It’s exciting when you get a time share, you’re on vacation and get caught up in the moment, however, later, getting rid of a timeshare can be challenging. In addition to the non-ending monthly or annual fees, timeshares are unique in that most timeshare obligations are binding upon your heirs. The three main options for getting rid of an unwanted timeshare is through a sale, donation or transfer.
Option one: sell your timeshare. Selling a timeshare is difficult because there is a glut of timeshares in the market. Your instinct not to trust the companies that promise to sell your timeshare is on the mark. There are many timeshare brokers and buy-back programs, but many of them are scams and are likely not to deliver on their promises to sell your timeshare. You should not give any company any money upfront, regardless of the amount, to sell your timeshare. The only companies that you should deal with are the ones that don’t charge an up-front fee and pay you only after they sell your timeshare. If you find a reputable company that will agree to try to sell your timeshare make sure that the sales brokerage agreement confirms that in addition to selling the timeshare that you will be released from all timeshare fees, dues and expenses and that the fee for finding a buyer will only be paid if these stipulations are met. You don’t want to find out after you sold it that you still have to pay a recurring fee. Another option is to try to sell the timeshare by listing it on sites like eBay or Craigslist – but this involves dealing directly with strangers and navigating the entire transaction on your own. Finally, what may be best for you is to try to sell the time share to a relative or friend. A relative or friend with a larger family may make good use of the timeshare. Typically you can sell the timeshare for $1 and then contact a timeshare closing and escrow company to assist you with the transfer of title. You should determine all the transfer fees that will be imposed including those by your time share company ahead of time.
Option two: donate the timeshare. There are well known charitable organizations that accept timeshare donations. You can call your favorite charity or search for organizations that accept timeshare donations online. In addition to the satisfaction of helping a good cause, the donation may be tax deductible, however don’t expect a huge write off. The deduction will depend on the fair market value of what a knowledgeable buyer would pay for your timeshare not the original purchase price or what the resort is now charging for similar timeshares. In most cases this can be a small amount. In addition, be aware that the transaction costs can be up to a few thousand dollars.
Option three: transfer the timeshare back to the timeshare company. In most cases, the company that sold you the timeshare will not want to take it back, but if you own the timeshare outright with no loan it is possible that the company may agree to take it back. Just be sure they are completely releasing you from all obligations including all maintenance fees, dues etc. If they don’t want to take it back a real estate litigation lawyer can assist you by contacting the timeshare company on your behalf. A letter from a lawyer can be a great motivator. When faced with litigation or the potential of litigation, timeshare companies may in fact either take back their timeshare or simply agree to release the timeshare owner from any future liability in connection with the timeshare contract. Of course the drawback here is that hiring a lawyer costs money and there is no guarantee of success.
If there is a loan and you owe more money than what the timeshare is worth make sure that in whatever manner you transfer it that the loan is paid off otherwise you will still be liable on the note even if title was changed over. If later, payments are not made on the loan the lender will likely file suit and obtain a deficiency judgment against you. A deficiency judgment will appear on your credit history and the creditor is likely to ultimately obtain a lien on real estate that you own, seek to collect against other assets or seek a wage garnishment. For example: You owe $20,000 on a time share. Payments are not made. The lender forecloses and sells the time share for $5,000. The lender has lost $15,000. This is the deficiency. Depending on state law, the lender may likely be able to sue for this deficiency. The lender then can get a judgment against you for the deficiency and perhaps legal fees and court costs.
In the end, and in most situations, what may be the most practical thing for you to do is to either transfer the timeshare to a relative or donate it to a charity. This avoids the hassle of trying to sell the timeshare or the angst of trying to force a transfer to the timeshare company. Good luck!
Anthony J. Vignier, JD, CFP is an attorney and Certified Financial Planner in Kearny, New Jersey. He helps his clients with legal matters, asset and income protection strategies as well as investment guidance. Please call Anthony at (800) 707-5252 or send him a message through our contact form.