May 26, 2010

Timeshare

You will be approached by Timeshare representatives on your holiday. This happens wherever tourists flock and so isn't peculiar to Mexico, but it is here too.

Timeshare


You can say, 'no gracias', then keep walking or you can agree to their '90 minute' presentation. Some people are able to secure free meals, cheap tickets to attractions or other gifts in this way. You may even want to sign the contract. Whichever your strategy here, it is worth understanding what timeshare is; along with the bonuses and the pitfalls.

Timeshare - The Basics


Timeshare is a concept which was introduced in the French Alps in the 1960s. It was a time when the resort industry was depressed and the developer, Hapimag, came up with the idea as a way of filling rooms throughout the year. It worked extremely well and was quickly taken up world-wide.

There are two variations on timeshare:

Fixed Time:

The general premise is that a hotel or other property is divided up into rooms and time within that room. Typically it is a week per room that a timeshare buyer will purchase. So room one will have 52 owners, each with the right to stay in it for one set week. Owner one can only use week one; owner two can only use week two etc. However, this is a right to use. It does not imply ownership of the property at all, even as a share-holder.

Floating Time:

In Mexico, this system is the most commonly found. Timeshare buyers are given a certain number of weeks, which they can use in a certain hotel or affiliate hotels, rather than a set week every year. This can be problematic if the desired week is not available; and they are often given out on a first come, first served basis.

The Costs


dollarsAs well as upfront costs, which run into the thousands, there will also be mortgage payments, travel costs, broker fees, maintenance fees, property taxes and finance charges for your room and/or weeks. The monthly maintenance fees are likely to increase every year, as they are linked with inflation. Some timeshare properties also employ someone to look after your interests there and you will be contributing to that person's wages.

All timeshare companies will be affiliated to an exchange company, who will be lauded as the people to sell on any unused weeks on your behalf. You will also be paying them a fee for doing so. You will have to pay these extras regardless of whether you are able to use up your weeks on vacations. You will also be paying these extras long after the initial mortgage on your timeshare property is paid off.

The average cost to a buyer of a timeshare property, taking into account all extra charges, is: $1,150 USD per year. This figure does not include your travel fees to the property nor your spending money whilst there. Also, should a natural disaster befall the property, like, for example, hurricane damage in Cancun, then you will also be charged part of the clean up and restoration costs.

Before making a purchase, you should ask if there is a price cap on the amount that you will ever have to pay. Compare this cap against the costs of just ordinarily booking a room in the same hotel and location. If it's favourable, then timeshare might be worth it.

Many timeshare sales representatives will inform you that you can reimburse yourself of these costs by renting out your week. This can result in a 'free' holiday for yourself, where you will only have to pay your travel fees and spending money; while your other weeks are generating you money. You will often be told that they will find people for you, who will rent your weeks. However, a critique of this is that, for this to work, those people renting will be paying well over the odds. They could get a cheaper holiday just by booking it directly with the hotel. There will also frequently be clauses, in the small print of your contract, which states that you have to wait a certain amount of time or else pay a set amount of your overall money, before you can rent out your weeks.

Please note that if you default on any payments, you may be served a foreclosure notice. This will revert everything back to the timeshare operative, but will damage your credit rating for up to seven years.

The Hard Sell


resortTimeshare representatives have a job to do and that job is to sell you timeshare. You will be approached at the airport, in the mall, on the street or, for the truly desperate, via a call to your hotel room. They will be friendly and may not be honest in their position. They may say that they represent your hotel and just want to give you a tour of it, so you can become oriented. They may say that they represent any company but a timeshare one. They may deny all hint of timeshare, even if directly asked. Others are more honest and will immediately state their position. If you aren't at all interested, then a simple 'no gracias' at this stage is perfectly alright. Then walk away. If they follow you, tell them that you live in Mexico. They aren't allowed to sell to you then.

There will be incentives to buy. Some tourists actually rely on timeshare representatives in order to secure free tickets to local attractions, spending money, a free rental car or a whole host of other gifts. There will often be a free breakfast or lunch and a tour of a luxury hotel. There will almost certainly be free alcohol, usually tequila in Mexico. The object is for the representive to induce such a feeling of friendliness and obligation (or intoxication) in the potential buyer, that you sign on the dotted line and a sale is made.

Typically, the timeshare representative will ask for 90 minutes of your time. If you agree to this and take the gift, then you should give them 90 minutes. At 91 minutes, you can walk away. However, you should agree in writing as to when this time period begins, as they may class it only as the presentation at the end. If they have driven you to a resort, it might not include the journey time. Therefore the proposed schedule is usually for 3-6 hours, not 90 minutes.

In short, they wish to keep you there for as long as it takes for you to sign the contract. The first part of this will usually be a tour of a hotel and a meal. The latter part will be a presentation about timeshare. This is a business meeting. Write down or record on a dictaphone (or similar) every word stated. If you are serious about buying, then don't touch the tequila. Do you really want to sign a contract worth thousands of dollars whilst drunk?

You will often find that you have three people in front of you. Your friendly salesperson, who is hovering like a concerned parent, only wanting what's best for you, ie signing this contract; the financial expert, who is doing lots of calculations and showing you how brilliant a deal this is; and then the manager, who takes a very hard-nosed, business attitude. Once all of the promises and information has been exchanged then you have two options.

The first is to say 'no gracias' and walk away. If this occurs, then the representatives might not be so friendly anymore. You may be insulted and accused of wasting their time. You may be told whatever is needful to pressurize you into staying and signing. This can be anything from sob stories to, in extreme cases, threats. You will almost certainly be left feeling like you are the world's most horrible, irreponsible person. Even the most secure and hardfaced person will be unsettled by the situation. It may cast a long shadow over your holiday.

Wet'n'WildOn the other hand, you will probably have the incentive as a gift, so if this is the only way your family can afford to enter an attraction, then you've secured that. Please note that timeshare representatives are paid by commission. This isn't very much money, so they need to make several sales to earn a living salary. Their nastiness at this junction is completely due to the fact that they've just worked for the past 90+ minutes for free. This is not putting food in their children's bellies, even if it is putting Aquaworld tickets in your children's hands.

The second option is to buy the timeshare. This should never, ever be done on the spot. You may be told that it has to be, as this is a once only opportunity and if you don't sign the contract now, then you never can again. This is almost certainly incorrect. The timing of the purchase is up to you and you need the opportunity to check some facts:

* An evaluation of the location and quality of the resort, as well as the availability of weeks;

* An investigation into the track record of the sales developers and management companies;

* A search of resales to see how easy it is to sell a week at your resort to other buyers;

* A study of various documents. You should be asking them for a copy of the current and projected maintenance fees and other costs of the properties; all policies on management repair, replacement furnishings and ground maintenance; and a list of properties covered in your timeshare agreement (it doesn't necessarily include the hotel you have just toured. A popular deception in the Yucatan is for buyers to tour the Royal Hotel in Cancun, only to discover that the property they can stay in is the Royal in Playa del Carmen).

* A check on any complaints issued against the company or their hotels with the Attorney General and Better Business Bureau;

* A legal reading of your contract. At the very least, you should take that contract away and read it outside the sales situation, with a cool mind. Does the contract include all of the things that you were promised? You need to check that against your notes and audio recording.

* A contract, including all terms and conditions, from their affiliate exchange agency.

You also need a lot of information from your sales representatives and more questions will emerge over the weeks that you are evaluating your purchase. You should therefore ask for a name and contact details of someone who can answer them for you. You should also ask about your right to cancel, aka 'a right of recission'. If they state that there is none, ask for one to be included in your contract. They will be lying anyway, because all business deals in Mexico can be cancelled within five working days, as long as a certain procedure is followed.

Finally, please remember that the laws of your own country do not protect you here. If you sign in Mexico, then that contract is subject to Mexican law. Please research that before committing to anything.

Reselling Weeks


VeniceOne of the major lures of timeshare is the ability to swop weeks with other owners in different locations. While another family is using your timeshare allocation in Cancun, you are using their allocation in Venice. That sort of thing.

Please note that while this may look like a straight swop, it will incur an additional fee, if done through your operator's exchange system. You may also have to have paid into your timeshare, and banked points, for up to five years before this even becomes an option. There may also be an additional points scheme, which will cost thousands of dollars, to pay into an exchange, before any swops can occur. Also certain locations are rated differently, so the exchange may not be like for like. You will still be paying all the fees liable to your own property, even if you've rented a week in a lesser property in a different country.

You may also be approached by other reselling agencies. Please do your homework on those too before any contracts are signed.

Reselling the Whole Timeshare


You will first need to acknowledge the fact that the value of a timeshare decreases rapidly, in the same way that car purchases do. Very few people get back more than 15% - 35% of the price that they paid. Most people discover that they cannot sell their timeshare on at all.

If you do find a buyer, then there is a lot of paperwork involved. Please consider hiring an attorney to ensure that you are completely covered against all of the legal and financial requirements.

Cancellation


By Mexican law, you can cancel without penalty any timeshare agreement within five working days. This is still true even if you signed a contract and you cannot be liable to pay any administration costs. However, you must contact PROFECO (Mexican trading standards agency) for this to happen. Cancellations from the timeshare companies or your hotel alone is not sufficient and may well be a stalling trick to ensure that you go over the five days. A PROFECO certificate is the only valid piece of paper. It is also worth notifying your bank/credit card agency to cancel any payments.

Here is the English language version of the form needed to report a cancellation to PROFECO: Federal Consumer Attorney Service Directorate General of Complaints and Conciliation file.

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