Why do timeshares loose so much value

[chubby Moderator Find all posts View Profile Close chubby]

I keep asking my self are we mad to go and waste our time going to a presentation of a timeshare when we could be having a good time on a beach or going some where seeing things
The moment you buy a timeshare you loose thousands of dollars why do they loose so much to what you can buy from resale yet we here so many going to presentations and then buying only to find they have done money in a big way.
Any other thing you buy in land or buildings will keep there value and gain value but not timeshare I know the holiday thing is you get a cheap holiday not if you pay the developers price it will be years before you get a head of the loss you made.
Then you have yearly fees to pay each year it is more then last year and when you want to trade into some place you get the same old thing sorry there is no trade so you say any rent avable o yes that can be arranged so you rent to get to the place you want to go to
So why do timeshares loose value so much and are we the biggest fools for buying and keeping the RCI and other exchange companys rich renting out our timeshares is it time to gang up show force and put a stop to it .
We are the loosers in a big way it is our timeshares we bought and our money we have lost is there any way to make these timeshares gain in value or are we going to sit and see it happen to more and more people most of us have been caught in these deals and we sit like little kittens and do nothing to stop it is there any way in these forums to get the value of our timeshares to even look like going up.

[Guest Close Quarterbore]

IMHO, the value of the timeshare doesn't go down... The problem is some people just pay 200% to 500% too much!

Sure, I could call my desired timeshare resort and tell them I am really anxious to buy a timeshare and can I attend an open house! When I get there I will be sitting at a table with some of the best salespeople in the world that have spent years learning to read people's emotions, understand what people want, and what things a person wants to hear in order for them to spend their money. They will show the charts and explain how this is an investment for your future, they will show how "low" your payments are compared at staying at decent hotel, they will show you the books with all the places you can go...

For an unexperienced timeshare person, they get really excited... they start evaluating their credit and think MAN DOES THIS SOUND GREAT and they spend their money.....

Then, after they buy they come to a place like here and they read a thread like this and say.... WHY WAS THAT SO BAD? Then they look at a page like this:

http://www.timeshareforums.com/main.php?page=ebay

And they discover that timeshare resales are the same unit, with the same resort, trade with RCI the same, have the same fees.... And they cost anywhere from 50% to 20% what they paid for their unit....

Then they go as they realize that the sales guy that sold them thier unit drives a fancy new Porche and has a Million dollar beach house... When they find that all they had to do was be patient and they could have bought 2 to 5 weeks for their investment they might just as now they can't sell their timeshare week in the resale market without stilll owing thousands of dollars...

THIS MESSAGE IS WHY THIS WEBSITE WAS STARTED IN THE FIRST PLACE!

[somerville Senior Member Find all posts View Profile Close somerville]

I read an industry paper that said 25% to 30% of the retail price of a timeshare was the cost of the real estate. Nearly 50% of the price was marketing cost. The rest was profit, holding costs, etc. Given these figures, it is no surprise that timeshares "depreciate" rapidly.

[Hostelling Senior Member Find all posts View Profile Close Hostelling]

Someone has To be The First To bite

If someone does not buy form the developer who will be selling to the secondary market?

Daniel

[BocaBum99 Super Moderator Find all posts View Profile Close BocaBum99]

Timeshares decline in value because the resale market is so weak. For every buyer of resale timeshares, there are at least 10 sellers. So, the prices stay depressed and will continue to be depressed until something changes that supply and demand imbalance. In essence, a major change in the entire industry dynamic needs to occur. Something big that will draw much more attention to the timesharing market.

I believe that Timeshare Rentals is potentially one of those big trends that could change that supply and demand imbalance. If the rental market for timeshares strengthens to the point where timeshares rent for the equivalent of suite hotels in vacation areas, then an investor class of timeshare buyers will come into the market to buy those properties that have very good discounted cash flows.

I don't think the resale market will strengthen until an investor class is attracted to it.

The interesting side benefit of such a class of timeshare buyer is that it will force resort developers to price much more closely to resale values over time as information diffuses out to the general population. But, the good news is that the high pressure sales pitch won't be required if there is a strong resale and rental market. People will come looking for timeshares rather than developers needing to lure them in.

[wombat Member Find all posts View Profile Close wombat]

I think there are 2 key factors: marketing costs (all the freebies given out during presentations, but how many actually buy?) and overpricing in terms of actual real estate (eg 52 weeks x US$10k or so for a 1-bedroom in Orlando = over $500k for a condo of about 700=800 sq ft!). However, if you price timeshares in terms of future holidays, relative to hotel room prices, then it doesn't work out so bad. So, I guess if hotel room rates keep rising, then that is one avenue for timeshare prices to stabilize.

[JLB Please excuse me, I'm a Dick. Not a moron just a Dick Find all posts View Profile Close JLB]

Everyone is Correct . . .

. . . so there's no need to rehash why retail is so much higher than resale.

Developers develop because they have determined that there is an ample supply of buyers, likely uninformed, who are willing to pay developer prices because they believe the things they are told to induce them to buy. Most buyers are not as astute as the seasoned veterans on TUG and TS4Ms. Most veterans on TUG and TS4Ms were not very astute at one time, the time they bought their first week(s).

It is revealing, and refreshing, to visit resorts where the developer is long gone and where they have their own resale program. True value in the marketplace, as fixed by supply and demand, sets the price, without artificial interference. Owners know what their weeks are worth because they know what they are selling for. They also know they will not get scammed by less-then-reputable resale companies.

When you vacation at those resorts you actually vacation. You are not hyped into attending a sales presentation you do not want to. If you are interested, resales are posted in some manner, but that is normally the extent of the hype.

The three resorts we stayed at in our January Florida trip this year are all long passed the developer phase and all have their own resale program, with folks on-site, or close at hand, to handle it.

The quicker a resort can get out of the developer phase and implement a resale program, the sooner the value of their weeks stabilizes, somewhere between the high price of retail and the low price of resale without resort assistance.

I am familar with some SW Florida resorts where if you could buy all the weeks at the current market price you would be paying close to or less than the actual value of the resort in the open market. I just hate it when someone tries to over-analyze timeshares with theoretical and irrelevant monetary evaluations, so here is mine for one resort.

There are 26 units and it is long-ago sold out. Let's say weeks are reselling for an average of $5000. If you multiply 26 units times 50 weeks times $5000, you get $6,500,000.

Three or four years ago two nearby lots sold for $6,000,000, to tear down what was on them and build a beach club. A nearby lot has four new condos going up on it, for $3 million each. Another nearby lot, with a single tear-down house, is priced at $3.5 million.

If the resort were sold as 26 full-ownership condos for a total of $6,500,000, each one would be $250,000. In that area $250,000 will not even by a 30-foot mobile home in the trailer park. We called on one this year, just for kicks, and it was $275,000.

If the resort were sold to an investor to be operated as a rental resort, the price would likely be around $20 million, or more.

So, the equity of the owners at that resort is actually greater than they have paid for their weeks.

The two resorts that constantly come to mind when it comes to the wide gap between retail and resale, and problems associated with owners wanting to sell, are the two Orlando mega-corporations who do not seem to be able to find a way to cut the cord connecting owners and developer, Westgate and Orange Lake. They have both been running their resorts for more than 20 years and they are both still there, on-site, selling new, but not offering a resale program. A google search of those two will find retail for $25000-plus and resales as low as $1000, with most in the mid 4-figures.

[Keitht Super Moderator Find all posts View Profile Close Keitht]

Quarterbore hit the nail on the head. They don't lose their true value, it is just that the cost of buying through the developer is grossly inflated.

[T. R. Oglodyte Moderator Find all posts View Profile Close T. R. Oglodyte]

After you buy a timeshare, the value does not change. The price does.

[Bill4728 Super Moderator Find all posts View Profile Close Bill4728]

I just hate it when someone tries to over-analyze timeshares with theoretical and irrelevant monetary evaluations, so here is mine for one resort.

There are 26 units and it is long-ago sold out. Let's say weeks are reselling for an average of $5000. If you multiply 26 units times 50 weeks times $5000, you get $6,500,000. (for the enter resort)

Three or four years ago two nearby lots sold for $6,000,000, to tear down what was on them and build a beach club. A nearby lot has four new condos going up on it, for $3 million each. Another nearby lot, with a single tear-down house, is priced at $3.5 million.

If the resort were sold as 26 full-ownership condos for a total of $6,500,000, each one would be $250,000. In that area $250,000 will not even by a 30-foot mobile home in the trailer park. (We called on one this year, just for kicks, and it was $275,000.)

If the resort were sold to an investor to be operated as a rental resort, the price would likely be around $20 million, or more.

So, the equity of the owners at that resort is actually greater than they have paid for their weeks.

JLB is correct that there are places were TS are massively underpriced. If the same buildings were simply call condos instead of TS, they would instanly be worth 10 times their current resale average price.

Marriott uses this technique to sell their TS at Newport coast. "our TS average cost is only $35k per week or less than $2,000,000 for the whole year" "there are TS with similar views selling for more than $3,000,000".
What Marriott doesn't say is that you could buy resale for an average of $17K and pay less than a million for that same condo.

There was another thread here about 6 months back with the same example (but at a TS with a lot lower average resale price) and at that TS, a 1 Br ocean view TS could be lived in year-round for about $250K.

[reddiablosv Member Find all posts View Profile Close reddiablosv]

JLB is correct that there are places were TS are massively underpriced. If the same buildings were simply call condos instead of TS, they would instanly be worth 10 times their current resale average price.

Marriott uses this technique to sell their TS at Newport coast. "our TS average cost is only $35k per week or less than $2,000,000 for the whole year" "there are TS with similar views selling for more than $3,000,000".
What Marriott doesn't say is that you could buy resale for an average of $17K and pay less than a million for that same condo.

There was another thread here about 6 months back with the same example (but at a TS with a lot lower average resale price) and at that TS, a 1 Br ocean view TS could be lived in year-round for about $250K.

On ebay recently a one bedroom, oceanview , summer season unit at Aquamarine Villas in Oceanside sold for 837 dollars!!! This was for an annual unit. Lets see, 51 x 837 = $42,687. Not bad for Southern California Beach Condo property! I used 51 weeks instead of 52 weeks as a multiplier to estimate a full time unit as the resort may hold one week per year for maintanence. In any case, it seems to me that in many cases resale TSs are being sold for less than their underlieing value for alternative use. It is not just a case of the 1st owner paying too much for the sales and marketing hype, but that the value of the timeshare can decline to levels below the value of the realestate! Why is this? I am not sure, but I think Boca's theory of a lack of an effective resale market is as good as any other. In the meantime, I own about 25 weeks a year and have been quite successful in renting them out. Who knows, Someday, I might even be able to capture some upside on the resale of my units if either a resale market developes or some of my resorts decide to go private. Ben

[jlee2070 Junior Member Find all posts View Profile Close jlee2070]

As everybody has said...

Mainly due to the high cost of marketing... so many perks when you attend a presentation but so low a % of hits making it costly to market...

BUT sometimes, if you are really like the resort and don't want to wait the several years until the Resale market is saturated with listings driving down the price, you might just want to buy from a developer (for a brand new resort)...

2 Cents... Where's my change!!!

[CaliDave Super Moderator Find all posts View Profile Close CaliDave]

Going along with what Ben said..

Aquamarine is not right on the beach.. but a 1bd condo just off the ocean in Oceanside, Ca would easily cost $650K

An oceanfornt resort in Cali.. like So Cal Beach Club would commad $1mil plus as a condo and to buy 52 weeks, you pay $150K or so as a timeshare.
Then again, you'll be paying $2500 a month in MF's.

[nkldavy Junior Member Find all posts View Profile Close nkldavy]

How Much Value ?

The first timeshare we bought was from the developer way back when we didn't know any better. However, we have used it enough that, even with maintenance fees, we feel it has paid for itself in our useage. Further, when we include the intangibles it brings such as getting all the kids and grandkids together, its value has far exceeded its cost. Had we purchased on the resale market, as we now do, that first purchase value would be much further ahead. When I think about all the trips/vacations we took before timeshares I think it would be nice to have the $ back for all of those times too, and in those cases we don't have a deed to pass along. And since we inherited a deed ourselves, we know the value of those as well. Bottom line is you can get value out of just about any timeshare, but the more savvy you are, the more value you can get out of it. Uncle Davey

[tonyg Goomba & Super Moderator Find all posts View Profile Close tonyg]

Resale values have a lot to do with the management of the resort, the desireability of the location and the quality of the resort. Perhaps even more important is the time of year for fixed weeks or float limits.If there are few people interested in buying, it will be hard to sell and about the only chance a seller has is to be the lowest asking price out there. Quality resorts run by respected management groups tend to have higher resale prices.