Buying Foreclosed Timeshares

A timeshare typically isn't a good investment. It can also be a financial burden—you still have to pay maintenance fees even if you don't use it. However, if you want a timeshare for your personal use for future vacations, purchasing one for a reduced price at a foreclosure sale is possible.

Still, while you might be able to get a sweet deal on a timeshare this way, go into the foreclosure auction with your eyes wide open and know the downsides.

Timeshare Basics: What Is a Timeshare?

A "timeshare" is a form of shared property ownership where several owners have the right to use the property for a certain amount of time during the year. Sometimes, a timeshare purchaser will take out a mortgage to purchase the timeshare interest. The purchaser is then deeded a small portion of a property, typically a certain number of weeks every year.

In addition to making monthly mortgage payments, the timeshare owner is typically also responsible for paying annual maintenance fees, special assessments, and utilities for the property.

How Timeshare Foreclosures Work

When facing tough financial times, one of the first things people tend to cut out of the family budget is payments on a timeshare mortgage and annual maintenance fees. A deeded timeshare might then go into foreclosure.

Depending on state law, the foreclosure process for a deeded timeshare will either be judicial or nonjudicial. Some states, like Florida and Illinois, allow nonjudicial foreclosures for timeshares even though residential foreclosures are judicial.

Either way, the timeshare interest will ultimately be sold at a foreclosure auction to pay off the debt.

How to Buy a Foreclosed Timeshare

Notice of a timeshare auction is usually given in the local newspaper. Foreclosure sales are usually advertised in the local newspaper and often online. Some websites, like auction.com, list foreclosures.

Once you find out when and where an auction will take place, you can attend the auction (either in person or perhaps online). If you are the high bidder at the sale, you'll become the new owner of the timeshare.

What Are the Benefits of Buying a Foreclosed Timeshare?

By bidding on a timeshare at a foreclosure auction, you might be able to purchase a timeshare interest for far less than what resorts usually offer.

What Are the Drawbacks of Buying a Foreclosed Timeshare?

While buying a timeshare at a foreclosure sale might seem like a great way to get a timeshare for a bargain price, there are downsides to buying a timeshare this way. So, be aware of the pitfalls before you jump in and decide to purchase a foreclosed timeshare.

You'll Be Responsible for the Assessments

When you buy a foreclosed timeshare, you become responsible for the annual assessments from that date forward. So, you're stuck with this payment, which will probably increase yearly.

You Might Need a Title Search

If you buy a deeded timeshare at a foreclosure sale, the timeshare could be subject to certain liens, such as tax liens, that aren't eliminated by the foreclosure.

You might want to pay for a title search before bidding on the property. That way, you can ensure you'll clear title after the sale.

Timeshare Foreclosures Don't Happen All the Time

Timeshare owners are usually in default for quite a while before the association eventually decides to foreclose. The association would prefer to attempt to get additional payments out of the owner before giving up and paying for a foreclosure. The association will only decide to pursue a foreclosure once it determines there is little likelihood of getting any more money out of the current owner.

So, there might not be a foreclosure sale around the time you want to purchase your timeshare.

You Might Not Know the Timeshare Very Well

If you buy a timeshare at a foreclosure sale, you might not know much about the property. You could be purchasing a timeshare in an undesirable location or time of use.

Reselling the Timeshare Could Be Difficult

Unless you buy at a desirable resort or popular area, you might be stuck with it once you own a timeshare. Many of the options for getting rid of a timeshare, such as selling it, donating it to a charity, or giving the timeshare back to the resort are usually difficult to complete or are at the option of the resort.

Tips for Buying a Foreclosed Timeshare

Even after considering the downsides, if you still want to purchase a timeshare at a foreclosure sale, here are a few tips to ensure you don't make a mistake.

Get a Copy of the Public Offering Statement

If you plan to make a bid on a timeshare interest at a foreclosure sale, you should research the timeshare resort so you know what you're getting into. Before the sale, get a copy of the public offering statement.

A "public offering statement" contains important matters to consider when buying a timeshare interest, such as:

• a general description of the property and units
• a description of all charges and assessments
• potential future expenses, and
• any restrictions on transfers.

Do Independent Research

You can check the Better Business Bureau website (www.bbb.org) and run an internet search to find out whether there are complaints against the timeshare resort or developer.

Visit the Resort Itself

Before purchasing a timeshare at a foreclosure sale, be sure to visit the resort and take a look at the facilities. Check out the location and amenities. You should also investigate the resort's reputation. It's often helpful to speak with current timeshare owners about their experiences. Ask current owners about how easy (or difficult) it is to book time at the resort, find out about maintenance, and ask about resale value.

It might also be helpful to sit through a timeshare sales pitch at the resort. You don't have to purchase from the resort directly, but this way you'll have access to all of the pertinent information about the resort (including the public offering statement) and can ask all the questions you want.

Talk to a Broker

Local real estate agents can be helpful resources for information about the resort. So, if you can't find information on your own, speak to a licensed timeshare sales broker who is reputable and knows the market.

What Are the Alternatives to Foreclosed Timeshares?

Instead of buying a foreclosed timeshare, you can look for deals posted on sites like eBay or elsewhere on the internet. Many sites have listing of timeshares for sale.

Getting Help

If you want to learn more about timeshares and how they work, talk to a consumer protection lawyer or real estate attorney. A foreclosure lawyer can help you understand the foreclosure process and how to bid on a property at a foreclosure sale.