What You Must Know Before Buying a Timeshare

(MoneyWatch)  Several months ago, my husband got an offer from a credit card company to visit Palm Springs for three nights for just a few hundred bucks. This winter ranks as one of the coldest in memory in Chicago, so a March visit to Palm Springs seemed like a no-brainer. The deal required us to sit through a timeshare presentation, and last Monday we sat through it at the Westin Mission Hills, in Rancho Mirage, Calif., part of the Starwood Vacation Ownership network.

A quick explanation of today's timeshares: Some of the newer programs have evolved from buying one specific week at one specific location into a points system that feels like an airline miles reward program: Accumulate points and spend them any way you can. With these deals, you're paying for a set number of points upfront, an annual maintenance fee that may include a small fee to the vacation ownership cooperative (the group of resorts you can stay at), and real estate taxes. Timeshare points can typically be exchanged through the immediate circle of member resorts (in this case, those in the Starwood network) or a larger network of loosely affiliated resorts (where your points may lose some value). Starwood also lets members convert points to Starwood hotel points and spend them on Starwood hotels or on airline miles.

Are timeshares a good idea? Here's what I learned from our 3 1/2 hours of visiting with our Starwood and Westin sales team, Chris, Christine, and Ken:

1. Don't buy a timeshare or vacation points deal unless you can plan way ahead. In a typical timeshare, to get prime weeks at a prime location, you'll have to book 8 to 12 months in advance. Even then, you might have a tough time getting Christmas in Hawaii.
2. If you want Christmas, you have to pay for it. Some Starwood vacation resorts sell Christmas week deals. But expect to pay through the nose for them. If you buy the same 148,100 points we were offered in Rancho Mirage for Christmas week in Hawaii, you'll pay more than a third more, plus a higher maintenance fee. (By the way: It's incomprehensible to me why you wouldn't just buy the points at the cheapest location. Christine explained that not all Starwood resorts sell points in all locations.)
3. There's no such thing as "rollover points." In this timeshare deal, you use 'em or lose 'em -- or you pay $99 and then turn the timeshare points into a Starwood-hotel points account.
4. You can probably vacation well for less money. The deal we looked at had a one-time payment of $40,000 plus about $2,000 per year in maintenance, real estate taxes, and a $109 contribution to the Starwood Vacation Ownership network. (The annual fee could rise over time.) Over 20 years, you'd spend about $4,000 per week per year just on the lodging portion of your vacation. With hotels hurting for business, you can probably do better on your own -- even in the same location.
5. This is a life-long obligation. Even if you write a check for $40,000, you'll owe the $2,000 (or whatever it rises to) per year for life...and beyond. The obligation doesn't end with death. Your heirs can continue to pay, or your estate can try to have the network resell your share. Speaking of which...
6. You can sell, but on their terms -- not yours. To preserve the "value" of your timeshare, your only real option is to sell through the Starwood network, which will list the timeshare at the current market value (rather than at the price you select). You'll pay a 20 percent commission when the timeshare is sold. No one said the word "investment" to us, but the implication is that if you sell for more than you bought, you've vacationed for "free." If you try to sell on your own, at the market price, your buyers will lose the ability to convert the timeshare into Starwood points to use at other resorts in the network, which kind of makes them worthless. In other words, Starwood runs this operation tightly, and you'll play by their rules.
7. You've still got to get there. When the timeshare folks ask if you'll spend $80,000 over 20 years on vacation, remember that they're talking just about the hotel. Airfare, meals, ground transportation, activities and just about everything else costs you extra.

Even with the incentives we were offered, it's hard to see who would benefit from making this kind of commitment. Even if you love Palm Springs (and I do), you can go on Vacation Rentals By Owner and rent the same unit we stayed in for about the same price we paid. That means you don't have to make the lifelong commitment or lock in your dollars upfront. Even if you think you want to go to the same place every year, will you still feel that way in five years -- or 40 years?

If you have $40,000 just hanging out in your checking account, and if the $2,000 per year maintenance fee won't kill you, and if you love Westin hotels and if you have the time to play the Starwood Vacation Ownership network game, then this might not be a bad idea.

But that's a lot of ifs, especially in tough economic times. And if you do sit through a timeshare presentation, leave your checkbook at home. The sales agents are experts at making a case so compelling, you may not even feel your wallet leave your pocket.