FTC FACTS for Consumers

FOR THE CONSUMER 1-877-FTC-HELP

ftc.gov FEDERAL TRADE COMMISSION

REAL ESTATE

Time and Time Again:

Buying and Selling Timeshares 

and Vacation Plans 

T he thought of owning a vacation home may sound appealing, but the yearround responsibility — and expense — that come with it may not. Purchasing a 

timeshare or vacation plan may be an alternative. If you consider a timeshare or vacation 

plan, the Federal Trade Commission (FTC), the nation’s consumer protection agency, says 

it’s a good idea to do some homework. 

THE BASICS

Two basic vacation ownership options are available: timeshares and vacation interval plans. 

You should know that the value of these options is in their use as vacation destinations, not 

as investments. Because so many timeshares and vacation interval plans are available, the 

resale value of yours is apt to be a good deal lower than what you paid. Both a timeshare and 

a vacation interval plan require you to pay an initial purchase price and periodic maintenance 

fees. The initial purchase price may be made all at once or over time; periodic maintenance 

fees are likely to increase every year.
Facts for Consumers 

Deeded Timeshare Ownership. In a timeshare, 

you either own your vacation unit for the rest 

of your life, for the number of years spelled out 

in your purchase contract, or until you sell it. 

Your interest is legally considered real property. 

You purchase the right to use a specific unit at a 

specific time every year, and you may rent, sell, 

exchange, or bequeath your specific timeshare 

unit. You and the other timeshare owners 

collectively own the resort.

Unless you’ve bought the timeshare outright for 

cash, you are responsible for paying the monthly 

mortgage. Regardless of how you bought the 

timeshare, you also are responsible for paying an 

annual maintenance fee; property taxes may be 

extra. Owners share in the use and upkeep of the 

units and of the common grounds of the resort 

property. A homeowners’ association usually 

handles management of the resort. Timeshare 

owners elect officers and control the expenses, the 

upkeep of the resort property, and the selection of 

the resort management company.

“Right to Use” Vacation Interval Option. In 

this option, a developer owns the resort, which is 

made up of condominiums or units. Each condo 

or unit is divided into “intervals” — either by 

weeks or the equivalent in points. You purchase 

the right to use an interval at the resort for a 

specific number of years — typically between 

10 and 50 years. The interest you own is legally 

considered personal property. The specific unit 

you use at the resort may not be the same each 

year. In addition to the price for the right to use 

an interval, you pay an annual maintenance fee 

that is likely to increase each year.

Within the “right to use” option several plans can 

affect your ability to use a unit: 

Fixed or Floating Time. In a fixed time option, 

you purchase the unit for use during a specific 

week of the year. In a floating time option, 

you use the unit within a certain season of the 

year, reserving the time you want in advance; 

confirmation typically is provided on a first-come, 

first-served basis. 

Fractional Ownership. Rather than an annual 

week, you buy a large share of vacation 

ownership time, usually up to 26 weeks.

Biennial Ownership. You use a resort unit every 

other year. 

Lockoff or Lockout. You occupy a portion of the 

unit and offer the remaining space for rental or 

exchange. These units typically have two to three 

bedrooms and baths. 

Points-Based Vacation Plans. You purchase a 

certain number of points, and exchange them for 

the right to use an interval at one or more resorts. 

In a points-based vacation plan (sometimes called 

a vacation club), the number of points you need 

to use an interval varies according to the length 

of the stay, size of the unit, location of the resort, 

and when you want to use it. 

BEFORE YOU BUY

In calculating the total cost of a timeshare or 

vacation plan, include mortgage payments and 

expenses, like travel costs, annual maintenance 

fees and taxes, closing costs, broker commissions, 

and finance charges. Maintenance fees can rise 

at rates that equal or exceed inflation, so ask 

whether your plan has a fee cap. You must pay 

fees and taxes, regardless of whether you use the 

unit. 

To help evaluate the purchase, compare 

these costs with the cost of renting similar 

accommodations with similar amenities in the 

same location for the same time period. If you 

determine that purchasing a timeshare or vacation 

plan makes sense, comparison shopping is your 

next step.
Facts for Consumers

• Evaluate the location and quality of the 

resort, as well as the availability of units. 

Visit the facilities and talk to current 

timeshare or vacation plan owners about their 

experiences. Local real estate agents also can 

be good sources of information. Check for 

complaints about the resort developer and 

management company with the state Attorney 

General, and local Better Business Bureau 

and consumer protection officials. 

• Research the track record of the seller, 

developer, and management company before 

you buy. Ask for a copy of the current 

maintenance budget for the property. 

Investigate the policies on management, 

repair, and replacement furnishings, and 

timetables for promised services.

• Get a handle on all the obligations and 

benefits of the timeshare or vacation plan 

purchase. Is everything the salesperson 

promises written into the contract? If not, 

walk away from the sale. 

• Don’t act on impulse or under pressure. 

Purchase incentives may be offered while 

you are touring or staying at a resort. While 

these bonuses may present a good value, 

the timing of a purchase is your decision. 

You have the right to get all promises and 

representations in writing, as well as a 

public offering statement and other relevant 

documents.

• Study the paperwork outside of the 

presentation environment and, if possible, 

ask someone who is knowledgeable about 

contracts and real estate to review it before 

you make a decision. 

• Get the name and phone number of someone 

at the company who can answer your 

questions — before, during, and after the 

sales presentation, and after your purchase.

• Ask about your ability to cancel the contract, 

sometimes referred to as a “right of 

rescission.” Many states — and maybe your 

contract — give you a right of rescission, but 

the amount of time you have to cancel may 

vary. State law or your contract also may 

specify a “cooling-off period” — that is, how 

long you have to cancel the deal once you’ve 

signed the papers. If a right of rescission or 

a cooling-off period aren’t required by law, 

ask that they be included in your contract. 

• If, for some reason, you decide to cancel 

the purchase — either through your contract 

or state law — cancel it in writing. Send 

your letter by certified mail, return receipt 

requested, so you can document what the 

seller received. Keep copies of your letter 

and any enclosures. You should receive a 

prompt refund of any monies you paid, as 

provided by law. 

• Use an escrow account if you’re buying an 

undeveloped property, and get a written 

commitment from the seller that the facilities 

will be finished as promised. That’s one 

way to help protect your contract rights 

if the developer defaults. Make sure your 

contract includes clauses concerning both 

“non-disturbance” and “non-performance.” 

A non-disturbance clause ensures that you’ll 

be able to use your unit or interval if the 

developer or management firm goes bankrupt 

or defaults. A non-performance clause lets 

you keep your rights, even if your contract 

is bought by a third party. You may want to 

contact an attorney who can provide you with 

more information about these provisions. 

• Be wary of offers to buy timeshares or 

vacation plans in foreign countries. If 

you sign a contract outside the U.S. for 
Facts for Consumers 

a timeshare or vacation plan in another 

country, you will not be protected by U.S. 

laws.

EXCHANGE SYSTEMS

An exchange allows a timeshare or vacation 

plan owner to trade units for a discrete time with 

another owner who has an equivalent unit at an 

affiliated resort within the system. Here’s how 

it works: A resort developer has a relationship 

with an exchange company, which administers the 

service for owners at the resort. Owners become 

members of the exchange system when they buy 

their timeshare or vacation plan. At most resorts, 

the developer pays for each new member’s first 

year of membership in the exchange company, but 

members pay the exchange company directly after 

that.

To participate, a member must deposit a unit 

into the exchange company’s inventory of weeks 

available for exchange. When a member takes a 

week from the inventory, the exchange company 

charges a fee.

In a points-based exchange system, the interval 

is automatically put into the inventory system 

for a specified period when the member joins. 

Point values are assigned to units based on length 

of stay, location, unit size, and seasonality. 

Members who have enough points to secure the 

vacation accommodations they want can reserve 

them on a space-available basis. Members who 

don’t have enough points may want to investigate 

programs that allow banking of prior-year points, 

advancing points, or even “renting” extra points 

to make up differences.

Whether the exchange system works satisfactorily 

for owners is another issue to research before 

buying. Keep in mind that, you will pay all fees 

and taxes in an exchange program no matter 

whether you use your unit or someone else’s.

SELLING A TIMESHARE

If you want to sell your deeded timeshare, and a 

company approaches you offering to resell your 

timeshare, go into skeptic mode:

• Don’t agree to anything over the phone or 

online until you’ve had a chance to check 

out the reseller. Contact the Better Business 

Bureau, state Attorney General, and local 

consumer protection agencies in the state 

where the reseller is located. Ask if any 

complaints are on file. 

• Ask the salesperson for all information in 

writing. 

• Ask if the reseller’s agents are licensed 

to sell real estate where your timeshare is 

located. If so, verify it with the Real Estate 

Commission. Deal only with licensed real 

estate brokers and agents, and ask for 

references from satisfied clients.

• Ask how the reseller will advertise and 

promote the timeshare unit. Will you get 

progress reports? How often? 

• Ask about fees and timing. It’s preferable to 

do business with a reseller that takes its fee 

after the timeshare is sold. If you must pay a 

fee in advance, ask about refunds. Get refund 

policies and promises in writing. 

• Don’t assume you’ll recoup your purchase 

price for your timeshare, especially if you’ve 

owned it for less than five years and the 

location is less than well-known.

• If you want an idea of the value of a 

timeshare that you’re interested in buying or 

selling, consider using a timeshare appraisal 

service. The appraiser should be licensed in 
Facts for Consumers

the state where the service is located. Check 

with the state to see if the license is current. 

CONTRACT CAVEATS

Before you sign a contract with a reseller, get the 

details of the terms and conditions of the contract. 

It should include the services the reseller will 

perform; the fees, commissions, and other costs 

you must pay and when; whether you can rent or 

sell the timeshare on your own at the same time 

the reseller is trying to sell your unit; the length 

or term of the contract to sell your timeshare; and 

who is responsible for documenting and closing 

the sale. 

If the deal isn’t what you expected or wanted, 

don’t sign the contract. Negotiate changes or find 

another reseller.

RESALE CHECKLIST

Selling a timeshare is a lot like selling any other 

piece of real estate. Check with the resort to 

determine restrictions, limits, or fees that could 

affect your ability to resell or transfer ownership. 

Then, make sure that your paperwork is in order. 

You’ll need:

• the name, address, and phone number of the 

resort;

• the deed and the contract or membership 

agreement;

• the financing agreement, if you’re still 

paying for the property;

• information to identify your interest or 

membership;

• the exchange company affiliation;

• the amount and due date of your maintenance 

fee;

• the amount of real estate taxes, if billed 

separately.

FOR MORE INFORMATION

To learn more about vacation ownership, contact 

the American Resort Development Association. 

It represents the vacation ownership and resort 

development industries. ARDA has nearly 1,000 

members, ranging from privately-held companies 

to major corporations, in the U.S. and overseas. 

American Resort Development Association

1201 15th Street N.W., Suite 400

Washington, D.C. 20005

(202) 371-6700; Fax: (202) 289-8544

www.arda.org

TO FILE A COMPLAINT

Timesharing usually is regulated through the 

Real Estate Commission in the state where 

the timeshare property is located. The sale of 

vacation plans generally is not regulated at all. 

However, if you believe you’ve been the victim 

of false or deceptive advertising or marketing 

of a vacation plan, contact the Federal Trade 

Commission. The FTC works for the consumer to 

prevent fraudulent, deceptive, and unfair business 

practices in the marketplace and to provide 

information to help consumers spot, stop, and 

avoid them. To file a complaint or to get free 

information on consumer issues, visit ftc.gov 

or call toll-free, 1-877-FTC-HELP (1-877-382-

4357); TTY: 1-866-653-4261. The FTC enters 

Internet, telemarketing, identity theft, and other 

fraud-related complaints into Consumer Sentinel, 

a secure, online database available to hundreds of 

civil and criminal law enforcement agencies in the 

U.S. and abroad.

1-877-FTC-HELP FOR THE CONSUMER

FEDERAL TRADE COMMISSION ftc.gov

March 2005

Federal Trade Commission

Bureau of Consumer Protection

Offi ce of Consumer and Business Education