Options to Avoid a Timeshare Foreclosure

If you have fallen behind in your timeshare mortgage payments or have stopped paying the assessments, your timeshare could be foreclosed. But there are ways that you may be able to get rid of the timeshare without going through foreclosure or to work out an arrangement to keep your timeshare, if that’s what you want to do.

Keep reading to learn about various options to avoid timeshare foreclosure, including selling your timeshare, as well as workout options such as negotiating a debt reduction or completing a deed in lieu of foreclosure.

(Learn more about foreclosure in Nolo's Foreclosure topic area. For articles related to timeshares, see Nolo's Timeshare Foreclosures topic area.)

Understanding Timeshares

A timeshare is a form of shared property ownership where several owners have the right to use the property for a specified period each year. Often, timeshare properties are resort condominiums, though it is also possible to have a timeshare interest in another type of property such as a hotel room, cabin, RV, or houseboat.

The two main different types of timeshare interests are:

• a deeded interest (fee simple) where you have an actual share of ownership in the property, or
• a right-to-use interest, which is more like a lease interest (and typically considered personal property) where you get to use the property, but you have no ownership in the property.

Timeshare Use

When you purchase a timeshare interest, you are typically allotted a certain period of time every year (or sometimes every other year) to use the property. The rest of the year, other people who purchased an interest in the timeshare get to use the property.

The amount of time you get to use the timeshare depends on the amount of interest you purchase. For example, if you have a 1/52 interest, this means you get to use the timeshare one week per year. The use period is generally:

• fixed (where you use the property at the same time every year)
• floating (where you use the property at different times of the year), or
• point-based (where you purchase points at a specific resort that may also be used at other locations).

Timeshare owners usually can do what they want with their allotted time, including letting guests use it or renting it out to others to use, so long as this is allowed by the rules of the timeshare. Different timeshares have different rules and conditions when it comes to renting out the property. (If you are thinking of purchasing a timeshare intending to rent it out, be sure to read the rules carefully because any violation can result in penalties.)

Timeshare Foreclosures

If you purchase a deeded timeshare and become delinquent in mortgage payments or fall behind in paying the assessments, you may lose the timeshare to foreclosure. State law governs timeshare foreclosures and the process will be judicial or nonjudicial, depending on the particular state’s laws. (To learn more about the difference between judicial and nonjudicial foreclosure, and the procedures for each, see our Judicial v. Nonjudicial Foreclosure topic area.)

If you go through a timeshare foreclosure, your credit score will likely drop—perhaps by as many as 100 points or so—depending on whether and when the lender reports late timeshare payments and the foreclosure itself. You might also be subject to a deficiency judgment, though this is not typical with a timeshare foreclosure. (To learn more about deficiency judgments in the foreclosure context, see our Deficiency Judgments After Foreclosure area.)

Options to Avoid Foreclosure

Timeshare resorts generally make it very difficult for you to get out of your timeshare obligations, but there are potential ways to dispose of the timeshare or work out a deal to keep the timeshare and avoid foreclosure including:

• selling the timeshare
• donating the timeshare to a charity
• negotiating with the resort to reduce the amount you owe
• negotiating a repayment plan, or
• working out a deal to give the timeshare back to the resort (called a deed in lieu of foreclosure or deedback).

Selling Your Timeshare

If your timeshare is in a very desirable location or at an extremely popular resort, you may be able to sell the timeshare and maybe even make a profit. This probably isn't the case though. Unfortunately, most timeshares have very little resale value.

Donating Your Timeshare

If you own the timeshare outright, but are just behind on assessments, you may be able to donate the timeshare to a charity and take a tax deduction. To donate the timeshare, you’ll need to bring the assessments up-to-date before donating it. Even though you’ll have to get caught up on the assessments to make the donation, you won’t be responsible for future assessments and you’ll be able to avoid foreclosure.

While it used to be popular for charities to take timeshares as a donation, now, most charities won't accept them. Still, you might be able to find a charity willing to take your timeshare off your hands.

Negotiating With Your Timeshare Resort

If you are behind on payments or assessments and want to keep the timeshare, you may be able to negotiate with the lender or resort to reduce the amount you owe and/or come up with a payment plan.

Foreclosure is an unappealing option for both sides—it hurts your credit and it costs the lender/resort time and money—so the resort may:

• agree to reduce the amount you owe
• provide you with a forbearance (where you don’t have to make any payments for a certain amount of time), or
• agree to a repayment plan with payments that you can afford.

Deed in Lieu of Foreclosure (Deed back)

A deed in lieu of foreclosure occurs when a lender agrees to accept a deed to the property instead of foreclosing in order to obtain title. (Learn more about deeds in lieu of foreclosure.) In the world of timeshares, voluntarily giving title back to the resort is typically called a deed back.

On the downside, most timeshare resorts are reluctant to accept a deed back, especially if you are delinquent on your assessments or behind in payments. This doesn’t mean that it never happens though. You may be able to convince the resort that accepting a deed back is a better option than a foreclosure. Or you may be able to bring the account current and then complete a deed back, releasing you from future liability and avoiding a foreclosure. Even if you bring the account current, the timeshare resort might require an additional fee to do a deed back.

Beware of Timeshare Rescue Scams

Timeshare rescue scams are common. Unscrupulous companies target timeshare owners who are desperate to unload their timeshares. If you are thinking of using a timeshare company to help you dispose of your timeshare, contact your state Attorney General and local consumer protection agencies in the state where the company is located to ask if any complaints are on file. You should also search online for complaints. Always check the Better Business Bureau before doing business with any timeshare company.

To learn more about timeshare resale scams or if you are thinking about purchasing a timeshare, visit the Federal Trade Commission’s website at www.consumer.ftc.gov and enter “Timeshares” in the search box for more information. Then click on the article called “Timeshares and Vacation Plans.”

When to Hire an Attorney

If you are facing foreclosure of your timeshare property, it is recommended that you speak to a qualified attorney who can advise you about what to do in your circumstances and inform you about the applicable timeshare laws.

To learn about different foreclosure defenses, see our Fighting Foreclosure in Court area.