What Is a Timeshare and How Does It Work?

If you have a family member or friend who periodically travels to the same destination, they likely have a timeshare. These vacation properties get their fair share of both good and bad publicity.

But what is a timeshare, and how does it work? Also, how can you purchase one or determine if it is the right option for you?

Whether you’re considering buying a timeshare or are interested in learning about how they work, we break down everything you need to know.

What Are Timeshares?

In a nutshell, when you own a timeshare, you possess fractional ownership of a vacation property.

Similar to owning fractional shares of stock like you can with free investment apps, a timeshare is just what the name implies. It is a share of time in a property.

Depending on the organization that owns the timeshare, your ownership contract may or may not include an interest in actual property.

People are attracted to timeshare ownership because it can be more cost-attainable than owning a vacation home or condominium outright. It also gives you the confidence of knowing you’ll get to go on vacation every so often.

Better yet, you don’t have to maintain your timeshare property. The timeshare company handles all of the property’s maintenance needs. This is similar to when you own shares in crowdfunded real estate.

However, ongoing maintenance fees and confusion about contracts or usage can be a deterrent to timeshare ownership.

How Do Timeshares Work?

When it comes to how timeshares work, ownership rules and availability vary based on the individual timeshare organization. Generally, your timeshare will be usable during certain periods of time.

Fixed-Week Timeshares

One popular type of timeshare is the fixed-week timeshare. With this type of agreement, you will have access to the property during the same week every year.

For instance, when my parents owned a timeshare property years ago, they could use it during weeks 20 and 21 of each year.

The benefit of a fixed-week timeshare is that you know which weeks your vacation will fall on every year. This can make it easy to plan your annual vacation since you know when you need to request time off or avoid other commitments.

Floating Week Timeshares

Floating week timeshares allow you to choose the week you want to travel to your destination. The flexibility that comes with a floating week timeshare can be an attractive feature.

However, there can be restrictions that come with this type of timeshare. For instance, the choice of the week often happens on a first come, first serve basis.

Also, timeshare regulations may restrict the week you choose based on the season or other factors.

For these reasons, it’s important to read the timeshare contract’s fine print when determining the flexibility of your floating week timeshare.

Points-Based Timeshares

Points-based timeshares work a bit differently than the other types of timeshares. With this option, you are awarded a designated number of points each year from your timeshare association.

You can use these points to choose which resort within the organization you go to and when you go.

This type of timeshare allows for the most flexibility in ownership.

Timeshare Seasons

Seasons are defined by your timeshare club. They are typically divided into increments of more popular and less popular in terms of demand.

Your timeshare club may have names to help you determine which seasons are most popular for staying at a particular resort, such as Gold, Silver and Bronze.

Knowing the seasons of the timeshare club you’re considering joining is important. This is because many contracts limit owners to certain seasons.

Types of Timeshare Contracts

There are several types of timeshare contracts. In order to choose the right one for your needs, it’s important to know details about each contract before making a purchase.

Biennial and Triennial Timeshares

Biennial and triennial timeshare contracts differ in that they don’t offer owners annual usage.

A biennial timeshare offers usage to owners every other year, while a triennial one offers usage to owners every third year.

You might choose biennial or triennial ownership because of the cost savings compared to timeshares that include annual ownership. However, the downside of this option is that your scheduled vacations are further apart.

Deeded Timeshares

Timeshares that have deeded contracts offer physical ownership of the property. In the case of a fixed-week timeshare, the maximum number of deeded shares for the property would be 52.

A shared deeded ownership is often held in perpetuity, meaning it’s an eternal ownership that is yours forever unless you sell your share, transfer it or bequeath it as a part of an estate.

Leaseholds

If a timeshare has a leasehold agreement as a part of the contract, it means that your agreement doesn’t include ownership of the physical property.

Instead, you’re purchasing the rights to rent the property during the specified fixed or floating weeks for a certain number of years.

The share in the property goes back to the resort company once your contract expires. While these types of timeshares might be less expensive, they can also be more difficult to sell.

Since there’s no actual ownership with leasehold contracts, you could be better off planning your vacation using one of the best vacation rental websites instead of signing up for a timeshare leasehold contract.

Right-to-Use Timeshares

Right-to-use timeshare contracts are usually found with properties that are out of the country. For instance, you can’t own property in Mexico unless you are a resident of that country.

Instead, you can sign a right-to-use contract that grants you access to use the property. These contracts generally last somewhere between 30-99 years. When the contract expires, the share goes back to the resort owner.

Timeshare Rentals

While this isn’t a type of timeshare contract, owners may have the option to rent their week out to another party if they cannot visit the resort during their designated week.

Sites such as Redweek Rentals share timeshare rental listings with the general public. Alternatively, some timeshare clubs offer their own rental advertisement sites or pages for owners to advertise a timeshare rental.

These rentals can also be a good way to test out a certain location if you are considering buying a timeshare. This can help you determine if you actually want to buy a timeshare at a specific location since you can check out the amenities and property.

How Much Do Timeshares Cost?

Timeshare costs vary based on several factors.

These can include:

Ownership rules
The type of contract
A location’s popularity
The ownership week
And more

According to the American Resort Development Association, the average cost for a weekly interval timeshare in 2021 was $24,140.

It’s common to have high upfront costs when you purchase a timeshare. Plus, you might be asked to pay closing costs.

Some timeshare companies require a downpayment. Others are connected with loan companies to help you finance the upfront costs of purchasing a timeshare.

Keep in mind that using a loan to purchase a timeshare will increase your overall cost since you pay interest on the loan.

Along with upfront costs such as the purchase price and any closing costs, you also need to understand maintenance fees and how those factor into the cost of ownership.

Maintenance Fees

Upfront costs are typically the highest lump sum cost to timeshare owners. However, you will likely also be obligated to pay monthly or annual maintenance fees.

Timeshare maintenance fees cover the expenses required to maintain and repair a resort. Similar to owning a condominium or townhome, the fees collected ensure the property stays in good condition and that the grounds are maintained.

You can expect to pay an average of $1,000 or more per year toward maintenance fees for your timeshare. The total fee depends on the value of your share, the location of the resort, the number of points you get and more.

These fees are one of the main reasons people want to get out of their timeshare. While they may seem costly, timeshare sales staff would argue that spending seven days in a hotel would cost the same or more.

They might also argue that the peace and security of having a set-in-stone week designated for a vacation can alleviate the stress of planning a trip from scratch and ensure that you get a vacation each year.

Beyond that, they may even say that if you owned your own vacation property outright, you’d have to pay upkeep costs equal to or greater than your timeshare maintenance fee.

Of course, these arguments may or may not convince you that owning a timeshare is worth the cost.

How to Buy (or Sell) a Timeshare

There are many ways to buy or sell timeshares. It’s important to note that the costs will vary depending on if you go directly through a timeshare company or you opt for timeshare resale.

Vacation Ownership Companies

There are many resort companies that own and sell timeshares. You may want to buy a timeshare through the company that owns the resort to simplify the process.

Several companies build, manage and own timeshares, including:

If you’re interested in buying a timeshare directly from the company that offers the timeshare, consider companies like the ones mentioned above.

Keep in mind that you may want to choose a company based on where you want to vacation. For example, Disney Vacation Club specializes in timeshare properties located at or near Disney parks.

Many timeshare resorts have free giveaways if you come and spend a weekend or a few hours listening to their sales pitch.

For instance, you might get a free weekend away at a resort, a free TV or some other big ticket item for coming and listening to a sales pitch from a particular resort company.

Timeshare Resale

If you’re a current timeshare owner and are looking to get out of your contract or you are looking to purchase a timeshare at a lower price, there are many resale companies that will help you do just that.

However, when it comes to getting out of a timeshare, you’ll want to be careful about which company you use so that you don’t get scammed. We’ve found some of the most highly-rated timeshare exit companies.

Timeshare Specialists

Timeshare Specialists is located in Bozeman, Montana and has been in the timeshare exit business for over a decade.

The company offers several ways for you to get out of your timeshare contract. For instance, they offer to list it for resale. Plus, they also offer exit options that don’t involve waiting for your timeshare to sell.

Timeshare Specialists claims that you won’t have to pay any fees until the transfer of your timeshare is complete.

However, this company can’t help you ditch your timeshare if there is a current mortgage balance on your contract.

Newton Group

Newton Group has been in the timeshare exit business for almost two decades and is one of the most highly-rated timeshare exit companies.

As with Timeshare Specialists, Newton Group won’t ask you to pay any costs upfront. When you visit Newton Group’s website, you can get a free copy of their booklet, The Consumer’s Guide to Timeshare Exit.

An interesting fact about the Newton Group is that they’ve partnered with a group and formed their own legal team to help timeshare owners get out of their contracts.

This partnership allows them to offer affordable legal representation to their clients.

Learn more: Newton Group Transfers Review: Is This Timeshare Exit Company Legit?

Summary

Knowing what a timeshare is and how it works is important if you’ve ever considered buying one. They can be costly, so it’s vital to know if the timeshare is worth it in terms of what you get in return.

Make sure you think through your decision before purchasing a timeshare and consider taking advantage of a rental option first if you have a particular property or location in mind.