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The joys and pitfalls of owning a timeshare -- The Business Journal of Portland -- 04-14-97

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April 14, 1997

Focus: Residential Real Estate

The joys and pitfalls of owning a timeshare

Watch out for scam artists on the road to ownership

Steve Law Business Journal Staff Writer

Mario Collura has some simple words of advice for timeshare buyers scared by the history of scams in the industry.

Don't buy new.

Many buyers plunk down $10,000 to $15,000 in cash for a new one-week-a-year timeshare they never use, Collura warns. When they finally cut their losses and put their timeshare up for resale, another buyer will swoop in and pick up the same deal for $3,000 to $9,000. What's more, consumers in the "used" timeshare market aren't relying on the vagaries of an artist's rendering of a resort not yet built.

"There's nothing based on promise," Collura says. "It's already there. You see what you're going to get."

Collura waded into the business by developing a timeshare resort in Maui. But he packed it in as a developer 16 years ago to specialize in brokering resales. Now he dispenses free consumer advice on timeshares over the Internet, making his L.A.-based Triwest brokerage one of a growing number of companies trying to remake the scandal-plagued industry into a respectable trade.

"Part of the problem has been there's a number of unlicensed companies that are making promises about things they can't perform on," Collura says. Most troublesome, he says, are the telemarketers.

In Oregon, most timeshare developers are operating under court orders to assure they don't take advantage of consumers, says Jan Margosian, a spokeswoman for the state Department of Justice. Just last month, the Federal Trade Commission announced "Operation Trip-Up," a multi-pronged campaign against bogus timeshare and other travel scams. The FTC filed legal actions against 21 vacation sellers on a single day.

Despite the bad publicity, the industry has been blooming. And it's becoming much more professionalized, with the likes of Disney and Marriott taking up the role of timeshare-resort developer.

There are now more than 4,000 timeshare resorts worldwide, with a third of them in the United States. Industry trade groups say there are more than 3 million owners of timeshares worldwide and annual timeshare sales of $4 billion.

Count Sam Hiebert among the happy timeshare owners. She and husband Marv own 2-1/2 weeks of timeshares at Whispering Woods near Mount Hood, plus an additional three weeks at El Cid in Mazatlan, Mexico. By trading their weeks through a timeshare exchange company, the Hieberts use them to stay at the equivalent of five-star hotels in Europe and Mexico. Past stays include a castle in England's Cotswold region and a manor house near St. Andrews, Scotland. Now the Hieberts are planning a stay in New Zealand.

"We've really gotten around using these," Sam Hiebert says. "I have never gotten into a place that I didn't think is wonderful."

Marjie Jones, owner of Sea Towne Realtors Inc. in Newport, may represent the opposite end of the spectrum for timeshare owners. In one year, she hasn't used her timeshare yet.

"If you're going to buy one," Jones says, "you better plan on using it. Trying to find time to get away is very, very hard."

Buying a timeshare and not using it is like buying a new car and leaving it in the garage, Collura says.

Timeshares work in a few different ways. You can buy one week and gain a one-52nd interest in a condo-style unit at a resort. You'll have use of the premises the same week each year. When you tire of holding the timeshare, you can sell it on the resale market or pass it on to your heirs.

Overseas timeshares don't generally come with actual real estate ownership. Instead, owners get the right to use the property one week a year for a fixed number of years.

Some timeshare companies grant the owner a certain number of credits each year. Then the owners can "spend" their credits at any of the company's resorts.

Then there are the exchange companies, such as Resort Condominiums International Inc. of Indianapolis and Interval International of Miami. Both are owned by publicly traded companies.

RCI, the nation's largest timeshare exchange company, has a contractual relationship with 3,100 resorts in 85 countries. Some 2.1 million timeshare owners pay $74 a year for the right to trade their weeks for other locations on the roster. For $100, they can trade their week at, say, one of the 17 timeshare resorts in Oregon for a week in Florida. For $120, they can trade it for an international resort.

The Hieberts use their Mount Hood timeshare property strictly for trade. They stay at their Mazatlan property every winter.

One should never buy a timeshare purely as a real estate investment, Collura says. He figures 10 to 15 percent of all timeshares are on the market, which tends to make them depreciate rather than climb in value.

It's best to think of timeshares as a pre-paid vacation, with a guaranteed right to a reservation. The Hieberts paid for their timeshares while they were working. Now they feel they can stay in ritzy places even though they are retired.

"It's probably a wash when it comes down to it," Hiebert says of the finances of the deal. "But there are some times in your life when you have more cash than other times."

Timeshares are a brilliant financing scheme for developers. They can cash out their development costs after completion by selling rights to use the properties for life. Operating costs are then paid by timeshare owners.

Such add-on charges, known as maintenance fees, can come as an unpleasant surprise to the unsuspecting timeshare owner. Timeshare owners may assume they own the property and already paid for it, but they also must pay hefty maintenance fees at their properties each year, whether they use them or not.

Maintenance fees can run $50 to $100 a night, Collura says.

The maintenance fee for the Jockey Club, a timeshare resort on the strip in Las Vegas, runs $60 a night. That provides a spacious suite comparable to a $150-a-night hotel, Collura says.

The upscale Marriott Villas in Palm Springs charges about $100 a night for maintenance, for a room that otherwise might go for $300 a night. But that still leaves a savings of about $200 a night, Collura says. At one week a year for 10 years, that might save the owner $14,000, or about the up-front cost of the Palm Springs timeshare.

A 1995 study concluded the average timeshare maintenance fee is $300 a week, according to RCI. If someone owns two weeks worth of timeshares, the maintenance fee would be double that.

Margosian warns consumers against falling for sales pitches where the deal has to be struck at the resort.

"You've got to be careful when they want to get you down there to make the final purchase," she says. "There's a reason for it."

Only one in 10 people who make those on-site visits wind up buying a timeshare, Collura says. Because of the high costs of luring people to the timeshares, new resorts often charge a 25 percent sales commission to cover their sales costs.

The Oregon Real Estate Agency prepares reports on each timeshare resort sold within the state. That includes information about the facilities prepared by state regulators. The state also requires that anyone selling a timeshare in Oregon must be a licensed real estate agent.

For more information, contact RCI at (800) 338-7777 or Interval International at (800) 828-8200.

Collura's Web site, which includes handy tips on buying timeshares, can be found at

© 1997, The Business Journal

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