How to Get Out of a Timeshare
Congratulations, you’ve bought a timeshare!
If you are like a lot of people, your next move will be trying to get rid of it.
Buyer’s remorse grips a lot of timeshare owners. If they’re lucky, they can get out before the “cooling off” window closes. After that, they have to sell it or just walk away.
Both options are costly, but many consumers think they’re worth it to escape annual maintenance fees that averaged $980 in 2018. All of that in addition to property taxes, utilities, repairs and even special assessments.
A University of Central Florida study found that 85% of timeshare buyers regret their purchase. Other studies dispute that, but there’s little doubt many purchasers think the timeshare industry is built on selling fanciful vacation dreams that never come true.
“There are a number of good guys in the market,” wrote Lisa Ann Schreier, author of the book “Timeshare Vacations For Dummies.”
“But little if anything is being done to disassociate themselves from the bad guys, therefore the consumer is still, rightfully so, leery.”
Whether you’ve been duped into buying a timeshare ripoff or just made a bad decision, what are your options?
How to Legally Cancel a Timeshare Contract
Reality often sets in after you’ve been dazzled by a sales pitch. Just hope it doesn’t take too long.
The Federal Trade Commission has a three-day “cooling off period” on many purchases. So, if you bought a Mongolian dinosaur skull for $200,000 and your spouse is threatening divorce, it’s comforting to know you have 72 hours to save your marriage.
Buyers paid an average of $21,455 for their timeshare interval in 2018. What if your spouse is threatening to leave because you were dumb enough to buy one in Detroit?
Good news, Dumbo! You have nine days to cancel in Michigan.
Most states have fixed periods in which you can cancel. It’s often called a “rescission” or “revocation.”
The beauty is you usually don’t have to come up with some elaborate justification. In fact, you don’t have to give any reason. It’s your right to change your mind, especially if your marriage depends on it.
The cancellation period typically begins the date you sign the contract, or the date you receive a disclosure statement. Sellers are required to provide information on cancellation and place your money in an escrow account until you close the deal or cancel the purchase.
The cooling off period varies from state to state, and some states don’t count Sunday as a day, so be sure to read the contract to find out when the clock starts ticking.
In most states, it’s five to seven days. Alaska gives buyers 15 day to change their minds, while Kentucky and Nebraska allow only three. Of course, if you’ve been duped into buying a timeshare in Omaha, it shouldn’t take longer than 72 hours to come to your senses.
U.S. rescission laws don’t apply in foreign countries, of course. Mexico has a five-day rescission period, but you should double-check the contract if you’ve purchased a timeshare outside the U.S., because you might be out of time and luck the minute you sign.
Timeshare Rescission Period
Whether the rescission period is three days or two weeks, it’s up to you to beat the deadline. Some contracts allow buyers to verbally cancel their contracts, but you don’t want to rely solely on a conversation.
Most of the time, you are required to notify the seller in writing. Your particular contract will provide instructions, but in general it should include the following information.
Sample Letter for Timeshare Cancellation:
- The current date
- Your name as it’s written on the contract
- Your address, phone number and email address
- The name of the timeshare company
- A specific description of the timeshare
- The date you bought the timeshare
- A clear statement you are cancelling the contract
Make copies of the cancellation letter and all related documents, and make sure the envelope is postmarked before midnight of the final day of the rescission period. Proof of mailing date and receipt are important, so send the letter via certified mail.
Grounds for Cancellation
If the rescission period has ended and you want out of the contract, timeshare companies will usually respond with two words – too bad!
They know a lot of people have buyer’s remorse, so the contracts make it extremely hard to wiggle out of the deal. You might have a shot if you can prove the company or salesperson engaged in fraudulent behavior.
Examples of fraudulent behavior include:
- Lying about interest rates or fees
- Not disclosing the rescission period
- Using fear or intimidation to close the deal
If none of that happened and the rescission period has ended, what can you do?
Sell the Timeshare
The market is always glutted, so you can find timeshares for as little as $1 on the internet. Chances are you’ll take a serious financial bath, but selling your timeshare albatross is worth a try.
You can list your timeshare on free sites like eBay or Craigslist or try a site like Redweek.com that’s specifically devoted to timeshares.
Be aware that some sites charge fees. And be doubly aware if you sign up with a company that promises to sell your property. Some timeshare-exit businesses charge exorbitant upfront fees and fail to deliver on their promises.
Your timeshare company might have a “deed-back/surrender” option that allows you to surrender your timeshare after paying an upfront fee. The fee could be thousands of dollars, but it might be worth it in the long run.
Many times, buyers just want to get out of the maintenance fees and other yearly costs, and they will just give their timeshares away.
Hopefully, it won’t come to that for you.
What Happens If You Stop Paying on Your Timeshare?
Owning a timeshare is like owning a house in at least one respect. Even after you pay off the mortgage, the bills never stop coming.
By bills, we mean property taxes, utilities and repairs. The difference is if the driveway to your house gets washed out, you are free to ignore it.
When a timeshare needs a major improvement or repair not covered by insurance, the timeshare association that governs the project can hit you with a special assessment. You have to pay it even if you have one leg and can’t use the new tennis courts the assessment might buy.
If you fall behind in your mortgage payments or the other fees, the timeshare association can get lien and repossess the property.
There are two types of timeshare foreclosures. In a judicial one, the timeshare association must file a lawsuit and get court permission to sell the timeshare to satisfy the lien. In a non-judicial foreclosure, the association doesn’t have to file a lawsuit. Instead, it follows procedures dictated by state law.
Those laws vary state to state, but both result in the association taking ownership of the timeshare.
Consequence of a Timeshare Lien
If you are foreclosed upon, it’s not the end of the story. You will also have to pay any outstanding fees and other costs. They typically include:
- Late charges
- Attorney fees
- Unpaid assessments
How a Timeshare Foreclosure Affects Credit
Timeshare associations don’t always report foreclosures to credit reporting bureaus. But foreclosures are public record, and credit bureaus typically search them for consumer information.
So it’s highly unlikely your foreclosure would go unnoticed. And it’s a cinch it will damage your credit score.
A drop of 100 points is typical, though it will be more if you miss foreclosure-related payments.
If you choose foreclosure, the good news is you’ll be out of your timeshare dream-turned-nightmare. The bad news is, one way or another, you’ll be paying for it long after you walk away.
Max Fay has been writing about personal finance for Debt.org for the past five years. His expertise is in student loans, credit cards and mortgages. Max inherited a genetic predisposition to being tight with his money and free with financial advice. He was published in every major newspaper in Florida while working his way through Florida State University. He can be reached at [email protected].
- Cornfield, J. (2019, July 19). Here are the top 5 things people wish they hadn’t spent their hard-earned money on. Retrieved from: https://www.cnbc.com/2019/07/19/monthly-car-payments-arent-necessary-timeshares-usually-spark-regret.html
- Esswein, P. (2019, October 3). How to Get Rid of a Timeshare. Retrieved from: https://www.kiplinger.com/article/spending/T059-C000-S002-how-to-get-rid-of-a-timeshare.html
- Gaines, J. (2019, December 4). Timeshares: travel bargain or trap? Retrieved from: https://www.knoxnews.com/story/money/business/journal/2019/12/04/timeshares-good-investment-trap-you-cant-escape/4259244002/