use of a very expensive property could be more affordable; for one thing you don’t need to worry about year-round maintenance.

2. If you like predictability, you have a guaranteed vacation destination.

3. You may be able to trade times and locations with other owners, allowing you to travel to new places.

4. You may be able to rent out your block of time if you can’t use it, although some timeshare contracts may not permit this and website exchange services may charge you to play matchmaker.

5. You might enjoy letting your friends or family use their timeshare for free or offer it at a charity auction.

4 Drawbacks of Timeshares

1. While you don’t need to worry about maintenance, you will need to worry about the annual fees and your lack of control over their annual increases. The average annual maintenance fee for a timeshare is $660, according to Howard Nusbaum, CEO and president of the American Resort Development Association. You pay that fee whether you use the property or not. In addition, you could be liable for special assessments.  If you don’t pay up, the developer can foreclose on your timeshare.

2. Timeshares are hard to sell, and used timeshare units are sold at a steep discount because there are so many on the market.  Thus, it might be a better deal to buy a used timeshare on the secondary market. Bear in mind that the Better Business Bureau has been warning about timeshare reselling schemes that defrauded victims out of thousands of dollars.

3. If you sell your timeshare at a loss, the Internal Revenue Service doesn’t let you claim a capital loss as you would with other investments and real property.

4. Buying a timeshare in a foreign country presents special challenges. In Mexico, for example, foreigners are not allowed to hold the direct title to property within 30 miles of the coast and 60 miles of international borders. They are limited to “right to use” timeshares.  (There is pending legislation in the Mexican Congress that may change that in the near future.) Also, consumer protection laws in some countries are more lax and lack enforcement.

Pointers for Potential Timeshare Buyers

Still interested in buying a timeshare? Here are a few pointers:

Think of a timeshare purchase as a lifestyle purchase, not an investment.  When you consider depreciation, travel costs and maintenance fees — on top of an uncertainty of use — the concept of “prepaying” for your vacations may not pencil out. Run the numbers.

Analyze your vacation patterns over the past few years. Do you really go to the same place at the same time every year? Or do you have a mix of activities and destinations, such as camping adventures, cruises, road trips or organized tours? If it’s the latter, a timeshare isn’t right for you.

If you must borrow to purchase a timeshare, you have no business buying one. Timeshares depreciate in value very quickly, so most banks will not lend you money to buy them. Often, the developer will arrange financing for you, but at a much higher interest rate than banks that do make the loans. What’s more, usually in a foreclosure, the outstanding mortgage balance and the unpaid maintenance fees are higher than the timeshare’s value, which creates what is called a deficiency. Then, lenders can go after your other assets.

Be wary of timeshare salespeople who answer your questions with a question and won’t be upfront about the purchase price. Another tip along these lines: it’s a good sign if you are offered a grace period allowing you to change your mind and cancel before committing to buying.

You will have more protections if your unit belongs to what is called an owners’ club or association. This is similar to a condominium board, giving the property’s owners a collective voice and strength in numbers. The owners’ club may also be helpful when you try to sell your unit.

Never pay an upfront deposit without having first identified and inspected the particular unit. You don’t want any unpleasant surprises when you show up for your vacation.

If you envision children or grandchildren vacationing with you, will they (or their parents) be able to afford the travel costs? If so, you may wind up not using your timeshare unit or points as much as you expect.

Ron Kelemen is the author of The Confident Retirement Journey and a certified financial planner with The H Group in Salem, Ore. His website is TheHGroup-Salem.com.

Article source: http://www.forbes.com/sites/nextavenue/2014/09/16/buying-a-timeshare-the-pros-and-cons/

Buying A Timeshare: The Pros And Cons

By Ron Kelemen, Next Avenue Contributor

The purchase of a timeshare — a way to own a piece of a vacation property that you can use, generally, once a year — is often an emotional and impulsive decision.

At our wealth management and planning firm (The H Group), we occasionally get questions from clients about timeshares, most calling after the fact — fresh and tan from a vacation — wondering if they did the right thing. We’ve also had to deal with clients in financial distress wanting to get out of their timeshare units.

If you’re considering buying a timeshare, so you’ll have a place to vacation regularly, you’ll want to understand the different types and the pros and cons.

(MORE: Timely Timeshare Tips for Families)

4 Types of Timeshares

First, a little background about the four types of timeshares:

1. Fixed Week The buyer usually owns the rights to a specific unit in the same week, year in and year out, for as long as the contract stipulates. There is predictability, but also little flexibility and the potential for long-range boredom.

With a fixed-rate timeshare, the owner can rent out his block of time or trade with owners of other properties. This type of arrangement works best if you have a highly desirable location.

2. Floating The buyer can reserve his own time during a given period of the year. This option has more freedom than the fixed week version, but getting the exact time you want may be difficult when other shareholders snap up many of the prime periods.

3. Right-To-Use With this arrangement, the buyer leases the property for a given amount of time each year for a set amount of years. The developer maintains ownership of the property, however.

4. Points Club This is similar to the floating timeshare, but buyers can stay at various locales depending on the amount of points they’ve accumulated from buying into a specific property or purchasing points from the club. The points are used like currency and timeslots at the property are reserved on a first-come basis.

(MORE: Watch Out for Timeshare Scams)

5 Advantages of Timeshares

1. Unlike a vacation home which may be vacant part of the year, you only pay for what you use. Thus, the use of a very expensive property could be more affordable; for one thing you don’t need to worry about year-round maintenance.

2. If you like predictability, you have a guaranteed vacation destination.

3. You may be able to trade times and locations with other owners, allowing you to travel to new places.

4. You may be able to rent out your block of time if you can’t use it, although some timeshare contracts may not permit this and website exchange services may charge you to play matchmaker.

5. You might enjoy letting your friends or family use their timeshare for free or offer it at a charity auction.

4 Drawbacks of Timeshares

1. While you don’t need to worry about maintenance, you will need to worry about the annual fees and your lack of control over their annual increases. The average annual maintenance fee for a timeshare is $660, according to Howard Nusbaum, CEO and president of the American Resort Development Association. You pay that fee whether you use the property or not. In addition, you could be liable for special assessments.  If you don’t pay up, the developer can foreclose on your timeshare.

2. Timeshares are hard to sell, and used timeshare units are sold at a steep discount because there are so many on the market.  Thus, it might be a better deal to buy a used timeshare on the secondary market. Bear in mind that the Better Business Bureau has been warning about timeshare reselling schemes that defrauded victims out of thousands of dollars.

3. If you sell your timeshare at a loss, the Internal Revenue Service doesn’t let you claim a capital loss as you would with other investments and real property.

4. Buying a timeshare in a foreign country presents special challenges. In Mexico, for example, foreigners are not allowed to hold the direct title to property within 30 miles of the coast and 60 miles of international borders. They are limited to “right to use” timeshares.  (There is pending legislation in the Mexican Congress that may change that in the near future.) Also, consumer protection laws in some countries are more lax and lack enforcement.

Pointers for Potential Timeshare Buyers

Still interested in buying a timeshare? Here are a few pointers:

Think of a timeshare purchase as a lifestyle purchase, not an investment.  When you consider depreciation, travel costs and maintenance fees — on top of an uncertainty of use — the concept of “prepaying” for your vacations may not pencil out. Run the numbers.

Analyze your vacation patterns over the past few years. Do you really go to the same place at the same time every year? Or do you have a mix of activities and destinations, such as camping adventures, cruises, road trips or organized tours? If it’s the latter, a timeshare isn’t right for you.

If you must borrow to purchase a timeshare, you have no business buying one. Timeshares depreciate in value very quickly, so most banks will not lend you money to buy them. Often, the developer will arrange financing for you, but at a much higher interest rate than banks that do make the loans. What’s more, usually in a foreclosure, the outstanding mortgage balance and the unpaid maintenance fees are higher than the timeshare’s value, which creates what is called a deficiency. Then, lenders can go after your other assets.

Be wary of timeshare salespeople who answer your questions with a question and won’t be upfront about the purchase price. Another tip along these lines: it’s a good sign if you are offered a grace period allowing you to change your mind and cancel before committing to buying.

You will have more protections if your unit belongs to what is called an owners’ club or association. This is similar to a condominium board, giving the property’s owners a collective voice and strength in numbers. The owners’ club may also be helpful when you try to sell your unit.

Never pay an upfront deposit without having first identified and inspected the particular unit. You don’t want any unpleasant surprises when you show up for your vacation.

If you envision children or grandchildren vacationing with you, will they (or their parents) be able to afford the travel costs? If so, you may wind up not using your timeshare unit or points as much as you expect.

Ron Kelemen is the author of The Confident Retirement Journey and a certified financial planner with The H Group in Salem, Ore. His website is TheHGroup-Salem.com.

Article source: http://www.forbes.com/sites/nextavenue/2014/09/16/buying-a-timeshare-the-pros-and-cons/

Buying A Timeshare: The Pros And Cons

By Ron Kelemen, Next Avenue Contributor

The purchase of a timeshare — a way to own a piece of a vacation property that you can use, generally, once a year — is often an emotional and impulsive decision.

At our wealth management and planning firm (The H Group), we occasionally get questions from clients about timeshares, most calling after the fact — fresh and tan from a vacation — wondering if they did the right thing. We’ve also had to deal with clients in financial distress wanting to get out of their timeshare units.

If you’re considering buying a timeshare, so you’ll have a place to vacation regularly, you’ll want to understand the different types and the pros and cons.

(MORE: Timely Timeshare Tips for Families)

4 Types of Timeshares

First, a little background about the four types of timeshares:

1. Fixed Week The buyer usually owns the rights to a specific unit in the same week, year in and year out, for as long as the contract stipulates. There is predictability, but also little flexibility and the potential for long-range boredom.

With a fixed-rate timeshare, the owner can rent out his block of time or trade with owners of other properties. This type of arrangement works best if you have a highly desirable location.

2. Floating The buyer can reserve his own time during a given period of the year. This option has more freedom than the fixed week version, but getting the exact time you want may be difficult when other shareholders snap up many of the prime periods.

3. Right-To-Use With this arrangement, the buyer leases the property for a given amount of time each year for a set amount of years. The developer maintains ownership of the property, however.

4. Points Club This is similar to the floating timeshare, but buyers can stay at various locales depending on the amount of points they’ve accumulated from buying into a specific property or purchasing points from the club. The points are used like currency and timeslots at the property are reserved on a first-come basis.

(MORE: Watch Out for Timeshare Scams)

5 Advantages of Timeshares

1. Unlike a vacation home which may be vacant part of the year, you only pay for what you use. Thus, the use of a very expensive property could be more affordable; for one thing you don’t need to worry about year-round maintenance.

2. If you like predictability, you have a guaranteed vacation destination.

3. You may be able to trade times and locations with other owners, allowing you to travel to new places.

4. You may be able to rent out your block of time if you can’t use it, although some timeshare contracts may not permit this and website exchange services may charge you to play matchmaker.

5. You might enjoy letting your friends or family use their timeshare for free or offer it at a charity auction.

4 Drawbacks of Timeshares

1. While you don’t need to worry about maintenance, you will need to worry about the annual fees and your lack of control over their annual increases. The average annual maintenance fee for a timeshare is $660, according to Howard Nusbaum, CEO and president of the American Resort Development Association. You pay that fee whether you use the property or not. In addition, you could be liable for special assessments.  If you don’t pay up, the developer can foreclose on your timeshare.

2. Timeshares are hard to sell, and used timeshare units are sold at a steep discount because there are so many on the market.  Thus, it might be a better deal to buy a used timeshare on the secondary market. Bear in mind that the Better Business Bureau has been warning about timeshare reselling schemes that defrauded victims out of thousands of dollars.

3. If you sell your timeshare at a loss, the Internal Revenue Service doesn’t let you claim a capital loss as you would with other investments and real property.

4. Buying a timeshare in a foreign country presents special challenges. In Mexico, for example, foreigners are not allowed to hold the direct title to property within 30 miles of the coast and 60 miles of international borders. They are limited to “right to use” timeshares.  (There is pending legislation in the Mexican Congress that may change that in the near future.) Also, consumer protection laws in some countries are more lax and lack enforcement.

Pointers for Potential Timeshare Buyers

Still interested in buying a timeshare? Here are a few pointers:

Think of a timeshare purchase as a lifestyle purchase, not an investment.  When you consider depreciation, travel costs and maintenance fees — on top of an uncertainty of use — the concept of “prepaying” for your vacations may not pencil out. Run the numbers.

Analyze your vacation patterns over the past few years. Do you really go to the same place at the same time every year? Or do you have a mix of activities and destinations, such as camping adventures, cruises, road trips or organized tours? If it’s the latter, a timeshare isn’t right for you.

If you must borrow to purchase a timeshare, you have no business buying one. Timeshares depreciate in value very quickly, so most banks will not lend you money to buy them. Often, the developer will arrange financing for you, but at a much higher interest rate than banks that do make the loans. What’s more, usually in a foreclosure, the outstanding mortgage balance and the unpaid maintenance fees are higher than the timeshare’s value, which creates what is called a deficiency. Then, lenders can go after your other assets.

Be wary of timeshare salespeople who answer your questions with a question and won’t be upfront about the purchase price. Another tip along these lines: it’s a good sign if you are offered a grace period allowing you to change your mind and cancel before committing to buying.

You will have more protections if your unit belongs to what is called an owners’ club or association. This is similar to a condominium board, giving the property’s owners a collective voice and strength in numbers. The owners’ club may also be helpful when you try to sell your unit.

Never pay an upfront deposit without having first identified and inspected the particular unit. You don’t want any unpleasant surprises when you show up for your vacation.

If you envision children or grandchildren vacationing with you, will they (or their parents) be able to afford the travel costs? If so, you may wind up not using your timeshare unit or points as much as you expect.

Ron Kelemen is the author of The Confident Retirement Journey and a certified financial planner with The H Group in Salem, Ore. His website is TheHGroup-Salem.com.

Article source: http://www.forbes.com/sites/nextavenue/2014/09/16/buying-a-timeshare-the-pros-and-cons/

Buying A Timeshare: The Pros And Cons

By Ron Kelemen, Next Avenue Contributor

The purchase of a timeshare — a way to own a piece of a vacation property that you can use, generally, once a year — is often an emotional and impulsive decision.

At our wealth management and planning firm (The H Group), we occasionally get questions from clients about timeshares, most calling after the fact — fresh and tan from a vacation — wondering if they did the right thing. We’ve also had to deal with clients in financial distress wanting to get out of their timeshare units.

If you’re considering buying a timeshare, so you’ll have a place to vacation regularly, you’ll want to understand the different types and the pros and cons.

(MORE: Timely Timeshare Tips for Families)

4 Types of Timeshares

First, a little background about the four types of timeshares:

1. Fixed Week The buyer usually owns the rights to a specific unit in the same week, year in and year out, for as long as the contract stipulates. There is predictability, but also little flexibility and the potential for long-range boredom.

With a fixed-rate timeshare, the owner can rent out his block of time or trade with owners of other properties. This type of arrangement works best if you have a highly desirable location.

2. Floating The buyer can reserve his own time during a given period of the year. This option has more freedom than the fixed week version, but getting the exact time you want may be difficult when other shareholders snap up many of the prime periods.

3. Right-To-Use With this arrangement, the buyer leases the property for a given amount of time each year for a set amount of years. The developer maintains ownership of the property, however.

4. Points Club This is similar to the floating timeshare, but buyers can stay at various locales depending on the amount of points they’ve accumulated from buying into a specific property or purchasing points from the club. The points are used like currency and timeslots at the property are reserved on a first-come basis.

(MORE: Watch Out for Timeshare Scams)

5 Advantages of Timeshares

1. Unlike a vacation home which may be vacant part of the year, you only pay for what you use. Thus, the use of a very expensive property could be more affordable; for one thing you don’t need to worry about year-round maintenance.

2. If you like predictability, you have a guaranteed vacation destination.

3. You may be able to trade times and locations with other owners, allowing you to travel to new places.

4. You may be able to rent out your block of time if you can’t use it, although some timeshare contracts may not permit this and website exchange services may charge you to play matchmaker.

5. You might enjoy letting your friends or family use their timeshare for free or offer it at a charity auction.

4 Drawbacks of Timeshares

1. While you don’t need to worry about maintenance, you will need to worry about the annual fees and your lack of control over their annual increases. The average annual maintenance fee for a timeshare is $660, according to Howard Nusbaum, CEO and president of the American Resort Development Association. You pay that fee whether you use the property or not. In addition, you could be liable for special assessments.  If you don’t pay up, the developer can foreclose on your timeshare.

2. Timeshares are hard to sell, and used timeshare units are sold at a steep discount because there are so many on the market.  Thus, it might be a better deal to buy a used timeshare on the secondary market. Bear in mind that the Better Business Bureau has been warning about timeshare reselling schemes that defrauded victims out of thousands of dollars.

3. If you sell your timeshare at a loss, the Internal Revenue Service doesn’t let you claim a capital loss as you would with other investments and real property.

4. Buying a timeshare in a foreign country presents special challenges. In Mexico, for example, foreigners are not allowed to hold the direct title to property within 30 miles of the coast and 60 miles of international borders. They are limited to “right to use” timeshares.  (There is pending legislation in the Mexican Congress that may change that in the near future.) Also, consumer protection laws in some countries are more lax and lack enforcement.

Pointers for Potential Timeshare Buyers

Still interested in buying a timeshare? Here are a few pointers:

Think of a timeshare purchase as a lifestyle purchase, not an investment.  When you consider depreciation, travel costs and maintenance fees — on top of an uncertainty of use — the concept of “prepaying” for your vacations may not pencil out. Run the numbers.

Analyze your vacation patterns over the past few years. Do you really go to the same place at the same time every year? Or do you have a mix of activities and destinations, such as camping adventures, cruises, road trips or organized tours? If it’s the latter, a timeshare isn’t right for you.

If you must borrow to purchase a timeshare, you have no business buying one. Timeshares depreciate in value very quickly, so most banks will not lend you money to buy them. Often, the developer will arrange financing for you, but at a much higher interest rate than banks that do make the loans. What’s more, usually in a foreclosure, the outstanding mortgage balance and the unpaid maintenance fees are higher than the timeshare’s value, which creates what is called a deficiency. Then, lenders can go after your other assets.

Be wary of timeshare salespeople who answer your questions with a question and won’t be upfront about the purchase price. Another tip along these lines: it’s a good sign if you are offered a grace period allowing you to change your mind and cancel before committing to buying.

You will have more protections if your unit belongs to what is called an owners’ club or association. This is similar to a condominium board, giving the property’s owners a collective voice and strength in numbers. The owners’ club may also be helpful when you try to sell your unit.

Never pay an upfront deposit without having first identified and inspected the particular unit. You don’t want any unpleasant surprises when you show up for your vacation.

If you envision children or grandchildren vacationing with you, will they (or their parents) be able to afford the travel costs? If so, you may wind up not using your timeshare unit or points as much as you expect.

Ron Kelemen is the author of The Confident Retirement Journey and a certified financial planner with The H Group in Salem, Ore. His website is TheHGroup-Salem.com.

Article source: http://www.forbes.com/sites/nextavenue/2014/09/16/buying-a-timeshare-the-pros-and-cons/

Finn Law Group Files Suit Against Bluegreen Corp. over Reporting Delinquent Timeshare Accounts as Foreclosures

LARGO, Fla.–(BUSINESS WIRE)–

A lawsuit has been filed against Bluegreen Corp. alleging that the resort developer engaged in unfair consumer collections practices when it reported delinquent accounts of its timeshare owners to credit agencies as foreclosures. The lawsuit also asserts that Equifax Information Services and Experian Information Solutions violated federal law when it reported delinquent installment loan accounts as foreclosures.

The suit, Best, et al. v. Bluegreen Corp., et al., case no. 14-cv-80929-JIC, was filed July 14 in the U.S. District Court, Southern District of Florida.

The plaintiffs purchased memberships in Bluegreen’s timeshare plan known as Bluegreen Vacation Club. The memberships did not include ownership in any real or tangible property. A trust agreement between Bluegreen and the plaintiffs stated that 120 days after owners defaulted on their obligations, they would be deleted from the trust estate. The trust agreement did not reference foreclosure nor did it give Bluegreen any authority to foreclose.

The plaintiffs alleged that when they were approximately 120-days delinquent, Bluegreen sent them letters advising them that they had been deleted from the Trust and reported the status of their accounts as foreclosures to the credit agencies. The plaintiffs alleged that their credit reports showed the Bluegreen accounts as foreclosed and that the credit reporting agencies subsequently reported the information to numerous third parties.

The complaint, which seeks class action status, alleges violations of Florida’s Consumer Collections Practices Act, the federal Fair Credit Reporting Act, defamation and slander of credit. The timeshare owners seek award of damages, costs, attorneys’ fees and other relief.

Michael D. Finn, managing member of Finn Law Group representing the plaintiff and the potential class, stated, “Bluegreen did not undertake any form of foreclosure action. Intentionally categorizing these defaults as foreclosures virtually insures that these former buyers, who had abandoned their property interests and forfeited all funds paid will not be able to either refinance or purchase new homes necessitating a mortgage for about five years. This result is unjust.”

The Finn Law Group, which has offices in Florida and Michigan, represents consumers in timeshare and related real estate matters. For more information, contact Michael D. Finn by calling 855-346-6529 or michaeldfinn@finnlawgroup.com.

Article source: http://finance.yahoo.com/news/finn-law-group-files-suit-154700381.html

Council OKs gradual timeshare tax change

LIHUE — Timeshare owners on Kauai will receive a temporary reprieve from higher property taxes, at least for the next year.

A divided Kauai County Council on Wednesday approved a proposal to change the current tax system by assessing timeshare properties at their fair market value. Those changes, outlined in Bill 2548, passed by a 6-1 vote. 

Councilman Gary Hooser cast the lone dissenting vote against the measure. Councilmembers Tim Bynum, JoAnn Yukimura, and Jay Furfaro all cast silent votes, which were counted toward the majority vote to approve the measure.

“I think we’re taking a step in the right direction,” Councilman Ross Kagawa said before casting his vote. “A wrong valuation problem was occurring for many years … and I sit here today concerned about the (timeshare) industry as a whole and the impact it will have on its workers and possible foreclosure rates.” 

Previous tax laws that assessed value of each timeshare unit operating under a timeshare plan were based on “the combined value of the individual time share interests contained in the time share plan.” The value of timeshare interests, in turn, was initially based on the fair market value of those available on the resale market. 

Declining interval resale prices, county officials said, caused some condo owners to pay more in property taxes than their timeshare counterparts, who in some cases, lived in the same building.

Timeshares are taxed under the county’s hotel and resort class — a rate that is set at $10.85 per $1,000 in assessed valuation. Condominiums, meanwhile, are taxed based on their use as homestead, residential or vacation rental properties.

Although the approved changes now bases the assessed value of timeshare units on its fair market value, the new valuation system will be phased in over the next year. 

To do this, the assessed value of a timeshare unit for the 2014-2015 tax year will be capped at 50 percent of the difference between the assessed value of the timeshare unit for the 2014-2015 tax year and the fair market value of the timeshare unit for the 2015-2016 tax year. 

Phasing in the changes, Kagawa said, would give timeshare owners and officials time to prepare for increased maintenance fees and other costs. 

“This is simply to give timeshares a better chance at succeeding,” said Kagawa, who introduced an amendment that lowered the capped difference from 75 percent. 

Councilmembers Bynum, Hooser, Yukimura cast the dissenting votes against that measure. 

The seven-member board, Yukimura said, has already alleviated concerns from timeshare industry officials about significantly higher property tax bills by deciding not to create a separate tax category for their properties.

“I think it was a huge way of positively addressing the request from the timeshare industry,” Yukimura said before casting her vote against Kagawa’s proposal. “After years of having given pretty low rates to the timeshare industry, we are increasing it but we’re also, I feel, being very attentive to their needs.” 

Bynum said he was also opposed to the amendment because the County Council previously voted down proposals to provide tax relief for residents in the homestead tax class but were willing to provide that opportunity for the timeshare industry. 

Previous tax laws, he claimed, already shielded time share owners from paying higher taxes.

“The public record will show that, over and over again that this council said, ‘We can’t hurt businesses that much — let’s protect them,’ but we haven’t done the same for people who live and work here,” Bynum said.

Article source: http://thegardenisland.com/news/local/govt-and-politics/2506b896-3a4c-11e4-bed4-475623a706e6.html

Council OKs gradual timeshare tax change

LIHUE — Timeshare owners on Kauai will receive a temporary reprieve from higher property taxes, at least for the next year.

A divided Kauai County Council on Wednesday approved a proposal to change the current tax system by assessing timeshare properties at their fair market value. Those changes, outlined in Bill 2548, passed by a 6-1 vote. 

Councilman Gary Hooser cast the lone dissenting vote against the measure. Councilmembers Tim Bynum, JoAnn Yukimura, and Jay Furfaro all cast silent votes, which were counted toward the majority vote to approve the measure.

“I think we’re taking a step in the right direction,” Councilman Ross Kagawa said before casting his vote. “A wrong valuation problem was occurring for many years … and I sit here today concerned about the (timeshare) industry as a whole and the impact it will have on its workers and possible foreclosure rates.” 

Previous tax laws that assessed value of each timeshare unit operating under a timeshare plan were based on “the combined value of the individual time share interests contained in the time share plan.” The value of timeshare interests, in turn, was initially based on the fair market value of those available on the resale market. 

Declining interval resale prices, county officials said, caused some condo owners to pay more in property taxes than their timeshare counterparts, who in some cases, lived in the same building.

Timeshares are taxed under the county’s hotel and resort class — a rate that is set at $10.85 per $1,000 in assessed valuation. Condominiums, meanwhile, are taxed based on their use as homestead, residential or vacation rental properties.

Although the approved changes now bases the assessed value of timeshare units on its fair market value, the new valuation system will be phased in over the next year. 

To do this, the assessed value of a timeshare unit for the 2014-2015 tax year will be capped at 50 percent of the difference between the assessed value of the timeshare unit for the 2014-2015 tax year and the fair market value of the timeshare unit for the 2015-2016 tax year. 

Phasing in the changes, Kagawa said, would give timeshare owners and officials time to prepare for increased maintenance fees and other costs. 

“This is simply to give timeshares a better chance at succeeding,” said Kagawa, who introduced an amendment that lowered the capped difference from 75 percent. 

Councilmembers Bynum, Hooser, Yukimura cast the dissenting votes against that measure. 

The seven-member board, Yukimura said, has already alleviated concerns from timeshare industry officials about significantly higher property tax bills by deciding not to create a separate tax category for their properties.

“I think it was a huge way of positively addressing the request from the timeshare industry,” Yukimura said before casting her vote against Kagawa’s proposal. “After years of having given pretty low rates to the timeshare industry, we are increasing it but we’re also, I feel, being very attentive to their needs.” 

Bynum said he was also opposed to the amendment because the County Council previously voted down proposals to provide tax relief for residents in the homestead tax class but were willing to provide that opportunity for the timeshare industry. 

Previous tax laws, he claimed, already shielded time share owners from paying higher taxes.

“The public record will show that, over and over again that this council said, ‘We can’t hurt businesses that much — let’s protect them,’ but we haven’t done the same for people who live and work here,” Bynum said.

Article source: http://thegardenisland.com/news/local/govt-and-politics/2506b896-3a4c-11e4-bed4-475623a706e6.html

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