Prepare for long wait on time-share savings

STAYING AHEAD

June 06, 1993|By JANE BRYANT QUINN | JANE BRYANT QUINN,1993, Washington Post Writers Group

New York -- In this summer vacation season, travelers will bu an estimated $4 billion worth of time shares -- often on impulse. A time share is a period of vacation time, usually a week, at a particular resort. For that fraction of time, the property belongs to you. Time shares are often sold to people who are happily renting at the resort and think it would be nice to own.

My question is "why?" Time shares are sold as "prepaid vacations" -- locking in today's prices for the rest of your life. But that's not quite true (these days, what is?). If you finance your purchase, the interest rate effectively increases the price; your annual real-estate taxes and maintenance costs will rise; and many resorts hit you with extra assessments -- in the $500 to $1,000 range -- for major improvements or repairs. If your resort runs downhill in the future, you won't want to go there anymore. If your life pattern changes, and you can't use your time share anymore, you'll be paying for a resort vacation you no longer take.

Take Ray and Janet H. (who don't want to be fully identified). They bought a summer week in Vero Beach, Fla., in 1980, and another in Kissimmee, Fla., in 1983. But they no longer go to either of them. "Our needs changed," Ray says. "We have three grown sons who live in different cities, and we arrange our vacations around the kids."

This couple has been trying to sell their time shares since 1987, with no takers. "We would be willing to part with them for a fraction of their so-called 'value,' for the comfort of not spending money on unusable property," Ray says. He's paying around $515 annually in taxes and maintenance for both. Taxes tripled on the Kissimmee property last year.

When the salespeople tell you that time shares will save you money, they may forget to mention how long it takes.

For example, take a peak-season week in a two-bedroom unit at the Disney Vacation Club in Orlando, Fla. If you rent, you'll pay $2,380. Rents rose about 5 percent last year.

If you decide to buy, the price is $17,360. Assuming you put 20 percent down and take seven years to pay at 11 percent interest, your total cost will be $23,464. Annual dues, for real-estate taxes and maintenance, come to $795, up 6 percent from a year ago.

Projecting current inflation rates, it would be cheaper to rent this unit for the first 11 years, according to financial planner John Allen of Allen-Warren in Arvada, Colo. Not until the 12th year does the buyer start realizing any savings. That's pretty long to wait.

Robert Miller, executive vice president of Marriott Ownership Resorts, says that someone who buys a two-bedroom Marriott time share in Orlando and pays all cash could catch up to a renter in nine years (although he reduces the cost by the value of certain membership benefits). All the packages break even in something under 20 years, he says.

If you decide to take a different kind of vacation in one of those years and can't rent it to someone, your break-even day gets pushed even further into the future. Most time-share resorts don't rent your week for you if you're not there.

As Ray and Janet can tell you, most time shares are virtually impossible to sell. Listing with a real-estate broker is usually a waste of time -- and a waste of money, if you have to pay up front. Clinton Burr of the Resort Property Owners Association in Northbrook, Ill., suggests that would-be sellers go to their unit for a week with a bunch of printed "For Sale" fliers and pass them out to the happy people around the pool.

If you do sell, it will usually be for much less than you paid. Time shares are most emphatically not a good investment.

If you don't want your time share any more, talk to the sponsor about taking it back. Tom Franks, president of the American Resort Development Association, says that most developers will accept a "deed in lieu of foreclosure." You get no money, but at least you're off the hook.

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