Timeshares are sometimes appealing because they allow many people to share the ownership or use of one property, like a condominium in a resort community. People who take out loans to buy timeshares usually plan on keeping up with the monthly payments.
But, during a personal financial crisis, like losing a job or getting hit with an unexpected medical expense, paying for a timeshare can seem like a low priority. If you get behind on timeshare loan payments, you’ll probably go through a foreclosure unless you work out a deal with the lender.
You might be able to avoid a timeshare foreclosure with a short payoff, repayment plan, or deed in lieu of foreclosure. (Note that this article applies to timeshare foreclosures in the United States, not other countries.)
Foreclosure Process Depends on Type of Timeshare
The two main types of timeshare interests are “deeded” and “right to use.” The type of interest that a timeshare owner has affects what happens if the owner falls behind on loan payments.
Deeded Timeshares
With a deeded timeshare, you and other owners each buy a percentage of the timeshare property. You get a deed describing your ownership rights. For example, the deed might say that you get to stay in the timeshare for two weeks every year.
If you fail to make the loan payments on your deeded timeshare, you might face a foreclosure.
Right-to-Use Timeshares
If you buy a right-to-use timeshare interest, you don’t own the property. Instead, you purchase the right to spend time at the property. For example, you might have the right to use the property for two weeks every year for a certain number of years, like 20 or even 99. You won’t get a deed because your interest is legally considered personal property, not real property.
Right-to-use timeshares are usually repossessed rather than foreclosed if you don't make the payments. Repossession is a different legal process than a foreclosure. This article focuses on foreclosures of deeded timeshares.
Taking Out a Mortgage to Buy a Timeshare
Unless you can come up with enough cash upfront, you’ll have to take out a loan to buy a deeded timeshare. Seeing as the average price of a timeshare is around $20,000, most people take out a loan to buy one.
The price will, of course, depend on the location and amenities. A luxurious ski resort timeshare in Aspen, for example, might cost around $70,000, while a timeshare in an over-developed part of Las Vegas could go for around $10,000.
Most banks don’t make timeshare loans. So, timeshare purchasers generally take out a loan from the resort developer (called the “lender” in this article). The purchaser pays the lender back by making monthly payments for typically ten or fifteen years.
What Happens If I Let My Timeshare Go Into Foreclosure?
When you take out a loan to buy a deeded timeshare, you sign a mortgage or deed of trust. This document gives the lender the right to foreclose your interest on the timeshare if you don’t make the payments. The foreclosure of your interest in the timeshare doesn’t affect the other owners of the property.
In some states, a lender has to file a lawsuit to foreclose a timeshare property. This lawsuit is a “judicial foreclosure.” In other states, the lender has the option of either filing a lawsuit or using an out-of-court (“nonjudicial”) process to foreclose. A nonjudicial foreclosure commonly involves the lender:
- sending a notice to the borrower about the foreclosure and
- recording the notice in the county or other public land records.
In some states, judicial foreclosure is for both homes and timeshares; in others, it’s not. For example, in Florida, lenders must foreclose people's homes through the courts. This process ordinarily takes a year or more. Florida law allows lenders to use a faster, nonjudicial procedure for foreclosing timeshares. That process normally takes only a few months.
How Can I Avoid a Timeshare Foreclosure?
A few ways to avoid a timeshare foreclosure are by completing:
- a short payoff
- a repayment plan, or
- a deed in lieu of foreclosure.
Pay Off the Debt With a Short Payoff
With a short payoff, you give the lender a lump sum of money that’s less than the amount you owe on the loan. In return, the lender forgives the rest of your debt. For example, if you owe $10,000 on the timeshare, the lender might agree to accept $6,000 to satisfy the loan.
Work Out a Repayment Plan With the Lender
A repayment plan is another agreement that you might make with the lender. A repayment plan allows you to get caught up on overdue payments and keep the timeshare. You pay part of the overdue amount along with your regular mortgage payment over a period of time until you get current on the loan.
For example, if you're five months behind on your timeshare payments of $200 a month ($1,000 behind), the lender might allow you to pay $100 extra each month over the next ten months to get caught up.
Give the Timeshare Back With a Deed in Lieu of Foreclosure
In a deed in lieu of foreclosure or “deedback,” you give your interest in the timeshare back to the lender. In exchange for title to your interest in the property, the lender cancels the foreclosure. A lender will typically ask for a lump sum of money, perhaps a few hundred or thousand dollars, depending on how much you owe, before agreeing to a deedback.
The benefit to a deedback is that you won't have a foreclosure on your record. Whether a deedback is the right option for you depends on your personal circumstances.
Getting Help With a Timeshare Issue
If you’re considering buying a timeshare and want details about how the process works, consider talking to a real estate attorney in the state where the timeshare is located.
If you’re facing a timeshare foreclosure, consider talking to a foreclosure attorney for advice on your particular situation and any other options you might have to avoid foreclosure.