Question. Recently, we have received a number of promotional letters indicating that we can win anything from a sizable amount of cash to a color television if we schedule an appointment to consider the purchase of a time-sharing condominium unit.
While we are willing to spend the time to see this presentation and maybe win a prize, we do not know enough about the time-sharing concept. What advice can you give us?
Answer. If you have the time -- and perhaps the patience -- to put up with the sales presentation, it certainly pays to make the appointment. However, you should look long and hard before you commit yourself to purchasing any kind of time-sharing condominium unit. If you do want to buy into a time-sharing arrangement, you should do so cautiously and with no expectation of profit.
Oversimplified, time-sharing is a way of making money for developers. Instead of selling a condominium outright, the developer is selling ownership of the same unit for parts of the year and is making a lot more money in the process.
Many time-share operators permit a buyer to purchase a week or more, or even a season, such as the spring or summer. You own that time period, and other purchasers will own subsequent periods. Usually, these condominiums are fully furnished. In effect, you are moving into a hotel for the period that you purchased.
My concern with time shares is that people do not fully understand what they are buying. The documents are vague, written in complex legalese and often high-pressure sales techniques are used In fact, from my personal experience, they won't let you take the proposed contract to your lawyer before you sign it.
In fairness to the industry, however, it has taken steps to change its reputation, primarily because of legislation that has been enacted in many states throughout the country.
If you are considering a time-share unit, do not jump in without giving the matter serious thought. Don't be convinced by the sales rhetoric that you must buy now or the deal is off. As you know from receiving all of those sales brochures, there will always be another time-share unit and another sales representative if you remain interested.
Here are some questions to ask before signing up to purchase:
- What kind of title will you receive?
- Are you getting fee-simple ownership of your time interval or are you merely getting a long-term lease?
- What kind of mortgage financing is available and how much will you have to pay? Don't forget you will have to make your mortgage payments every month throughout the year, even though you may have the use of your apartment for only one or two weeks.
- Who controls the condominium or homeowner's association? Do you have a vote in the association, or are you delegating all of your responsibilities to the developer, who in reality now becomes the new property manager?
- What are the costs over and above the mortgage payments? Often, you will have to pay for such items as condominium maintenance, weekly cleaning, use of the swimming pool and other amenities, and these fees may continue on a monthly basis.
- Are there any tax benefits for you? Are the real estate taxes allocated, and are you entitled to treat this property as your second home, or is it an investment property for tax purposes? Discuss this important question with your tax advisers.
You must ask these questions of the real estate agent and make sure any representations by the agent are put in writing.
One of the interesting developments of time-share operations is the exchange program. Under this system, you are permitted to swap all over the world. But what restrictions are there? What fee is charged to participate? Are you eligible to participate in only one such program or can you join others? I know of one couple who swapped a Christmas week with another couple who were only able to swap for a February week in Canada.
In the final analysis, the decision to purchase a time-share unit depends on your lifestyle. Many people want to take a vacation at the same place every year; others like to travel around. If you decide you like a location, can afford the monthly payments, but recognize that it is most likely not a profit-making investment, then perhaps a time-share arrangement is right for you.
And getting out of the time-share may be impossible. I constantly get calls -- and complaints -- that owners cannot sell. I once represented an elderly couple who could not travel anymore to their time share and wanted out. We finally were able to convince the developer to take it back, but only on the condition that my clients paid two full years of mortgage and maintenance charges.
Incidentally, look on the back of the sales promotional letters. It should contain a statement of the odds of winning that color television, the cash or some piece of cheap jewelry. I know one person who thought he was very lucky when he won a power boat. When he went to collect his prize, it turned out to be a 10-inch, battery-operated child's toy.
And the latest scam -- in my opinion -- are the robotic telephone calls we are getting telling us we just won a free cruise. Good luck with that!