Options to Avoid a Timeshare Foreclosure

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's 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, and
• 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 interest.

If you've fallen behind in your deeded timeshare mortgage payments or stopped paying the assessments, your timeshare could be foreclosed. But you might be able to get rid of the timeshare without going through foreclosure or work out an arrangement to keep your timeshare. A few of the various options to avoid a timeshare foreclosure include:

• selling the timeshare
• donating the timeshare to a charity
• negotiating with the resort to reduce the amount you owe
• arranging 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").

How Timeshare Foreclosures Work

If you purchase a deeded timeshare and become delinquent in mortgage payments or fall behind in paying the assessments, you might 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.

After you go through a timeshare foreclosure, your credit score will likely drop—perhaps by as many as 100 points or so—depending on a few factors, like whether and when the lender or developer reports late timeshare payments. While not every foreclosure gets reported to the credit reporting bureaus, foreclosures are part of the public record, and the bureaus often search public records for information. If the bureaus learn about a timeshare foreclosure, the foreclosure goes into the credit history.

You might also be subject to a deficiency judgment, but deficiency judgments aren't common after a timeshare foreclosure.

Options to Avoid Foreclosure

Timeshare resorts generally make it very difficult for you to get out of your timeshare obligations. But options exist for disposing of a timeshare or working out a deal to keep it.

Selling Your Timeshare

If your timeshare is in a very desirable location or at an extremely popular resort, you might be able to sell the timeshare and maybe, in rare cases, even make a profit. Unfortunately, though, most timeshares have very little resale value.

Donating Your Timeshare

If you own the timeshare outright but are just behind on assessments, you might 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're behind on payments or assessments and want to keep the timeshare, you could potentially be able to negotiate with the lender or resort to reduce the amount you owe or come up with a payment plan.

Foreclosure is an unappealing option for both sides—it hurts your credit, and it costs the lender or resort time and money—so you might be able to work out an agreement in which the lender or resort:

• reduces the amount you owe
• provides you with a forbearance agreement (where you don't have to make any payments for a certain amount of time), or
• agrees to a repayment plan with payments that you can afford.

Deed in Lieu of Foreclosure (Deedback)

A "deed in lieu of foreclosure" occurs when the lender or resort agrees to accept a deed to the property instead of foreclosing. In the world of timeshares, voluntarily giving a deeded timeshare's title to the resort is typically called a "deedback." On the downside, most timeshare resorts are reluctant to accept a deedback, especially if you're delinquent on your assessments or behind in payments. But you might be able to convince the resort that accepting a deed back is a better option than a foreclosure. Or you could be able to bring the account current and then complete a deedback, 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 deedback.

If your timeshare is of the right-to-use variety, you might be able to relinquish (give up) your right to use the timeshare. This type of transaction is similar to a deedback. Although, timeshare companies tend to reject relinquishment requests.

Beware of Timeshare Rescue Scams

Timeshare rescue scams are common. Unscrupulous companies target timeshare owners who are desperate to unload their timeshares. If you're 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.

Be sure not to pay upfront fees or mystery fees, and if the deal sounds too good to be true (for example, the company says it will be easy to unload your timeshare or you'll get a lot of money for it), you're probably getting scammed.

When to Hire an Attorney

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