Canadian Finance Blog

The Smart Consumer’s Approach to Buying Timeshare Resales

Posted: 17 Sep 2011 02:00 AM PDT

Using a marketing model unlike that of any other good or service in any category, timeshares have traditionally been sold through sales presentations. For decades, timeshare developers invested heavily in seeking qualified (and sometimes not so well-qualified) consumers, whom the developer would gladly woo with mini-vacations, theme park tickets, electronics and other "gifts" in return for that consumer's willingness to sit through a timeshare sales presentation.

Purely as a business sales model, there has never been another industry, including that of luxury car manufacturers, as willing to spend as much money speculatively per potential buyer as has the timeshare industry. But such front-end loaded marketing expenditures come at a cost, a cost that must ultimately be built back into the sales price of the product.

Moreover, the investment in every consumer who accepts the gifts and sits through a timeshare sales presentation but does not make a buying decision has to be absorbed into the price paid by each of the couples who does purchase a timeshare.

Caught Up in the Excitement

When you look at this sales process pragmatically, you might wonder why anyone buys timeshare during a timeshare sales pitch.

Although the economic downturn of the last three years has made consumer financing more stringent, many owners bought timeshare because developer sales included the offer of financing. Other owners bought because they felt confidence in a purchase made directly from a branded hospitality provider—a name well known in the hotel industry as well as in timeshares.

Still some made the decision to buy timeshare because they were caught up in the excitement of the vacation they were currently enjoying, were "sold to" by skillful sales associates or simply because they liked the product and were willing to pay the price.

It's a Whole New World

As the first generation of timeshare owners (remember timeshare didn't have a significant presence in most of the world until the 1980s) have reached the point they no longer want to take timeshare vacations, the number of timeshares for sale on the secondary market has exploded. And from the fallout of the explosion, a strong and vibrant timeshare resale market is carving out its place—a market you may want to jump into.

Timeshare resale is not driven by marketing costs, but instead by market value. This means, that consumers buying timeshare from other consumers, even if it is via a timeshare broker or agent, recognize that like buying a resale automobile, the product has depreciated in price. The first buyer has to shoulder the cost of the developer's advertising investment but the second buyer is paying a price defined by the consumer market … the timeshare resale buyer is buying at market value.

Canadian Timeshare Owners and Canadian Timeshare

Until the fall of 2007, Canadian timeshare buyers had, for at least thirty years, been in the position of paying for United States timeshare with Canadian dollars at an exchange rate that worked against Canadians. But as the US dollar has weakened, the playing field has become leveler. During the past few years, parity has shifted back and forth between the US dollar and the Canadian Loonie, but has remained roughly equivalent.

As long as the US dollar remains weak, Canadian consumers can head south to enjoy warmer winters in United States timeshares, taking advantage of the competitive prices of timeshare resales as well as a Canadian dollar that has strong buying power in the US.

For Canadians interested in buying Canada timeshare, global economic challenges again work to the benefit of Canadian buyers. American and European buyers have tightened their belts, cutting back on purchases of luxurious ski resort or mountain retreat timeshares in Canada, creating reduced demand and driving the price of Canadian vacation ownership even lower.

Buy Safe and Buy Smart

If you see the value in locking in the price of a lifetime of vacation accommodations at today's prices and recognize the convenience and time savings of having a pre-paid, pre-planned vacation that rolls around year after year, then a timeshare resale is likely to be a great purchase for you. Know before you buy, that timeshares are an investment in vacationing, not a traditional investment from which you seek to gain financial return or appreciation.

Look at the cost of maintenance fees and or taxes you will need to pay annually. If you want to vacation in different destinations each year, consider the exchange value of the timeshare you are purchasing. Timeshares in peak times at high-demand destinations are easier to exchange than are smaller timeshares in off-season or low-demand resorts. Look at the potential cost to exchange your timeshare. Some resorts offer timeshare owners an internal exchange at a select group of resorts for little to no exchange fee. Timeshare exchange may also be made through membership with a timeshare exchange company. Such companies vary in cost, with some charging an annual membership fee and others charging you only a flat fee at the time of exchange.

In addition to which timeshare you buy, you also have options regarding how you buy it. You may wish to purchase a timeshare resale through a timeshare by-owner service or you may want to deal only with timeshares sales facilitated by a timeshare broker. Whichever option you choose, do your homework first.

Look to see what other comparable units or intervals are selling for as resales at the resort you are considering. If you are buying through a by-owner service or timeshare broker, look for one with a large, well-established website, and ideally a company that is a member of both ARDA (the American Resort Development Association) and CRDA (the Canadian Resort Development Association). Be extra cautious of timeshare sold through online auctions, as they may have many hidden fees or costs that aren't evident until you are deep into the closing process.

Before you buy, understand that typically purchases of timeshare are governed by the law of the country in which the timeshare stands, but can occasionally be governed by the country in which a timeshare company is headquartered. Canadian law, like those in other countries, has ramped up in recent years, taking a tougher position on timeshare sales and resales for the increased protection of the consumer. You can view the most current Canadian regulations at Can LII under the heading: Time Share and Points-Based Contracts and Business Regulation.

Consider renting timeshare at a location where you are interested in buying as a way to try before you buy. Although over 80 percent of timeshare owners use and enjoy their timeshare, vacation ownership is not the right choice for everyone. Before buying a timeshare resale, take your time to shop, study and understand what you are buying; timeshare that you don't use is never a smart way to spend your hard earned money.

Jason Tremblay is the founder and CEO of Sell My Timeshare NOW and Timeshare Broker Services, the leading online provider of timeshare resales, rentals and resort services. An entrepreneur since the age of fifteen, Jason has founded multiple fast-growth companies. He is recognized for his skill in pinpointing emerging business opportunities and his leadership in growing businesses to profitability and market domination as demonstrated by Sell My Timeshare NOW’s strong industry position.

The Smart Consumer's Approach to Buying Timeshare Resales originally appeared on Canadian Finance Blog on September 17, 2011.