Before You Buy a Timeshare
Beware of envelopes bearing gifts. Many New Yorkers have recently gone to their mailboxes and were thrilled to receive the happy news that as part of a promotional effort to sell timeshares, they were the lucky winners of a free trip to a tropical paradise. We all know it's hard to resist the lure of a dream come true for little or no apparent expense. Unfortunately, all that glitters is not gold and all that's promised is not delivered Often the free trip turns out to be a grueling trek from timeshare to timeshare, punctuated by endless sales talks, and topped off by a whopping bill for hidden costs and unforeseen charges.
The New York State Attorney General would like to offer you some advice and show you how to protect yourself when you are contemplating buying a timeshare.
Of course, not every prize winner turns out to be a loser, and there are reputable sellers of timeshare products that offer their clients all that they promise. How can you sift through the offers and figure out who's scamming you and who's not?
Read The Fine Print
A timeshare is defined as any arrangement for sharing ownership of a vacation home, condominium or other interest in realty where each of the joint purchasers may occupy the unit during a specified period each year.
Any timeshare offer mailed to your home in New York is subject to New York law. Check the letter that you received. Any offer of a free or low cost tour which includes a timeshare presentation must state that the complete offering terms are in a New York offering plan available from the sponsor. The fact that an offering plan has been filed in New York gives you extra protection. Sponsors wishing to market timeshares in New York are required to fully disclose the terms, conditions and facts of the transaction to all prospective purchasers. Moreover, the seller must also offer buyers an opportunity to cancel their purchase for a period of seven business days after they have signed a contract of sale.
Sometimes the developer avoids using the term "timeshare" altogether, substituting "interval ownership" or "vacation club ownership" for the word "timeshare." All advertisements to New Yorkers must clearly and conspicuously use the term "timesharing" to describe the product offered for sale by the sponsor. In any event, no matter what terminology is used, the offer is subject to the same rules and regulations. So be sure that before you pack your bags you establish that the timeshare is, in fact, on file in New York.
Playing The Odds
Some of these offers are designed to create the impression that you've already won something, like a sweepstakes or a lottery. They may promise you a car or a television or some other type of extravagant prize. However, in order to collect, you are usually required to visit the timeshare. Don't be fooled. If any advertisement or direct mail piece makes such an offer, then it must state the following:
- A full description of the exact prize won;
- The cash value of the prize;
- Whether or not you are required to submit to a sales presentation;
- All terms and conditions attached to the prize;
Many times a seller's letter will often appear to be an urgent notification to winners in a contest informing them that if they want to take advantage of the special deal that is being offered, then they must act now. This sense of urgency is meant to sweep the recipient into impulsive action.
This sales technique is often effective, but it is against New York law. Under the law advertisements must "not appear to be an urgent and official notification to winners in a contest and must not use any other means to convey a false sense of urgency or importance." Reputable timeshare developers are familiar with our local requirements. If their competitors are ignoring our advertising rules, there may be other traps that they're setting for you.
How To Protect Yourself
Before you sign anything, make sure that you have been given an offering plan that's been filed in New York, even if the timeshare is out-of-state or you are out-of-state. Unless the entire sale is transacted out-of-state, the developer should turn away your business if he or she has decided not to file in New York. New York law requires that if any business is transacted in New York, the offerors must be registered here
If a New York plan has been filed, you have the right to cancel within seven business days after you sign a contract. If a plan has not been filed, you might be dealing with an out-of-state developer who is running the show in whatever fashion he or she fancies. You should know that New York law requires that any seller doing business in the state must provide prospective buyers with full and complete information concerning the material facts of the deal. These facts might include the identity of the sellers, their financial condition, the status of the property for sale, the existence of any risks or problems and any other issue or matter which a prospective buyer may consider important in his or her decision to purchase.
Once you have the offering plan, be sure to read it before the seven day cancellation period expires. The Attorney General urges that you show it to your attorney or financial advisor for assistance in determining whether or not to stay in the deal. Don't let high pressure tactics force you into signing anything, because some salespeople specialize in aggressive sales techniques. Don't be afraid to ask questions and insist that the answers be in writing, or shown to you in the plan. What's most important is that you use your best, and most prudent judgment, for these are often long term commitments that once entered into, are difficult to get out of. Remember, you can always just say no.
Before you decide to buy a timeshare, you should examine whether the deal makes sense in light of the continuing financial and legal obligations involved. The purchase of a timeshare is likely to be a permanent benefit and commitment that you might have for the rest of your life.
Examine the special risks summarized at the front of the offering plan.
The factors to be considered include:
- In a right-to-use timesharing plan, if the sponsor declares bankruptcy, the rights of all purchasers may be terminated.
- Timeshares should be purchased for personal recreational use and not for profit or investment. Often no resale market exists for timeshares.
- Most real estate brokers will not list timeshares. You can try to sell your timeshare on your own, but this may bring you into direct competition with the sponsor who may have a large inventory of unsold units.
- Full control for the adequate operation and maintenance of the timeshare lies with the developer or a successor operator. Therefore, the facilities and services will be available only as long as the sponsor is able to provide them. During the early years of the project, the failure of the sponsor to meet his or her obligations will require a small number of timeshare owners to cover the costs of keeping the entire project going.
What's It Worth? The Bottom Line
After the risks have been examined, you still have to decide whether the convenience and appeal of the timeshare is worth the price. You should compare the expenses with the cost of a comparable hotel or resort for the number of years you plan to own the timeshare and the time value of your money. Consider that you're going to have to produce a down payment. If you borrow the balance due, in addition to any financing costs for the remainder of the purchase price, you have to factor in the annual timesharing charges necessary to maintain the unit. You might also be liable for any special assessments that timeshare management might deem necessary for future operations. These assessments are hard to predict and might arise when you least expect them. You will still be responsible for paying for typical vacation costs, such as meals, transportation and miscellaneous expenses. Again, you should consult with a financial advisor.
The new breed of timeshare developers has seized upon the concept of flexibility to help market their units. You can sometimes trade or swap for different weeks of the year at different resorts all over the world. You should keep in mind, however, that if you purchase an undesirable week at a bargain price, you're probably not going to be able to trade it for anything much better. Some timeshares are set up so that once you've purchased, you still are not guaranteed a specified time interval. These resorts are operated on a first come, first serve basis and their internal reservation system requires that owners get in line to obtain a reservation. You're usually promised that you'll get some reservation, but it may not be your first choice.
The New York State Attorney General enforces the rules and regulations which protect consumers against fraudulent timeshare practices. If you have any questions or concerns, don't hesitate to call or write.
The Attorney General and his staff are here to help you.