Time-Share Ownership Offers ‘Same Time Next Year’ Trip Advantages : Trends: Buyers should ignore pressure tactics and thoroughly investigate before making an investment. Bargains may be available on the resale market.

A colleague of mine flew back from the Caribbean a few months ago bubbling with good news. Captivated by the island she was visiting, she had made a spur-of-the-moment decision to buy a time-share on a condominium apartment. Every Thanksgiving from now on, she can return to her sun-soaked island for a week’s getaway--or make an exchange for a comparable property anywhere in the world--and know she has an attractive, fully furnished place waiting.

Sound familiar?

Time-share ownership has become a significant factor in the nation’s vacationing habits. More than 1.3 million American families have purchased time-shares at more than 1,000 resorts countrywide, according to industry reports. Many other Americans own time-shares abroad.

Are time-shares a good buy? The answer depends on what you are looking for.

If you are seeking a solid investment--one that appreciates quickly--the answer is probably no, at least for the near future. The resale value--depending in part on the property’s location and the time of the year you own--could be no more than half of what you paid, according to Clinton Burr, president of the Resort Property Owners Assn. of Chicago, a consumer-oriented organization representing about 16,000 time-share owners.

If, however, you look forward to repeating a pleasant vacation year after year--one in which your lodging costs remain stable--a time-share purchase may prove worthwhile.

In the last two decades, some hard-sell tactics have given the time-share sales industry a bad name. In response, the industry’s trade association, the Washington-based American Resort & Residential Development Assn. has adopted a code of ethics aimed at improving the industry’s business practices. And some states have enacted time-share regulations to curb misrepresentations. The baddies are on the run, says the association.

Nevertheless, prospective purchasers should investigate a time-share offer as thoroughly as they would any major expense, particularly if the sales pitch is made while they are in a relaxed and receptive vacation mood. If possible, you may want to spend a few nights in one of the property’s apartments or villas before you commit yourself.

You also should think seriously about your lifestyle: Do you really want to spend a week out of every year’s vacation at Disney World in Orlando, Fla.? Or, if you exchange regularly for different locations, will you always want to stay in a resort environment rather than finding a small, cozy inn?

An often overlooked possibility is buying a time-share on the resale market. Resale prices may be much lower than the cost of a new time-share unit, even in the same condo or villa development. You may be able to find an exceptional bargain from somebody wanting to sell quickly.

Time-share rentals also can be a bargain, with two-bedroom condo apartments and villas in major resort areas often renting for less than a hotel room in the same area. Some resorts have time-share rental offices. And in recent years, nationwide time-share rental agencies have gotten into the business. If you can’t use or exchange your time-share, you may want to put it on the rental market.

Typically, a time-share provides for the use of an apartment or villa for a specific week or two weeks each year. But the industry has come up with alternatives that may be more in line with your vacation needs. For example:

--Fractional ownership: This is an arrangement by which you may acquire a one-month to half a year’s share of a vacation home, making the cost more affordable since two, four or a dozen families are contributing. Four families might use the property for one full season each, alternating the seasons over the years. About 60 resorts offer fractional ownership plans, primarily on Hilton Head Island in South Carolina and the Outer Banks in North Carolina, as well as in Aspen, Palm Springs, Newport, R.I., and St. John in the U.S. Virgin Islands.

--Urban time-sharing: This variation of the split week seems to be working well in San Francisco. At five small all-suites hotels, you can divide a weeklong time-share into seven separate one-night stays rather than using your week all at one time. This option has caught on with suburbanites who attend evening theater performances and concerts in the city. They can choose seven nights in the city over a year’s period, and after the evening’s entertainment, they can remain overnight in their time-share suite.

“With time-sharing . . . remember that you are buying vacation time and not a real estate investment,” warns a new consumer brochure distributed by the American Resort & Residential Development Assn. Unlike other real estate, time-share properties generally have not appreciated much in value, and in many cases the value may have decreased. There are exceptions, of course, but you should not count on selling at a profit.

Given the nature of the association, the warning is a strong one. The organization has about 800 members representing about 90% of the vacation ownership and time-share industry. About half of the members are resort developers--the folks who are building and selling second-home and time-share properties. In the past, sales personnel sometimes gave the generally misleading impression that time-share weeks were easily or profitably resold.

The real value of a time share, says Tom Franks, the association’s senior vice president, “is in savings accrued to the user by locking in vacation costs each year.” If you buy now, you get yearly vacations at 1990 prices. Like paintings, you acquire a time-share not for the resale potential but because you like using it or exchanging it.

For example: Say you are accustomed to paying perhaps $200 a night for a beach-front hotel room during the prime tourist season. You decide to buy a week’s use of a two-bedroom beach condo for $8,500--an average price for time shares. At $200 a night, it would take you about six years (six weeks, 42 nights) to recover your $8,500 payment.

In six years, however, the cost of a hotel room might have jumped to $300 or more. You can continue to have use of your apartment--which has a kitchen and is more spacious than a hotel room--for years to come.

For you, the no-vacancy sign never goes up. And you also have the option of exchanging it for an apartment in an equivalent resort at some other appealing destination. Finally, you can always expect some return if you decided to sell.

This all sounds perfectly logical, but to make the figures work you must use your apartment regularly, rent it out or arrange an exchange. You also must ensure that the development remains well-managed and is maintained satisfactorily over the years.

Not everyone who purchases a time-share property ends up wanting to hold onto it for years. Though figures vary, a large number of time-share resales reportedly are available today. As a result, resales are essentially a buyer’s market--for the time being, anyway--and there are bargains to be found. Time-shares on the resale market generally are selling from 30% to 40% less than the original purchase price, according to Linda Miller, vice president of Condolink of Omaha, a major time-share resale and rental firm.

“Time-share is obviously not an investment that will appreciate in value,” says Burr. “The resale market is now glutted with owners trying to recover some of their initial cash outlay.” He estimates that perhaps 300,000 to 500,000 time-shares are on the resale market.

While this is bad news for sellers, he says, the opposite is true for someone interested in buying or renting. Last year, Burr bought a week’s time-share in a two-bedroom apartment on a golf course in what he describes as a “top quality” Arizona resort. His occupancy week occurs in March, when the golfing is great. He paid only $1,800 for his time-share; originally, it sold for $10,000.

Burr is a knowledgeable player on the time-share scene, and he held off buying until he found the price he was looking for. But other bargain hunters may be able to find comparably low prices, he says, by taking advantage of time-share auctions, which are held periodically. His association distributes a list of auction houses where you can be placed on a mailing list for upcoming sales. His organization also can provide a list of firms such as Condolink that handle regular time-share resales and rentals.

Despite the low resale value of many time-shares, Franks says the outlook for the future of time-shares is optimistic. One reason is that such well-known hotel chains as Marriott, Hilton and Sheraton have entered the vacation time-share market.

In addition, an association survey, just completed, indicates that as many as 13 million American households are interested in buying some type of recreational property in the next decade. The industry, Franks says, “is well-positioned to benefit . . . from the nation’s relentless search for the good life.”

Both the American Resort & Residential Development Assn. and the Resort Property Owners Assn. offer consumer advice on buying a time-share. Among the considerations:

--Know yourself: Are you the kind of vacationer who likes returning to a familiar place, or will you become bored quickly of the same view? Does the resort have a variety of activities that interest everyone in the family? Is a condominium apartment the type of vacation lodging that you prefer, or do you really like romantic little hotels and country inns?

--Check out the developer: Contact references--such as people who already own time-shares in the development--as well as the local chamber of commerce and Better Business Bureau. Is the firm a member of the American Resort & Residential Development Assn.?

To curb abusive sales tactics, the association has adopted a code of ethical practices. If a member firm is found to have violated the code, if can be suspended from membership for up to two years. Buyers should determine whether the resort property they are interested in is a member in good standing. If you think you have been given a bum deal, complain to the association.

--Check out the management: Are housekeeping standards and security arrangements sufficient? Does the facility have a large-enough budget to maintain the property adequately?

Time-share owners generally are assessed an annual fee, which may be supplemented by the developer until most of the units are sold. You may want to try out the property in advance of buying by renting for a few days.

--Verify exchange programs: Will you have access to a time-share exchange network? How does it work, and how much does each exchange cost? Talk to other owners in the resort complex about their exchange experiences. Are there exchanges at destinations that appeal to you?

For more information, contact:

--American Resort & Residential Development Assn., 1220 L St. N.W., 5th Floor, Washington, D.C. 20005, (202) 371-6700. For a copy of the organization’s guide to buying a time share, call (800) 695-2732.

--Resort Property Owners Assn., 175 W. Jackson, Suite 1901, Chicago, Ill. 60604, (312) 939-0141. The organization is a source of consumer information as well as the names of clearinghouses that resale, auction or rent time-share properties.