What Is a Timeshare and How Does It Work?

If you have a family member or friend who travels to the same destination regularly, 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, 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 owning shares in a crowdfunded real estate fund.

However, ongoing maintenance fees and confusion about contracts or usage can deter potential timeshare owners.

How Do Timeshares Work?

When it comes to how timeshares work, ownership rules and availability vary by timeshare organization. Generally, your timeshare will be usable during specific 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 makes it easier to plan your annual vacation, as you know when to request time off and avoid other commitments.

Floating Week Timeshares

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

However, there may be restrictions associated with this type of timeshare. For instance, the choice of the week often happens on a first-come, first-served 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 from 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 visit and when you visit. This type of timeshare offers the greatest ownership flexibility.

Timeshare Seasons

Seasons are defined by your timeshare club. They are typically divided into more and less popular categories based on demand. Your timeshare club may use names to indicate 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. To choose the right one for your needs, it’s important to understand the details of 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 owners usage every other year, while a triennial one offers usage every third year.

You might choose biennial or triennial ownership because of the cost savings compared to annual timeshare 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 a fixed-week timeshare, the maximum number of deeded shares for the property is 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 reverts to the resort company upon your contract’s expiration. While these types of timeshares might be less expensive, they can also be more challenging 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 associated with properties outside 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 and 99 years. When the contract expires, the share goes back to the resort owner.

Timeshare Rentals

While this isn’t a timeshare contract, owners may have the option to rent their week 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 list timeshare rentals.

These rentals can also be a good way to test out a specific location if you are considering buying a timeshare. This can help you determine whether you actually want to buy a timeshare at a particular area, since you can check out the amenities and the 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 is $24,170. It’s common to face high upfront costs when purchasing a timeshare. Plus, you might be asked to pay closing costs.

Some timeshare companies require a down payment. 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 buy 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 a lump-sum cost for timeshare owners. However, you will likely also be obligated to pay monthly or annual maintenance fees. Timeshare maintenance fees cover the costs of maintaining and repairing a resort. As with a condominium or townhome, the fees collected help maintain the property and its grounds.

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 your share value, the resort’s location, the number of points you earn, and other factors.

These fees are a major reason people want to exit their timeshare. While they may seem costly, timeshare sales staff would argue that a seven-day hotel stay would cost the same or more.

For most in the timeshare industry, annual maintenance fees are due every January, when owners often feel the financial pressure most acutely. According to Vacation Ownership Consultants, the average timeshare maintenance fee rose to $1,480 per weekly interval equivalent—the highest level the industry has recorded.

That data reflects a 36% increase in average maintenance fees over just five years, driven by rising property costs, ongoing resort renovations, and inflation. For many families, these annual fees are no longer affordable or sustainable.

What To Do If You Need To Sell A Timeshare

If you buy a timeshare and decide to get out of your contract, many companies can help you do so.

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.

Vacation Ownership Consultants

Vacation Ownership Consultants is a company that helps timeshare owners safely and effectively exit their contracts. They’ve spent more than 11 years providing reliable timeshare exit strategies to help owners exit their timeshare contracts when the long-term costs no longer make financial sense.

Their goal is to offer a transparent, ethical, and stress-free path to timeshare freedom. With years of experience in the timeshare exit industry, Vacation Ownership Consultants has built a strong reputation for integrity and results.

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 to exit your timeshare contract. For instance, they offer to list it for resale. Plus, they also provide 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 release your timeshare if there is an outstanding 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 another firm and formed their own legal team to help timeshare owners exit 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 understand whether the timeshare is worth it given what you get in return.

Make sure you think through your decision before purchasing a timeshare, and consider renting first if you have a particular property or location in mind.

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