According to one recent report, nearly 10 million U.S. households now own at least one type of timeshare product. This includes timeshare deeds, timeshare weeks, timeshare points, or membership into a timeshare club.
While a timeshare can open up your vacation potential and earn you access to some of the most exclusive properties in the world, it isn’t without its drawbacks. Today, we’re taking a closer look at how these deeds work so you can gauge whether it’s time to invest in one or not.
How Does a Timeshare Deed Work?
A timeshare deed is a specific type of timeshare ownership. With this setup, owners purchase vacation time at a particular unit at a resort, for a designated week (or weeks) during the year. In the United States, this is the most common and popular type of timeshare arrangement.
As you browse openings, keep in mind that each vacation unit will come equipped with 52 total timeshare deeds. Each deed applies to a fixed week. Owners can choose to purchase one deed or multiple deeds depending on their needs and future plans.
If you purchase multiple weeks and do not intend to use all of them, then you can rent your timeshare to others. Many people use this strategy to help offset the sky-high maintenance fees that can often accompany timeshare rentals.
What if you want to sell down the road? In most cases, these deeds are purchased as a “contract in perpetuity”. This means that they do not have a set end date, and owners will usually include them in their wills for their heirs to use and enjoy.
While timeshare owners will usually have the opportunity to sell their deeds down the road, this isn’t always the case. Be sure to understand your contract in full before signing on the dotted line.
Benefits of Deeded Timeshares
The deeded timeshare model goes back to the early days of this industry and is aligned with the traditional U.S. real estate model. In many contracts, timeshare owners actually possess a registered “deed” of their ownership in the resort. This means that they effectively own a portion of it.
As such, they usually serve on the HOA Board and possess voting rights. This means they can voice their opinion on the way that certain elements should be conducted. They may even have a say in setting the annual maintenance fees, as well as other policies that affect the resort.
Another benefit to keep in mind? By purchasing a deeded timeshare, you can guarantee that you’ll have at least one week of vacation secured at an exclusive resort. Depending on where you purchase, this can put you at a major advantage.
Many resorts, especially in high-profile tropical destinations, tend to fill up quickly, even years in advance. It can be nearly impossible to get in, even as an insider. However, if you’ve pre-purchased a deed at one of these locales, then you can rest assured that your spot is secured.
Drawbacks of Deeded Timeshares
While a timeshare deed can have its perks, it can often bring more trouble than it’s worth.
That report exclusivity we mentioned? If you don’t mind vacationing at the same spot year after year, then it’s fine. Otherwise, you may feel frustrated by the lack of options.
Not only are you limited to a certain time each year, but you’ll also be required to stay at the same spot. While there are certain exchange companies that can expand your options and allow you more flexibility in your timeshare, these services usually come with extra fees.
Speaking of fees, this is another point to consider as you browse available timeshare options. While you can expect to pay a certain amount each year in maintenance fees and utilities, there can often be other, unexpected charges that you aren’t as prepared to cover. These may include:
- Assessment fees
- Property upgrades
- Property repairs
As a part-owner in the property, you’ll be expected to help shoulder these expenses if and when they occur. For this reason, many people seek to sell their timeshares when the financial burden becomes too cumbersome. However, selling a timeshare deed is rarely simple or straightforward.
That’s why it pays to team with a reputable third party that will help you sell your timeshare when you’re ready to get out or purchase a new one when it’s time to try something different.
Timeshare Deeds vs. Right-to-Use Timeshares
When it comes to understanding timeshares, there are two main types to consider. As mentioned, the first is a deeded timeshare. The second is a right-to-use (RTU) timeshare.
In the latter, also called a non-deeded timeshare, buyers will simply purchase the right to use a certain property each year. Those rights might be to a specific week, a flexible/floating week, or simply in the form of credits, which are based on availability and can be used at the buyer’s discretion.
However, they do not retain any type of ownership in the resort, nor do they receive any kind of deed. These types of timeshares are more popular for properties outside of the U.S., especially in resorts that have more complicated laws around foreign ownership.
With these types of setups, there is usually much more built-in flexibility. Buyers will usually purchase timeshare “points”, which they can then use within a greater resort network, allowing them a greater number of options when it’s time to plan their annual getaway. However, they are usually restricted by more specific terms if they want to rent out their unit to others.
Unlike deeded timeshares, which can exist in perpetuity, most RTU timeshares do have a set end date. Most of the time, they are designed to last between 20 and 30 years. As such, most buyers opt to structure their points within a trust, along with their certificate of timeshare ownership.
Benefits to Owners
If you’re considering a deeded timeshare vs. an RTU timeshare, then it helps to know what you could stand to gain (or lose) with each one.
Let’s start by considering what would happen if the resort in question went into bankruptcy or experienced some other kind of financial distress. If you were in an RTU arrangement, then your ownership would simply diminish, and you would have no other choice but to walk away.
However, with a deeded timeshare, you could stand to earn some of that money back. If the resort sold, you could gain access to some of those proceeds. This can help soften the impact and allow you to invest in another timeshare if you desire.
Then, there are differences to note in terms of the resale process. As we’ve covered, deeded timeshares can be very difficult to get rid of, and usually are only eliminated if an owner:
- Sells the timeshare
- Gives the timeshare away
- Transfers the timeshare through legal action (such as a foreclosure)
If you plan to purchase and pay for a timeshare that your future children and family members can enjoy even after you’re gone, then a deeded timeshare is the way to go. Otherwise, an RTU timeshare could expire before you’re ready. However, most vacation clubs will allow you to purchase additional points to extend your time, and you can also buy additional time online through special resale markets.
What About Points-Based Deeded Timeshares?
Are all points-based timeshares purchased on an RTU basis? Or, can you find points-based deeded timeshares that offer more flexibility than their traditional alternatives?
The answer is yes, but you’ll need to do a little research. Some vacation clubs will offer a deeded, points-based system that can offer the best of all worlds.
As you might expect, these options are preferred, as they do not tie owners down to a specific time of the year. Some will even operate on what’s known as a “floating week” basis, which means buyers can usually book one week within their specific ownership season.
Many times, you can also choose between a variety of property units and resort locations. If you know that you can take an extended vacation at least once a year, but you aren’t 100% sure when or where you can go, then this may be the ideal route for you.
As you browse your options, it’s important to realize that the more exclusive, higher-value units will usually come at a higher price than other, less-desirable spots. This means you’ll spend more “points” to stay there. Once you visit a resort a few times, you can understand which units are the best ones for your family, and book accordingly.
Learn More About Timeshare Deeds Before You Invest
As you can see, there’s more to timeshare deeds than what meets the eye. While they can offer plenty of benefits, it’s important to know what you’re getting into. If you’re willing to meet the terms, then you could enjoy access to a built-in vacation, every year!
At the same time, timeshares can also be riddled with red tape. An experienced reseller can help you navigate all those loopholes to find a setup that works for you.
In the meantime, we’re here with all the latest business, technology, and lifestyle news you need. Be sure to check back often for more informative guides!