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Expert Advice

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Robert J. Webb, senior partner in the hospitality practice at the Orlando offices of the law firm Baker Hostetler, and Jason Gamel, vice president and in-house counsel at the American Resort Development Association, explain the questions that you should ask before you sign anything.

Should people be concerned about reports of a "softening" of the real estate market?

Gamel The state of the market varies from location to location. In some of the most popular areas, where second homes simply aren’t available—like Beaver Creek or Bachelor Gulch—we won’t see dips. In some other, less expensive vacation markets, there are more opportunities; it’s a buyer’s market.

What questions should someone ask before joining a destination club?

Webb There are serious consumer protection concerns, although so far regulators have left these clubs alone, as there have been few complaints. Find out how they guarantee refunds for members who leave and how many properties are leased rather than owned.

Gamel Inquire about refunds and leased homes (leasing can make sense as a short-term strategy for a club to test a destination). Also check how willing a club is to share financial data, how many members share how many homes, and what the annual dues cover. Find out how much say you will have over the direction of the club.

What are the pros and cons of different vacation-home alternatives?

Gamel Consumers are familiar with time- shares, and there is an incredible variety in terms of destinations. The disadvantage is that services can be limited and the block of time is small. Fractionals are more exclusive, but the cost and maintenance fees can be high. Condo- hotels are a true real-estate investment, with the advantages of whole ownership and the opportunity for rental income.

Webb I see these options as a continuum, with hotels at one end and whole ownership at the other. Hotels require no commitment; second homes do—a significant investment and expense. The advantages of fractionals and time-shares is that you are paying for the time you’ll realistically use and are sharing the expenses with others.

What advice would you give to someone considering properties in the Caribbean or Mexico?

Gamel I know many people who have had positive experiences purchasing in the Caribbean and Mexico, but I’ve also heard of instances that weren’t as great. My best advice is to retain a local attorney. It’s a different market and different legal system, and local counsel can help buyers navigate it.

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