Understanding Timeshares: How They Work & Developer Insights

The Developer Builds a Facility

Developers generally know before even building a facility if it will be used for timeshares, hotels, condos or apartments. Based on the knowledge of the building's use, developers tailor the design and construction of the building to meet the expected demands. Although the building is usually assigned permits and licensing for its expected use before it becomes open to investors and/or the public, it is not uncommon for developers to change how the building will be marketed (as a timeshare or as condos, for example) in response to fluctuating market conditions.

The Developer Sells Timeshare Units

Once the building is complete or nearing completion, the developer and/or his representatives begin marketing and selling the individual units of the development. Units may range from small, studio-like dwellings to large, spacious facilities. As with most other real estate, the price is determined based on the size and location of the unit being sold. In a timeshare, sales are not directed at one individual owner. Instead, 52 individuals, families or groups purchase individual weeks (or slots). Based on the desirability of the week to be purchased, the price may be slightly higher than the typical sales price divided by 52. For example, a $52,000 unit could be expected to be divided into 52 weeks at $1,000 per week. The week of Christmas, for example, or the week of July fourth may sell for $3,500, though, because there is a higher demand for the property during those times. For this reason, the developer and his agents are able to sell the time share unit for more than the amount it would have brought as an individual, simple transaction.

Owners Occupy the Property During Their Week

Once all--or most--of the available time slots have been sold, the property is opened to owners who wish to spend time there. Owners occupy the property for the purchased week, or rent out the property if they will be unable to physically be at the property location. (Some large timeshare chains allow owners to exchange unused weeks for an unused week in a more convenient locale.) Owners pay an annual maintenance fee that covers taxes, insurance, upkeep, and cleaning of the property, allowing the facilities to always be in excellent condition for the next weekly occupant.