What is a timeshare and how does it work?

Love soaking up the sun on a beach, exploring a vibrant new city, or returning to a favorite getaway spot every year? A timeshare offers a unique way to make those dream vacations a reality. But exactly what is a timeshare, and is it the right choice for you and your vacation needs?

A timeshare is simply a vacation property arrangement that allows you to share the cost of a property with others. It allows different unrelated parties to own or lease a fractional portion of that property. Case in point: You purchase a 1-week timeshare at a Florida beachfront condo, allowing your family to stay at that property on the same week each year, while other owners use the condo on other allotted weeks.

Read on to learn more about how timeshare vacation ownership works, types of ownership, deeded vs non-deeded timeshares, fixed-week versus floating-week timeshares, how much a timeshare costs including annual dues, pros and cons of purchasing a timeshare, ways to get as well as get rid of a timeshare, and worthy alternatives.

A brief history of timeshares

Curious where the concept of timeshares came from? It began in Europe in the 1960s as a novel way to attract vacationers. Instead of just booking hotel rooms, travelers were encouraged to buy "right-to-use" agreements, which meant they owned the right to use a property for a certain amount of time each year.

The very first timeshare was actually created by a developer named Hapimag and his partner, Dr. Guido Renggli, in Graubünden, Switzerland. They built a 13-unit resort and incorporated right-to-use packages, created the first points program, and even added a cancellation policy. This creative idea quickly spread to the U.S. By 1965, Americans started their own version of timeshares in Maui, Hawaii. The Hilton Hale Kaanapali began construction in late October and was built on a massive 15,000-acre Pioneer Mill Plantation.

Timeshares evolved from a small, specialized market to a much wider trend in the 1970s. That’s when the American Resort Development Association (ARDA) and exchange companies like Resort Condominiums International (RCI) and Interval International (II) were established. By the 1980s and 1990s, big-name brands like Disney, Hilton, and Marriott hopped on the bandwagon, which made them even more popular with vacationers.

However, over time, consumers began questioning whether timeshares are really worth the investment. Today, people are more careful to do their homework on timeshares and weigh the benefits and drawbacks before committing to one.

How timeshare ownership works

As a timeshare owner, you split the property with others, each taking turns using it, usually for a week at a time. Because you share the costs with other individuals, purchasing a timeshare is much more affordable than buying a vacation home of your own, which can make it an appealing option.

“With a timeshare, you buy or lease the right to use a vacation property for a set period every year or with points that convert to stays. As a timeshare owner, you will still pay annual maintenance and must follow resort rules. Think of it not as an investment, but rather as prepaid lodging with recurring obligations,” says Josh Bajer, a financial advisor with My Timeshare Exit Reviews LLC. “Timeshare ownership can be real property, which means deeded, a right-to-use contract, or a membership/points model.”

A deeded timeshare provides actual ownership of a fractional portion of real property; a right-to-use timeshare, on the other hand, only gives you the contractual right to occupy the unit for a set number of years without owning any real estate.

Timeshares are also structured differently from hotels and traditional rentals. That’s because they involve long-term financial commitments, split up occupancy and expenses among many users, and commonly operate via maintenance fees, governance, and booking systems that resemble shared ownership rather than short-term lodging.

To purchase a timeshare, you’ll need to pay an initial cost, which is done via a sales meeting or through a resale transaction on the secondary market. Then, maintenance fees will be charged to cover things like resort operations throughout your contract. Keep in mind, these fees can differ widely.

Timeshare vacation slots may also vary depending on the property you choose. While some may have fixed-week options, others have point systems that you can build and redeem at different locations.

But before you make a timeshare purchase, it's a good idea to understand the different types available so that you can determine if the investment fits comfortably within your budget and schedule.

Types of timeshares

There are several types of timeshares you can explore, including fixed-weeks, floating-weeks, and points systems. Here’s a breakdown of each.

Fixed-week timeshare

With a fixed-week timeshare, at the time of purchase each owner is designated a specific week to access the property in the calendar year. This means that you can count on a vacation at that property during the same week every year you own the timeshare, providing peace of mind that you’ll always have that slot reserved.

If something comes up and you need to reschedule, you’ll have to find another owner to switch dates with, which can be tricky if all timeshare owners expect to use a specific date. The management company might not be able to coordinate your newly requested dates.

Floating-week timeshare

A floating-week timeshare allows you to plan your vacation week around your schedule. The benefit here is that you are not limited to only the same week year after year; you can choose a different week to use the property next year, assuming the week you choose is available.

Points system

Hospitality chains like Marriott Vacation Club, Club Wyndham, and Hilton Grand Vacation Club offer timeshare options, often through a points system. With this option, you receive points that can be used at any of the chain’s properties.

Many hospitality chains partner with timeshare developers to create a vast network of locations available to timeshare owners.

Types of timeshare ownership

It’s equally important to look closely at the different timeshare ownership types, including shared deeded ownership and shared lease ownership. Take time to read over your contract carefully so that you fully understand exactly how each ownership type works.

Shared deeded ownership

In a shared deeded ownership timeshare, you hold a deed to a fractional piece of the timeshare property. A deeded property means that you own it for life and can pass it on to your children and grandchildren or sell it. Let’s say you purchase a week’s worth of vacation at a given property; in this case, you own 1/52 of the property (since there are 52 weeks in a year).

Owning a deed to the property can offer some tax advantages. For example, you may be able to deduct the financing interest payments and the portion of the monthly fees that go to taxes.

Shared leased ownership

A leased timeshare is a method of acquiring a right to stay at a property for either a fixed or floating week over a specified number of years. A leased timeshare is also known as a non-deeded timeshare. In this arrangement, the deed remains with the timeshare developer, not with you, the timeshare owner.

“With shared-lease ownership, you do not own real property. Instead, you lease the right to use the resort for a set number of years. When the lease expires, your usage rights end,” says Errol Lawrence, a timeshare expert and director of timeshare rental marketplace VakayMood.

A leased timeshare doesn’t confer any tax benefits to you as the owner. It’s also important to note that the value of the timeshare decreases over time.

How much does a timeshare cost?

There are a variety of costs involved in purchasing a timeshare, including:

• Purchase price: The direct purchase is the largest part of the investment. The average price of a timeshare transaction is $23,160, according to the American Resort Development Association (ARDA). Note that timeshares rarely appreciate in value, so you could spend far less for a resale purchase on the secondary market instead of buying a new one. You could save as much as 70% of the original purchase cost.
• Annual maintenance fees: The annual maintenance fees cost $1,480 on average in 2024. However, it could cost you more or less, depending on the size of the unit. If you have a deeded timeshare, you'll pay these costs indefinitely. The costs usually increase over time due to inflation.
• Special assessment fees: “Resorts may charge special assessments for unexpected repairs, major renovations, storm damage, or upgrades not covered by regular maintenance fees. These are not charged every year but can be significant,” says Lawrence.
• Exchange fees: If you'd rather head to Florida instead of Las Vegas during your annual vacation, you may have to pay exchange fees to switch locations.

Be aware that some or all of these costs can change over time due to fluctuations in the timeshare market or other economic factors. Make sure to ask about your all-in costs per year and when they’re due. Some resorts require you to pay monthly, quarterly, or twice per year.

Pros and cons of a timeshare purchase

It's important to determine whether a timeshare fits into your overall goals. Ultimately, a timeshare is not considered an investment because you won't see returns from the funds you put into it.

On the downside, expect high initial costs, ongoing fees, and low resale value. However, if you've always wanted to own a vacation home but can’t fit the high costs into your budget, a timeshare might make sense for your needs. Here are some pluses and minuses to consider.

Pros

The benefits of owning a timeshare include:

• Predictability: “A timeshare gives you dependable vacation planning as your use is secured each year,” says Dennis Shirshikov, a professor of finance and economics at City University of New York/Queens College.
• Upscale amenities: Timeshares typically offer spacious accommodations, resort-like amenities, and other luxuries.
• Familiarity with the location: You can return to a recognizable and beloved destination each year, which can be beneficial if you really enjoy the perks of that particular area.
• Points could be bankable: Some timeshares allow you to take advantage of points that you can use at other properties within that resort chain. Also, you may be able to tap into a vast network of locations and save up points to use later, in case you want to skip a year.

Cons

Then again, there are drawbacks to owning a timeshare, including:  

• High up-front costs: Timeshares usually come with a large upfront price tag. That said, make sure to think about whether you’re ready to handle not just the initial costs but also the ongoing expenses.
• Fees: You'll also have to pay annual dues and maintenance fees, which you’ll fork over on an ongoing basis as long as you own the timeshare.
• Inflexibility: Changing your vacation week may not be possible unless your timeshare offers a floating schedule. This lack of flexibility in booking and cancellations can be challenging if unexpected events, like an illness, arise.
• Tough to exit: If you decide to cancel your timeshare, you may need to work with a lawyer or a timeshare exit company, which can be costly and time-consuming. Reselling can also be difficult, as you’ll be competing with others trying to offload their timeshares.
• Will likely lose money: Timeshares typically depreciate in value because they are illiquid assets. Unlike purchasing a vacation home, where you own the property and it may appreciate over time, a timeshare does not provide true ownership or equity and often decreases in value.

How to get a timeshare

You can typically acquire timeshares in one of two ways: through a timeshare presentation or the timeshare secondary market.

Timeshare presentation

A timeshare presentation, also sometimes called a discovery tour, allows you to learn about timeshare opportunities with a representative. These opportunities are often easily found at major hotels and vacation resorts.

“These are typically very scripted presentations with an incentive to sit through it, typically a discount on estate or gift cards,” Shirshikov adds.

Lawrence adds that “timeshare presentations tend to be much longer than the initial 90 minutes potential buyers are promised. They usually include on-site tours, very often high-pressure sales tactics and prices are always much higher than resale prices, because you are paying full retail rates and sales commissions.”

If you don't fulfill all the requirements to get the deal, such as meeting specific age requirements or bringing your spouse, you could forfeit the timeshare or have to pay full price instead of getting the deal being offered.

Timeshare secondary market

You can also get a timeshare through what's known as the timeshare secondary market. This is a place where timeshares are sold by owners who no longer want or use them. You can find them online via resale markets, such as through the Timeshare Users Group (TUG). You can also search for them by destination or vacation club.

You may find a better deal going this route. But if you do, it’s important to make sure you work with a timeshare broker or a licensed timeshare resale agent. They can help you identify who is responsible for paying for final fees and who can assist you in navigating legal documents, such as the accompanying deeds.

Remember: It’s easy to fall prey to timeshare scams. So it’s important to vet anyone you deal with carefully.

How to get rid of a timeshare

Many timeshare owners report eventually regretting their purchase and feeling like it wasn’t worth the investment. In fact, per timeshare exit company Lonestar Transfer, about 87% of owners feel this way, usually because of high maintenance fees, the hassle of reselling, and the financial burden it creates.

If you end up purchasing a timeshare but feel regretful and stuck, you’re not alone. The good news is that there are ways to exit your timeshare agreement. Here are a few strategies to consider.

Rescission laws

If you recently purchased a timeshare and have second thoughts, you can use rescission laws to your advantage. These laws give you a short period, usually 3 to 15 days, depending on your state, in which you can cancel the contract.

Timeshare companies are required to include this "cool-down" period in their contracts, and they must explain your cancellation rights clearly. Many states also make sure buyers get all the details about how to cancel when they buy the timeshare or shortly after. This way, if you change your mind, you don’t have to jump through hoops to get your investment back.

“Every state gives new buyers a short rescission period, usually a few days, to cancel a timeshare purchase for a full refund. This must be done in writing and within the deadline listed in the contract,” Lawrence says. “It is the easiest and safest way to cancel, but it only applies right after the purchase.”

Negotiate directly with the timeshare developer

If the cool-down period has already passed, don’t panic — there are still options available to help you legally get out of your timeshare. One option is to contact the timeshare company yourself.

Make sure to explain that you’d like to exit your contract and ask about the process. Some timeshare developers offer deed-back programs, also known as buyback programs, that let the developer buy the property back from you.

For example, Wyndham Destinations, one of the largest vacation ownership companies in the U.S., has a Certified Exit program. This program lets owners explore options like returning ownership if their loan is paid off or if they qualify for a hardship exception.

However, be aware that you may have to pay a fee to cancel your timeshare agreement in some cases.

Hire a lawyer

Another option is to hire a lawyer to negotiate on your behalf. This legal expert can guide you through the steps needed to exit a timeshare and carefully review your agreement to find solutions, such as canceling during the rescission period or using deed-back programs.

While this option may cost more than others, it can help you avoid common pitfalls. For example, if you attempt to negotiate with the timeshare developer yourself, they may try to persuade you to stay with offers like “free” upgrades. But these upgrades often come with new contracts, making it even harder to get out later. A lawyer can review these agreements, simplify the process, and help minimize the costs of ending your timeshare contract.

Resell your timeshare

What happens if your rescission period has passed and the developer doesn't offer buyback programs? In this scenario, you can try reselling your timeshare by connecting with a timeshare company or agent familiar with the secondary market.

But this option typically applies only to timeshares that are fully paid off. If your timeshare still has an outstanding loan, it could be considered "encumbered." This essentially means the property has financial obligations attached to it, which can limit your ability to resell the timeshare.

Here are the typical steps involved with reselling your paid-off timeshare:

• Review your purchase agreement: Check to see if your contract allows you to sell directly to a new owner or if your timeshare developer has the right to buy it back first through a "right of first refusal" (ROFR) clause.
• Determine its value: Take time to research the market by comparing prices of similar timeshares for sale. Be sure to look at factors like location, square footage, and amenities to estimate how much your timeshare is worth.
• List your timeshare for sale: It's best to use reputable online resale platforms such as RedWeek to advertise your timeshare. However, proceed with caution when you hear companies promote "exclusive" listings but charge high fees to post your property.

Remember that timeshares usually lose value over time. While you probably won’t get back the full amount you paid, selling can still free you from the ongoing stress of maintenance fees and other costs.

Use a timeshare exit company

If other methods don’t work, a timeshare exit company might be your next viable avenue. Since there are many scams in this industry, it’s important to choose a reputable exit company. Be sure to choose one with a solid track record by checking how long they’ve been in business and reading reviews on their website or trusted platforms like Yelp. Up-front payment requests should raise concern, as they’re commonly associated with scams.

Foreclosure as a final option

There’s a drastic final resort you can turn to if all else fails: Stop paying your timeshare mortgage or maintenance fees, which should trigger the timeshare company to foreclose on the property, similar to a traditional mortgage.

While allowing foreclosure can be a way out, it comes with significant risks, including potential damage to your credit score. So, before considering foreclosure, take the time to explore all other options. Even if you’re in a tough financial spot, finding a safer solution can help you avoid long-term consequences.

Alternatives to a timeshare

While timeshares can offer enticing vacation accommodations, there are plenty of other choices to consider, such as:

• Purchasing a vacation home. With this choice, you can earn equity and rent out the property to others when you’re not using it, but you’ll be required to purchase the home in full and pursue mortgage financing if you cannot afford an all-cash transaction.
• Staying in a hotel. “The good news is that hotel rewards never require you to actually own a property. You simply pay nightly and bypass ownership expenses and maintenance fees. And hotels can provide great discounts and points-based travel,” says Shirshikov.
• Staying in a home rental service such as Airbnb or VRBO. “Here you can book condos, homes, or apartments through established platforms with no long-term commitment,” says Lawrence.
• Enjoying a bed and breakfast. A bed and breakfast usually provides a more personalized and homey experience, where you get more individualized attention; but you will receive less privacy and fewer amenities than an Airbnb or hotel stay.
• Staying in a cabin. If you prefer a more rustic and often woodsy setting, a cabin often promises more space, privacy, and quietude, but you’ll sacrifice the luxuries and conveniences of a hotel, Airbnb, or bed and breakfast stay.

Take the time to explore these alternatives to learn what best suits your lifestyle and vacation preferences.

Avoiding timeshare scams

The Federal Trade Commission (FTC) warns that timeshare resale and exit scams are a common issue. Beware of fraudulent companies that promote timeshare resale or exit services on the Internet, radio, or social media with claims that they can quickly sell your timeshare, guarantee high returns, or have interested buyers lined up. Most of these promises are fraudulent or exaggerated.

A good rule of thumb is that if it seems too good to be true, it likely is. So, be vigilant about these types of scams. The FTC recommends the following to avoid timeshare resale scams:

• Research the seller by contacting the state attorney general and local consumer protection agencies to see if there are any related complaints. Make certain their agents are licensed where the timeshare is located.
• Use a timeshare appraisal service to assess the timeshare’s value.
• Ask about any upfront fees, cancellation terms, and refund policy. Get everything in writing.
• Ask for references from previous clients.
• Ask if the reseller will promote your timeshare and how to gauge their marketing practices.

What to do if you’re a victim of a timeshare scam

Worry that you've been scammed? Stop making any payments immediately and contact your bank or financial institution for help. After that, enlist the help of an attorney for guidance on your next steps.

It’s also a good idea to report the scam to the FBI’s Internet Crime Complaint Center at ic3.gov and the Federal Trade Commission (FTC) at ReportFraud.ftc.gov. Even if you just spot a scam, make sure to report it to the FTC, the state attorney general, and the Better Business Bureau (BBB).

The FTC also has plenty of helpful resources if you’ve fallen victim to a timeshare scheme. You can check them out here.

FAQ about timeshares

Here are some frequently asked questions about timeshares.

Can I rent out my timeshare week?

Yes, with few exceptions. Most major timeshare developers and homeowners associations allow owners to rent their unused weeks as long as their account is in good standing and the resort’s rules are followed. Owners should check their contract and resort rules carefully. Some resorts restrict rentals or require resort-approved platforms. Taxes, HOA rules, and exchange program restrictions can apply.

What happens if I don’t pay the annual fee?

If you don’t pay your annual fee, your account will be treated as delinquent. Late fees and interest will begin to accumulate, and the management company may suspend your ability to make reservations or use your ownership. If the balance remains unpaid, the resort may send your account to collections, report the delinquency to credit bureaus, and eventually begin foreclosure on your timeshare. Foreclosure removes your ownership but can damage your credit and may include additional legal or collection costs.

Can I ever pay off a timeshare?

If you purchased a deeded timeshare, you can pay it off because it’s real property and may come with a mortgage that can be fully paid off. However, paying it off only provides you with shared ownership of a particular unit for a set time.

If you purchased a membership-based or right-to-use type timeshare, you don’t actually own property – you have essentially bought access for a particular number of years – so you can’t pay it off.

What happens if I walk away from a timeshare?

If you walk away from a timeshare, you can expect to get calls from a collection agency and have your credit score take a hit. That's why it's important to carefully read through a timeshare contract before you sign up for one.

Is there a way to save money on a timeshare?

Typically, purchasing a timeshare from a current owner (on the secondary market) is much cheaper than buying one from a timeshare developer.

The bottom line: Timeshare investments come with risks

Take the time to better understand how timeshares work and what’s involved – including the long-term costs – before committing to this transaction. Consider that a timeshare can provide a predictable and comfortable means to vacation with your loved ones, but it comes with serious long-term financial commitments, limited flexibility, and difficulties if and when you want to sell or exit the timeshare.

If, after researching your options, you decide to go in a different direction – such as purchasing a second home or vacation home – crunch the numbers carefully by using our handy home affordability calculator. When you are ready, you can start your home loan application with Rocket Mortgage.

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