Volume 10 - Issue 1, February 15, 2008 - Lake Chapala Review

Page 52 Lake Chapala Review
February 2008
Home Inspector
by J. Brad Grieve Timeshares
This may not sound like a real estate or home
maintenance issue, but I thought my experience was worth
sharing. Recently, my wife and I purchased a vacation
package offered by our bank. And after various delays we
finally managed to take the kids to Puerto Vallarta for a
four-night stay at one of the beachfront resorts.
Shortly after arrival, we were greeted by a hotel
“employee”, who offered a free breakfast buffet and hotel
orientation tour. Yeah, yeah… free breakfast and a tour?
After a few questions, we thought why not. We have been
through it and we were curious about all the small villas
on the property, how they were configured, how much
they rent for, special facilities, etc.
After the promised 90 minutes extended to more than
150 minutes, we were at our limit with the vacation club/
timeshare promotion and were not interested after being
confused by the numbers during the presentation. I found
the presentation to be very aggressive and to say the
least, after correcting the math of the presenter several
times, confusing. Remember, timeshares are not a real
estate investment but a membership to access vacation
programs, even though it appears you are sharing a specific
accommodation.
Anyway, the final number was $14,900 for a junior suite
that sleeps four and has a small kitchenette. Apparently
promising use of it once a year for 25 years although it was
not clear it was for every year and the maintenance fees
were $250 USD per year. Now using simple net present
value calculations and assuming my money can normally
earn about 2% over inflation, I actually would be paying
approximately $1,300 USD per week over the next 25
years. Considering the advertised rate for the same unit
was $250 USD per night (or $1,750 USD per week) without
promotion or discount. I am sure the hotel would provide
a discount if I was looking for a one week rate.
I was not impressed with the effective discounted
rate, the upfront payment and the lack of control of the
maintenance fees, which likely would increase. Also it is
a commitment for 25 years of vacations, which is longer
than my economic commitment with my own house and
my children’s education. However, what is interesting
the secondary market for timeshares. There are various
websites that promote timeshares for sale and typically are
available for much less than the promotional “new” price
available from the developers. This is partially due to the
high cost of promotion; in some cases as high as 50% of the
cost is marketing. This secondary market for timeshares
is essentially one person selling their timeshare to another
person, if the timeshare contract permits the sale.
Now there are some benefits to timeshares which include
access to the RCI (Resorts & Condominium International)
network, which will allow you access to places around the
world at discounted rates however, you will need to be
flexible on dates available. Also if you enter a system with
points, you are at the mercy of the value of those same
points. There of course is a cost to enter the network and
annual fees, deposits to put on a vacation unit, etc.
Remember, read your contract thoroughly and assure
everything discussed is in the contract. Also PROFECO
(the Mexican government consumer protection agency) is
available to help you if you feel you have not been fairly
treated. By Mexican law you do have a five-day cooling off
period after signing should you want to cancel the contract
with a full refund of deposit.
On the novel side of timeshares, I have learned of people
that have economized their vacations by planning their
vacation around the bonuses they receive for the timeshare
presentations. In some cases, timeshare promoters will
give cash to draw in clients for their presentations. One
case I read about was a person who programmed timeshare
presentations for the morning and afternoon to receive the
cash bonus that in total effectively paid for the vacation
with the money received. Sounds too much like work
during a vacation and isn’t a vacation to help get away from
a work schedule? Hence the question; what is the value of
your time during a vacation? I know the time sitting at the
table with the presenter when my daughter was pleading
to go to the swimming pool, was very valuable time for
me.