Timeshare Purchase Options

While millions of families are now enjoying the experience of timeshare ownership and many others are contemplating buying, it is worthwhile to explore two basic options for purchasing a unit:

1. Buying through the resale marketplace, or
2. Buying directly from the developer

Buying Through the Resale Marketplace

Within the past ten years, the marketplace for timeshare sales has changed dramatically. Until the mid-90's, most buyers bought directly from the developer. The resale marketplace then began emerging through the efforts of resale brokers and publications such as TimeSharing Today Magazine. Now, because of the Internet, buyers have more access to information and increased options for purchasing, as can be seen in the dynamic growth of online timeshare marketplaces, such as RedWeek.com.

Years ago, the tendency was to buy on impulse during a sales presentation conducted on-site by the developer at a resort. After all, it is quite tempting to buy while you are having a fantastic vacation and are enjoying the amenities of the resort. While it's true that many timeshare sales still take place in this way, buyers are now able to better equip themselves to make an informed decision about their buying options. Buyers can gain valuable insights about a particular resort by checking prevailing resale prices and learning about the experiences of various owners through articles, online forums and resort ratings. TimeSharing Today and RedWeek.com offer a wealth of information for both buyers and sellers. This broad range of objectivity is not readily available from developers.

Today, many owners will tell you that, in their opinion, the best way to buy timeshares is through the resale marketplace. The primary reason behind this is simply that resales cost substantially less than units offered by developers. If you study the comparative prices, you'll find that resales run about 35% to 50% below developer prices. It is ironic that, for the most part, a timeshare is one of the only real estate assets that depreciates immediately upon purchasing, pretty much the same way as a new automobile. This disparity in pricing may be due, in part, to the fact that, once the unit is sold, most developers do not maintain active resale services to help owners dispose of units that the owner no longer needs or is able to use. The typical developer's business model is based on building and selling new units or selling those units that have been turned back to the developer or abandoned by the owner. Units that have been reclaimed by the developer are recycled at the same or close to the original selling price. For years, the lack of developer support for resales left owners on their own to find a buyer. Now, the availability of timeshare resales is widely known and very accessible.

Another reason for the difference between resale and developer pricing can be found in the costs associated with the marketing and sales of developer-sold units. It is estimated that as much as 50% of the purchase price of a timeshare unit, sold by the developer, is expended on sales commissions, advertising and promotional incentives to get prospective buyers to tour a resort and sign up. So, after these cost-of-sale expenses are taken into consideration, the real value of a new timeshare comes considerably closer to its resale value.

An often overlooked aspect of timeshare sales is that, in most cases, the only difference between a unit purchased from the developer and one that is purchased as a resale from an owner is the price. There are usually no, or very few, qualitative differences between units of that same size with similar amenities. The developer tends not to discount a previously-owned unit. The owner, to be competitive, tends to sell at lower prices, thereby creating a buyer's market in resales.

Buying Directly from the Developer

So, then why buy from a developer when there is so much of a price difference? Let's consider some very good reasons. Many hospitality companies such as Marriott, Hilton and Disney have invested heavily in developing timeshare resorts. There is an element of trust associated with buying directly from an established and respected brand in which you have confidence. In today's rapidly expanding vacation ownership industry, developers know that this type of lifestyle resort is very lucrative and salable. New construction is very robust. It then becomes obvious that new construction would not be available in the resale marketplace and that your options would be limited to buying only from the developer.

If you discover a destination and resort that you truly love, and there is availability during your favorite season for travel, you might just decide that it is worth the price to buy from the developer and enjoy the amenities of a brand new unit. Buying early will definitely afford you the widest range of choices in terms of available weeks or seasons, a unit's amenities, its location at the resort, and pricing.

The same qualitative factors would also apply to buying into an established resort from the developer, especially if you have not found anything else comparable in the resale marketplace. In addition, some special perks and incentives, such as rewards programs, free bonus vacations or extra points may only be available when the timeshare is bought from the developer. Even though resales are available from owners or brokers, the benefits of the perks may be worth the extra cost of purchasing from the developer.

If you will need financing to purchase a timeshare, the developer may offer financing options that you may not be able to get when buying a resale. Regardless of which way you purchase, from the developer or through a resale, be sure to ask about financing if it is not initially offered. Some owners, who are eager to sell, may finance the deal in order to make the sale.

Most prospective buyers attending a sales presentation and end up buying without trying to negotiate the price. Developers are fully aware of the prevailing lower prices of timeshare resales and so are the sales representatives. Just think about it. Here you are, sitting in the sales office, an interested and qualified buyer who has traveled a long way to get there. The sales rep has offered you a special discount for signing up "today." Once you have the final price, there is absolutely no rush to accept it immediately. Make an offer just as you would do in a resale. Chances are you can close, or reduce, the gap between the asking price and the fair market price just by asking. The sales rep has this one chance of closing a sale and you might as well take advantage of the situation to get the best deal possible.

Conclusion

In the final analysis, no matter how you buy, it's a good policy to buy at a resort you would like to return to for many years in the future. That's simply the best way to be assured of getting the most value and enjoyment from your investment in vacation ownership.