The basics on timeshares

You may not be able to afford a second home at the beach, but about 8 percent of all households in the U.S. own timeshares to cut the expense of annual getaways. It’s a $70 billion industry ... and it’s growing.

I hear from a lot of people who became timeshare owners through an impulse purchase. They were lured in by offers of free stays or extra benefits or enticing giveaways, and the next thing they knew they were the proud owners of Week 24 at a villa in Florida. Owning a piece of paradise may sound irresistible, but before you sign on the dotted line, make sure you are fully informed.

The basics:

A timeshare is a piece of property where you own a specific amount of time, usually a week per year, to use as a vacation home. For the entrepreneur who develops the property, it’s like selling the same property 52 times to 52 different people.

Types of ownership:

Deeded is when fractional ownership is sold as real property. You can do whatever you want with your property — use it, rent it, give it away, leave it to your children or sell it to another owner. You will pay maintenance fees, your share of taxes and possibly homeowner association fees. Some of these expenses may be tax-deductible.

Right of usage is when you have a contract that allows you to use the property, but the owner resumes full ownership and use when the contract ends. This may be presented as “vacation club membership,” and it usually relies on a reservation system — so you may not always be able to use your timeshare when you want. On the other hand, there is often a great deal of flexibility in where you may use your membership. If you like to stay in a different place every year, you may enjoy the choices this type of ownership offers.

Options for use:

You can stay at your timeshare property on fixed weeks, meaning the same time each year; on floating weeks, which offers a choice of weeks within a specified time range; on flex weeks, where your time rotates throughout the year; and on points programs that let you redeem your ownership in a variety of ways, from staying on properties to making travel arrangements within the property groups.

When you are tired of your home away from home:

There is a secondary market for rentals and re-sales of timeshares, but it is not robust. Unlike a vacation home, timeshares do not appreciate in value. Many owners who want to unload their timeshares will sell them for a nominal amount, with the new owners taking over payment of maintenance fees and membership costs. Timeshare rentals are usually handled by third-party brokers who are equipped to deal with additional liabilities, such as timely payment by the renter and coverage for any damage by the renter.