Are timeshares worthwhile?

(AP) -- Question: I'm thinking about buying a timeshare. Would it be a worthwhile investment?

People often buy a timeshare and never use it, according to the author of "Timeshare Vacations for Dummies."

Answer: Timeshares can bring their owners substantial savings in time and money when planning vacations, but experts warn that they should never be viewed as a financial or real estate investment.
Timeshares are typically resort condominium units that multiple parties have the right to use, generally by the week, and are an alternative for people who don't want to rent and can't afford to own a vacation home or condo outright. The timeshare system also allows owners to trade weeks at a property with timeshare owners elsewhere.

They do have their drawbacks -- an owner hoping to sell a timeshare might end up taking a loss. And while there are laws protecting buyers who purchase a timeshare from a developer, they don't help someone buying from an owner.
"A lot of times, people get caught up in the moment and drop a ton of money on a timeshare, and then never use it," said Lisa Ann Schreier, author of "Timeshare Vacations for Dummies."
"You have to take into consideration how spontaneous you are; how often you vacation, and for how long; and how much you're willing to spend for your accommodations. If you're used to going away for a few days and spending less than $80 a night at a hotel, then a timeshare is probably not for you," Schreier said.
Schreier suggested this formula for determining if a timeshare makes sense financially: If you're paying $100 for hotel rooms 10 nights a year, you would break even after 13 years if you bought a timeshare for $13,500.
The average cost of a two-bedroom timeshare is $18,000, plus about $500 a year in maintenance fees, according to Howard Nusbaum, president of the American Resort Development Association. The resorts offer amenities that many hotels don't, Nusbaum said, such as a full kitchen, Jacuzzi or screened-in porch.
"Basically, if you take at least a week of vacation each year and don't like sleeping on grandma's couch, then this is a great deal," Nusbaum said. "But if you're not a vacationer, then I wouldn't recommend this, just as I wouldn't recommend you buy a car if you don't drive."
Nusbaum and Schreier both said it's important to understand what you're purchasing -- most importantly, when and how the time can be used. Is it fixed for the same week of every year? What is the policy for transferring the stay to another city or resort? Also, are you buying a deeded interest, or just access to the resort?
It's also important to find out about maintenance fees or other hefty, unexpected fees. Some timeshares require an owners vote to approve a developer's request for a special assessment fee.
Schreier says prospective buyers should be sure they're not lured by sales pitches, often made at high-pressure presentations put on by developers.
"You have to remember to think like a consumer as you would in any other situation. They're trying everything to get the sale that day, so if it sounds too good to be true, then it is. If they're saying it's perfect, ask questions and consider whether it makes sense for you," she said.
Schreier said it's important to look at a timeshare as a long-term commitment, and said reselling or renting one out can be extremely difficult.
There is a secondary market for timeshares, in which the properties are resold by their owners, but timeshares depreciate dramatically in value, Nusbaum said. A timeshare purchased for $15,000 would likely sell for about $5,000.
Prospective buyers might think that purchasing from a timeshare owner could seem like a steal, but Nusbaum warns, buyer beware. While there are consumer protections and regulatory oversight of the industry, that would not apply to a sale in the secondary market. Most important, the buyer should be sure that all of the rights to the property or access to the facilities would transfer with the deed. While a contract with the developer is government-backed, that protection may not extend to the person the timeshare is resold to.

"Sure, there are great bargains out there, but it's the same as if you opened a newspaper to buy a used car," Nusbaum said. "You don't really know what you're getting."

Copyright 2008 The Associated Press. All rights reserved.This material may not be published, broadcast, rewritten, or redistributed.