Timeshares are vacation properties that are typically owned by multiple owners who have an interest in the property. Timeshares can be a nice way to enjoy a vacation at the same spot on a regular basis.
However, buying a timeshare frequently turns into an expensive cost that rarely gets used by many buyers. It is important to weigh the cost against the possible use and enjoyment. There are two primary forms of timeshares:
- A deeded interest in property where you have actual ownership; and
- A right-to-use interest that provides the right to access and use the property but you do not actually own the property.
A foreclosure can occur on a deeded interest property when the owner fails to make timely payments on their mortgage loan. When a foreclosure occurs, the bank can move to take the property. If the bank is successful in foreclosing on the property, the bank has the tedious job of finding a new buyer.
Banks are in the money business; they do not want to be realtors. However, when they are forced to foreclose on a timeshare property they need to find a buyer. Most banks will put property up for auction to move it quickly off their books.
This is where you may find a deal. Auctions are listed online or in the newspaper. Check the date and time of the auction and do your own research before you attend to make sure that price you are ready to pay is worth the value.
There is a reason that we have the “buyers beware” saying and purchasing a foreclosed timeshare is one example of where that rings true. Some pitfalls include the following:
- Timeliness: Buying real property, even if it’s a small interest in a timeshare, requires a long-term commitment. Before making such a purchase, you should do research and a lot of thinking about the kind of resort, location, or amenity offering that you want to enjoy in the years to come.
- Timeshare auctions can be announced with very little time between announcement and auction. So, if you have not been considering that kind of timeshare or location, the auction might not be the right time to buy.
- Assessments: If a property is in foreclosure, it probably has a history of unpaid assessments that you may have to take on.
- Unforeseen Debts: A previous owner who has foreclosed on the timeshare likely had other financial troubles. Unpaid taxes or other debts may have resulted in liens on the property.
- Before buying any property you should do a proper title search and see if anyone or any entity has an interest in the property.
Before laying down cash or signing a mortgage, follow some of these tips:
- Review the public offering statement. When a property is listed, a public offering statement should be available. Before the auction date, take the time to review the statement. It should include the following information:
- Review the general description of the property and specific unit. If the property is within a larger community, review the description of the surrounding area and the details of the unit you plan purchase.
- Get a list and description of all charges and assessments on the property.
- Consider possible future expenses. Check if there any major necessary repairs such as a new roof, plumbing work, HVAC replacement, etc. If the work is necessary, you may need the funds right away to get the property usable. Also, look at whether there are HOA fees or monthly/annual resort fees and factor these into your budget.
- Find out whether there are any restrictions on transfers. If you are buying a property for a specific use and there are restrictions on that use, you should reconsider. If you were planning on transferring the property to another family member, you want to make sure you are free to do so.
- Conduct a title search. You want a clear title and clean transfer.
- Go online. Find out what others say about the resort or community and the nearby amenities.
- Check the Better Business Bureau site and see the rating of the resort or property management company.
- Visit the property or resort. Make sure it offers the vacation you want to enjoy.
- Consult a realtor or broker. A professional can help you understand the information and answer your questions.
A real estate lawyer can help you conduct proper searches on the title and the resort company. They can also answer your questions and guide you through the necessary paperwork.
Having an experienced attorney prepare you before the auction and then review the transaction can help you avoid some pitfalls or at least prepare you for any that might arise.