Avoiding a Timeshare Foreclosure

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 What is a Timeshare?

A timeshare is a property in which ownership is shared by more than one individual. In many cases, a timeshare is located in a condominium and/or living space in a desirable vacation destination. A developer is able to reduce the costs for each owner by creating a shared ownership.

A timeshare owner purchases the right to use the property at specific times during the year. For example, a timeshare owner may choose to pay for three weeks during the month of August at a property that is located near the beach. This type of purchase helps the individual to reduce costs since they are not required to pay for the property during the times of the year they are not using it.

When an individual owns a timeshare, for a specific time, they have the exclusive use of the share they own in the property. For example, if an individual’s share is 4 weeks in July, they have exclusive use of the property during that time period. The other owners of the timeshare have exclusive use of the property for the remainder of the year.

There are three main types of timeshares, including:

  • A fixed unit, fixed week, deeded agreement: In this type of timeshare, an individual owns a deeded interest to the property and has actual ownership for a specific time during the year;
  • A floating time agreement: In this type of timeshare, the use is flexible and reservations are often on a first come, first serve basis; and
  • A right to use plan: This type of timeshare provides the individual the right to access and use the property prior to a set termination date but they do not actually own it. After that date, they have no rights to the property.

Generally, a timeshare agreement is final once the contract is signed. Some timeshare companies, however, provide a short return window in which a timeshare purchase may be cancelled and/or revoked. This option will depend on the agreement between the seller and purchaser.

What Legal Issues Arise from Timeshares?

There are many legal issues that may arise from timeshares. They have recently become more common, especially due to recent changes in the housing economy.

Timeshare legal issues may involve a combination of real estate, contract, and/or business laws. Common timeshare legal issues may include:

  • An owner defaulting on timeshare payments, or not paying timeshare payments;
  • A failure of the property, such as an unexpected timeshare foreclosure;
  • A timeshare scam and/or fraud scheme;
  • A conflicts between timeshare owners, for example, two owners being scheduled to use the timeshare during the same time period;
  • Timeshare cancellation and/or rescission;
  • An owner transferring their timeshare rights;
  • An owner giving a timeshare away;
  • An overlap of state laws, which may occur because timeshares are frequently located in a different state than the purchaser’s home residence.

A timeshare may be used part-time and/or during specific times of the year. Typically, they are used for traveling, vacation, and/or temporary housing. A timeshare can provide individuals with the ability to utilize a vacation property they could not otherwise afford to purchase. However, if an individual gets behind on their timeshare payments, they may be subject to a foreclosure process that can take interest away.

What is Foreclosure?

A foreclosure occurs when a timeshare owner fails to make timely payments over a period of time. During a foreclosure, the company that has a loan on the property may seize the property.

If the company successfully forecloses on the property, it may damage the timeshare owner’s credit score and make it difficult for them to obtain new loans and/or lines of credit in the future.

What Options are Available to Avoid a Timeshare Foreclosure?

Depending on an individual’s goal, there are different ways to handle a pending foreclosure and/or to avoid a foreclosure from occurring. An individual should take these into consideration if their goal is to cease owning the timeshare altogether or to keep and/or maintain the property.

Some ways to avoid a timeshare foreclosure include:

  • Selling the property interest to another person and/or entity;
  • Donating the timeshare interest to a non-profit or charity;
  • Negotiating with the timeshare company to avoid the foreclosure; and/or
  • Offering the deed of the timeshare in lieu of foreclosure.

If an individual sells, donates, and/or offers the deed in lieu of foreclosure, they release their interest in the timeshare and it is no longer theirs. It may be possible to negotiate with the timeshare company to keep the timeshare, but that will depend on each specific case and company.

How Can I Sell My Timeshare to Avoid a Foreclosure?

An individual can sell their timeshare to avoid foreclosure by finding a buyer. They may also inquire with the timeshare company to see if they have any potential buyers interested in the property. It is important to be aware that most timeshares are not profitable. However, if the property is in a popular and high demand location, selling it may produce a profit.

An individual may also sell their timeshare, even if they suffer a financial loss. Selling the timeshare at a loss may reduce the amount owed to an amount that can be used to pay off the debt related to the timeshare and avoid negative implications of a foreclosure.

How Can I Donate my Timeshare to Avoid a Foreclosure?

If an individual owns the timeshare but has trouble paying the tax assessments, they may be able to donate the property to a qualifying charity. They will be required to make the assessments current but should be able to take a tax deduction after donation and avoid future assessments, which may avoid foreclosure.

It is important to note that many charities will not desire the donation of a timeshare, so an individual may have to search for a charity willing to accept it.

How Can I Negotiate with My Timeshare Company to Avoid a Timeshare Foreclosure?

Neither the timeshare owner nor the timeshare company or bank that loaned the funds for the timeshare desire a foreclosure. That provides both parties an incentive to negotiate in order to avoid the foreclosure process. It may be possible to come to an agreement by:

  • Negotiating a forbearance which could give an individual several months where they do not have to pay while they search for other options and/or money to make their payments current;
  • Talking to the timeshare company or resort about reducing the amount the individual owes; and/or
  • Negotiating with the bank and/or timeshare company for a reduced payment plan. Getting a new, lower payment may help an individual stay on top of timely payments rather than falling behind. However, be on the lookout for bigger fees and/or increased interest.

What is a Deed in Lieu of Foreclosure and How Can I Use it to Avoid a Timeshare Foreclosure?

In some cases, a deed in lieu of foreclosure may be accepted by the bank and/or timeshare company as a way to obtain the title of the property instead of foreclosing.

This deed back process is typically voluntary on the part of the bank or resort; in other words, they are not required to take the deed back instead of foreclosing.

What are Timeshare Rescue Scams and How Can They Hurt Me?

Timeshare scam companies may contact an individual in order to get money from them with fake promises of getting them out of their timeshare debt. If an individual decides to use a third party company to assist with foreclosure and/or to sell their timeshare, they should first check with the Better Business Bureau regarding the company’s reputation and rating.

The individual may also conduct their own online research to determine if the company is legitimate.

Should I Consult a Lawyer About My Timeshare Foreclosure Problem?

Yes, it is essential to have the help of an experienced foreclosure attorney for any timeshare foreclosure problems. As noted above, timeshares can involve many parties and even potential scammers. An attorney can review your specific timeshare situation, advise you of your legal options, and represent you during court proceedings, if necessary.

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