Timeshares are properties where ownership is shared by more than one individual. In many instances, timeshares are located in condominiums or living spaces in desirable vacation destinations. Developers are able to reduce the costs for each of the owners by creating a shared ownership.
The owner of a timeshare purchases the rights to use the property at specific times during the year. For example, the owner of a timeshare may choose to pay for three weeks during the month of July at a property which is located near the beach.
A timeshare purchase helps an individual to reduce their costs because they are not required to pay for the property during the times of the year when they are not using it. When an individual owns a timeshare, for a certain specific time, that individual has the exclusive use of the share they own in the property.
For example, if an individual has a share which is 4 weeks in July, that individual has exclusive use of the property during that time. The other owners of the timeshare will have exclusive use of the property for the remainder of the year.
There are three main categories of timeshares, including:
- Fixed unit, fixed week, deeded agreements: With this category of timeshare, an individual owns a deeded interest to the property and has actual ownership for a specific time during the year;
- Floating time agreements: With this category of timeshare, the use is flexible and reservations are typically on a first come, first serve basis; and
- Right to use plans: This type of timeshare provides an individual with 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.
In general, a timeshare agreement is final once the timeshare contract is signed. There are some timeshare companies, however, that will provide a short return window in which a timeshare purchase may be canceled or revoked.
This option to cancel or revoke will depend upon the agreement between the buyer and the seller.
What is Foreclosure?
Foreclosures occur when the owner of a timeshare fails to make timely payments over a period of time. When a foreclosure occurs, the company which has a loan on the property may seize the property.
If the company is successful in their foreclosure of the property, it may damage the credit score of the timeshare owner and may make it difficult for them to obtain new loans or lines of credit in the future.
What about Buying Foreclosed Timeshares?
As previously noted, a timeshare is a vacation property which is usually owned by multiple individuals who have an interest in the property. A timeshare may be a nice way to enjoy a vacation in the same area on a regular basis.
Purchasing a timeshare, however, frequently turns into an expensive cost which rarely gets used by many buyers. It is important for a timeshare purchaser to weigh the costs against the possible use and enjoyment of the timeshare.
Foreclosures may occur on deeded interests properties when an owner fails to make time payments on their mortgage loan. As noted above, when a foreclosure occurs, the bank can take back the property.
If the bank succeeds in foreclosing on the property, the bank will be required to find a new buyer.
What about Buying a Foreclosed Timeshare at Auction?
Banks are in the business of money and they do not want to function as realtors. If, however, a bank is forced to foreclose on a timeshare property, they will be required to find a buyer.
The majority of banks will put the property up for auction to move it quickly off their books. Auctions are where an individual may find a deal.
Foreclosed timeshare auctions are listed online or in the newspaper. It is important for a potential buyer to review the date and time of the auction and do their own research before attending to ensure that the price they are ready to pay is worth the value.
What Might Go Wrong if I Buy a Foreclosed Timeshare?
There is a good reason for the phrase buyer beware and purchasing a foreclosed timeshare is one example of where this saying rings true. Some issues that may occur related to this type of purchase include:
- Timeliness: Purchasing real property, even if it is a small interest in a timeshare, requires a long-term commitment. Prior to making such a purchase, an individual should do research and consider the kind of resort, location, or amenity offering that they will want to enjoy in the years to come;
- A timeshare auction may be announced with very little time between the announcement and the auction. Therefore, if an individual has 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 an individual may have to take on; and
- Unforeseen debts: If the timeshare was foreclosed on, the previous owner likely had other financial troubles. Because of this, unpaid taxes or other debts may have resulted in liens on the property;
- Prior to buying any property, an individual should conduct a proper title search and see if anyone or any entity has an interest in the property.
I Have Decided to Buy the Foreclosed Timeshare, What Should I Do?
Prior to paying for a foreclosed timeshare or signing a mortgage, an individual should follow certain tips, including:
- Review the public offering statement. Prior to the date of the auction, take the time to review the statement. It should include the following information:
- the general description of the property as well as a description of the specific unit. If the property is within a larger community, review the description of the surrounding area and the details of the unit the individual plans to purchase; and
- a list and description of all assessments and charges on the property;
- Consider possible future expenses. Check if there are any major necessary repairs such as:
- a new roof;
- plumbing work;
- HVAC replacement; and
- other issues;
- if any work is necessary, an individual may need the funds right away to get the property usable;
- Examine whether there are HOA fees or monthly or annual resort fees and factor these into the budget;
- Find out whether or not there are any restrictions on transfers. If an individual is buying a property for a specific use and there are restrictions on that use, they should reconsider. If the individual is planning on transferring the property to another family member, they want to make sure they are free to do so;
- Conduct a title search. It is important to have a clear title and clean transfer;
- Go online. Find out what other individuals have to say about the resort or community and the nearby amenities;
- Check the Better Business Bureau website and view the rating of the resort or the property management company;
- Visit the property or resort. It is important to make sure the property is the vacation the individual wants to enjoy; and
- Consult a realtor or broker. A professional can help a buyer understand the information and answer any questions.
Should I Consult a Lawyer if I Want to Buy a Foreclosed Timeshare?
If you are considering purchasing a foreclosed timeshare, a real estate lawyer can assist you with conducting the proper searches on the title as well as the resort company. Your lawyer can also answer any questions you have as well as assist you with completing any necessary paperwork.
Having your attorney prepare you prior to the auction and review the transaction will help you avoid pitfalls or, at the very least, prepare you for any issues which may arise.