Interested in a Timeshare? You Can Be Stuck With It Forever -- Literally

The timeshare industry is worth a cool $8.1 billion. To put that into perspective, that's a little more than the entire music industry's revenue for a year. Before jumping into that pool of timeshare owners, consider how much the venture will likely cost you over the long term. You may also want to consider an exit strategy because getting out of a timeshare can feel next to impossible. 

What is a timeshare?

If you've ever received an invitation for a free weekend getaway that seems too good to be true, the people behind it were likely selling timeshares. They offer weekend stays in return for a "few hours of your time." While they have you in a room, they use phrases like "vacation lifestyle product" to describe what they're selling.

Buying into a timeshare means sharing the cost of a vacation property with unrelated parties. In theory, you each own a fractional share of the property and take turns using it. Usually, timeshare owners use the property in week-long increments. Timeshare sales forces use this as a selling point. They tell prospective buyers that sharing the price of a vacation spot costs far less than purchasing a vacation home on their own.

Depending on the company, potential buyers may also be told that they can "trade" their property for another location, so they're not committed to visiting the same spot year after year.

The purchase itself is relatively straightforward:

A buyer pays the initial cost of the timeshare. The average price is $24,140, according to the American Resort Development Association (ARDA). They either pay cash or finance their purchase.

The buyer pays a maintenance fee. While the cost varies by property, the fee averages $1,000 annually. This fee is due whether the timeshare owner visits the property or not. 

The downsides of timeshares

We're surrounded by advertisements for timeshare exit companies promising to help timeshare owners get out of their contracts. Given the number of challenges facing timeshare owners, it's no surprise that many want a way out to improve their personal finances. Here are some of the issues timeshare owners run into.

Upfront costs

It's easy to fall for a slick sales pitch, especially when a salesperson makes it sound like the purchase will benefit your family. They may say, "Your children and grandchildren will use this property for decades to come." 

The problem with falling for a slick pitch is that you may pay far more upfront than you're comfortable paying. Before shelling out $24,000 (or more) for a timeshare, ask yourself if you have enough money in your emergency savings account to carry you through an economic downturn. Also, take a look at your retirement account. Are you on track? 

Fees forever

As long as you own the timeshare, you're responsible for paying your portion of upkeep. While annual timeshare fees vary by location and property type, you can be sure of one thing: The fee will increase over time.

Strict schedules

Unlike a vacation home you own, your visits to the timeshare will be strictly scheduled. Before you buy, you'll likely hear whether your timeshare works on a "fixed-week" or "floating-week" schedule. If it's a fixed-week, you'll visit the property the same week each year. Floating-week means your week may be different each year.

A single timeshare unit can belong to 52 different families. That means that 51 weeks of the year may be spoken for, and you'll have to make do with the week available. When money is coming out of the monthly budget to pay for a timeshare, limited vacation times can be frustrating. 

Getting "stuck"

You're not alone if you're starting to think that a timeshare is not worth the money and frustration it will cost. Selling your fraction of a timeshare can be challenging, because it's not like traditional ownership of a home via a mortgage loan. Once in, you remain financially responsible until you can find someone else to take over.

Chances are, you'll lose money

If you decide to hire a timeshare exit company to negotiate your exit, you can expect to pay between $3,000 and $15,000, reports Fidelity Real Estate. And, if you decide to go it alone and advertise your timeshare for sale, it's doubtful you'll receive an offer for anywhere near as much as you've paid into the unit. 

AARP offers this advice to timeshare owners who want nothing more than to get out:

• Check with the resort. When you call, don't just speak with anyone. Specifically, ask to talk with the person who handles "deed-backs" or "surrenders." A deed-back or surrender is when you pay a fee and return the property to the company. 
• Share the details. Once you have someone on the line, explain your situation in detail. Ask them to provide potential solutions. Even if you've heard it's "impossible" to surrender your property, call the resort. They may not advertise their willingness to take possession of a previously sold timeshare, but it's in their best interest to do so. After all, they'll just resale it to another party. 

A word of caution: AARP warns that the representative you speak with may try to talk you into upgrading your timeshare plan before it allows you to cancel. Prepare in advance to say no, then stick to your guns. 

A few more steps to try

If you don't get anywhere with the timeshare reps, you may have to resort to the following:

1. Stop paying annual fees. Although it's not a great solution because the timeshare may report it to the credit bureaus, we mention this because it's what some timeshare owners resort to. Your refusal to pay fees may push the resort to allow you to surrender your deed. While fees may erode your bank account, they don't usually amount to enough to justify the resort bringing suit. 
2. Offer it on the resale market. You can market it anywhere, but sites like tug2.com provide forums where you can interact with other people in the same boat as you. As mentioned, you'll likely get little or no money for the timeshare, but you may find someone willing to take over the annual fees.
3. Consider a timeshare exit company as a last resort. The most important thing to remember about timeshare exit companies is that they don't do anything you can't do. For example, if you pay an exit company, they will call the resort on your behalf. The only reason to consider hiring an exit company is if you can't stand the idea of dealing with the timeshare company. 

There are millions of people worldwide who probably enjoy their timeshares and are glad they bought in. However, it's essential to know that your experience might be different. And if your situation is not what you hoped, it's good to know there is a way out.