A timeshare allows a buyer the right to use a property – usually part of a resort – every year for a specified period of time. Essentially, purchasing a timeshare involves pre-paying for vacation accommodations rather than paying for a hotel room, resort space or vacation home. Unfortunately, the economics of buying and owning a timeshare do not always work out in favor of the owner.
In 2019, the average timeshare cost approximately $22,000 – and that’s before an approximate additional $1,000 in maintenance fees each year and additional interest expense that results from financing the purchase.
If you’re been feeling the strain of owning a timeshare that you no longer really want, you’re not alone. The reality is that purchasing a timeshare is very often a bad idea because tastes change, circumstances change, people get older, and the willingness or opportunity to travel becomes less frequent. Are you trying to get out of a timeshare? Here are some tips on how to get out of a large timeshare debt and some steps you can take now.
How To Get Out of a Large Timeshare Debt
If you are looking for a way to get out of a large timeshare debt, there are several approaches to consider. These include calling the timeshare developer, renting out your timeshare, selling your timeshare on the re-sale market, giving your timeshare to a friend or family member – or maybe even just ceasing to make payments on it (not the greatest idea – there will be consequences).
For starters, many timeshare developers offer surrender or “deed-back” programs largely unknown to the general public that can help facilitate a timeshare exit. Developers have become more amenable to the reality that older customers may face financial challenges that preclude them from using the timeshare (particularly during the pandemic), so an honest discussion of your circumstances and personal financial situation can yield results.
If you’re looking to get out of your timeshare, your first call should go to the timeshare developer. Timeshare developer buyback programs come with predictably low prices, since timeshares rarely sell for more than 15% of their original price. However, a quick sale will eliminate annual maintenance fees while putting a dent in any remaining loan payments on the property, providing some degree of timeshare debt relief.
A second option is to look into renting out the timeshare. Most timeshare contracts do not preclude subletting, and there are a number of online platforms that allow for listings.
Timeshare Users Group is a good place to start. Selling a timeshare on the resale market is a third option, but it is important to understand that timeshare ownership is not a form of real estate ownership.
Timeshares, because they are split with as many as fifty-one different owners, do not appreciate in value like traditional real estate does. Selling a timeshare into a crowded re-sale market can help you pay off some remaining timeshare debt – but you should expect to take a loss on the value of the timeshare relative to what you initially paid for it.
How Can I Get Out of My Timeshare Debt?
Gifting a timeshare may sound like a good idea, but it really isn’t. When a timeshare has been fully paid off, transferring the deed can be relatively straightforward – but not so if you’re still carrying debt on the timeshare.
Can timeshare debt be transferred to another person? Well, laws for sizable gifts will vary from state to state, so it’s best to consult an attorney before doing anything.
Then, regardless of whether there’s a debt balance, there’s still the matter of whoever receives the gift becoming responsible for the annual maintenance payments, which have a nasty habit of increasing approximately 5% every year. Might not be such a nice gift, after all. Another option is to just throw up your arms and stop making payments on the timeshare – but this will have consequences and raises a number of questions.
What happens if I stop making payments on a timeshare? Is a timeshare unsecured debt? What happens if the lender forecloses on my timeshare?
If you decide to default on your timeshare payments – financing or maintenance – your defaulted payments will be turned over to a collection agency, and you’ll start receiving plenty of annoying collection phone calls.
Falling seriously delinquent on timeshare finance payments and allowing a finance company to foreclose on the property will often lead to collection fees, missed payment fees, accumulated interest expense and damage to a credit score and profile.
A timeshare foreclosure will have a negative impact on the ability to secure another mortgage for up to seven years. The better, less expensive, less burdensome choice is to work with your lender to find a solution. Also, be aware that many timeshare management companies require that maintenance fees be current before allowing any transference of timeshare ownership.
How Do I Get Out of My Timeshare?
When a timeshare buyer quickly realizes that the purchase was a mistake, there is a rescission period during which the timeshare can be cancelled – but this period lasts only three to fifteen days from the purchase date, depending upon the state.
After that, available options include refinancing, timeshare debt settlement with a modification of terms based on documented financial hardship, and in extreme cases – bankruptcy.
A deeded timeshare involves purchasing a portion of the property and is a secured debt. A non-deeded timeshare involves leasing the right to use the property for a contracted number of years and is a form of unsecured debt that can be discharged through bankruptcy.
Filing for Chapter 7 or Chapter 13 bankruptcy can suspend collection activity and erase timeshare debt, but this form of timeshare settlement comes with significant long-term damage to a credit score and profile.
Consider contacting the owners of the adjacent weeks to your timeshare (the weeks immediately before and after your ownership week), as they may be interested in acquiring a longer, consecutive stay without incurring additional travel costs. A final option worthy of investigation is timeshareexitteam.com, a consumer protection organization that helps timeshare owners rid themselves of unwanted timeshare contracts.
Assessing Your Timeshare Contract
Clearly, you have several options when it comes to getting out of a timeshare debt. So, how do you decide the best way to get out of debt in your specific situation?
When determining how to get out of a timeshare, the very first thing you should do is assess your timeshare contract. Reviewing your contract will help you make a more informed decision moving forward. Look over the details on your contract to determine:
- Any costs associated with selling your property
- How annual maintenance and other fees will get handled after a sale
- If there are any subletting stipulations
- If the developer offers a surrender program
- Whether there are any stipulations regarding gifting your timeshare
- What will happen if you stop making payments
Learning more about these details will help you make a good decision on how to handle the debt. If you’re unclear about any of the terms of the contract, then it might be best to consult with a lawyer before you make any moves.
Negotiating with the Timeshare Company
As you go through and review your contract, it might be worth your time to stop and ask yourself — what is a timeshare, and how do timeshares work? Once you dig deeper into the situation, you’ll realize that you are only one small cog in the big wheel which is the timeshare you’ve purchased. This realization is powerful, and it can give you the strength and motivation you need to show up at the negotiating table with the timeshare company.
Often, the timeshare company knows that they can get another person to fulfill your role, but that doesn’t make it any easier to let go of you as a crucial part of the timeshare. If you can offer solutions or help the timeshare cut its losses, then they’ll be more likely to work with you and let you out of the contract.
Consumer Protection Laws to be Aware of
The Department of Consumer Protection does offer specific protections to individuals looking to purchase timeshares. According to the department, selling or buying a timeshare is always a real estate transaction, so you should consider hiring an agent to help guide you through the process. Timeshare resale and transfer companies are often, but not always, scams that offer to sell your timeshare property for a fee. What often happens in these situations is that the company takes over the property and takes the title but never actually transfers the property. This leaves the timeshare owner not only out of the property but still stuck with all the maintenance fees, too.
Managing Credit Score Impact
Another important thing to consider when determining how to handle your timeshare is your credit score. Your credit score is an important indicator of your overall financial health, and it comes into play when financial decisions are made by lenders and financial institutions. With that in mind, the last thing you want is for your timeshare debt to start impacting your score.
Your timeshare could negatively impact your score if you open multiple lines of credit on one timeshare purchase, you have a very high balance on your timeshare, you apply for a new line of credit for your timeshare, you fall behind on payments, or your timeshare goes into foreclosure.
If you know that the timeshare is impacting your credit, then getting rid of the debt by transferring it might be a good option. If the delinquency is the issue, you might be able to rectify the situation and remove the negative remark by negotiating with the timeshare owner.
Avoiding Future Timeshare Traps
Timeshares have the potential to be wonderful vacation opportunities, but they can also turn into debt traps that you can’t seem to get out of, too. Due to the yearly maintenance fees and contract terms, you agreed to, you might find out that you can’t get rid of your timeshare. Even gifting the timeshare to someone else would wind up costing them in the long run.
The best way to avoid a future timeshare trap is to always be wary of the terms of the contract you’re agreeing to sign. Be mindful of the fees associated with the timeshare and consider how you’ll get out of the contract before you become bound by it.
What happens when you don’t pay your timeshare maintenance fees?
When you don’t pay your timeshare maintenance fees and fall seriously delinquent, the timeshare finance company can foreclose on the property. This will usually compound collection fees, missed payment fees, accumulated interest expense and damage to your credit score and profile. Timeshare foreclosure will have significant negative impact on your ability to secure another mortgage for up to seven years. The better, less expensive, less burdensome option is to work with your lender to find a solution. However, many timeshare management companies require that maintenance fees be current before allowing for a transference of timeshare ownership.
What is the average cost of getting out of a timeshare?
If you’re looking to get out of a timeshare, your first phone call should go to the timeshare developer. Timeshare developer buyback programs come with predictably low prices, since timeshares rarely sell for more than 15% of their original price. However, a quick sale will eliminate annual maintenance fees while putting a dent in any remaining loan payments on the property, providing some degree of timeshare debt relief.
What happens to my timeshare when I die?
Timeshare agreements often include a “perpetuity clause” that states the timeshare is valid throughout the lifespan of the original owner. When the owner passes away, the timeshare becomes part of the estate. The beneficiaries who inherit the timeshare become the new owners by default and are responsible for ongoing maintenance fees on the timeshare. It is also possible to make heirs co-trustees on the timeshare, thereby “protecting” them from automatically inheriting the timeshare and its ongoing maintenance fees.
Can you refuse to inherit a timeshare?
When heirs are named as co-trustees on a timeshare, they are given the option to keep the timeshare, sell it, or abandon it altogether. However, even in the absence of being named as co-trustees, heirs can refuse to inherit a timeshare by filing a refusal to accept through a Disclaimer of Interest letter written to the probate court handling the estate.
About the Author: Steven Brachman
Steven Brachman is the lead content provider for UnitedSettlement.com. A graduate of the University of Michigan with a B.A. in Economics, Steven spent several years as a registered representative in the securities industry before moving on to equity research and trading. He is also an experienced test-prep professional and admissions consultant to aspiring graduate business school students. In his spare time, Steven enjoys writing, reading, travel, music and fantasy sports.
Gabriel Gorelik paves the way for customer service and operations at United Settlement. He is passionate about numbers and holds a strong belief in helping anyone with their debt. Before United Settlement, Gabriel received his BS in Finance & Economics from Brooklyn College. After graduation, Gabriel went on to build his first financial services company where he managed thousands of accounts for business and consumer clients. He understands the importance of client satisfaction, professionalism, and exceeding expectations.