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.
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.