Timeshares impose unreasonable economic hardships on owners. Payment of annual maintenance fees, special assessments, exchange club fees, a mortgage, and other fees will quickly drain your bank account in addition to any use or value you once got from your timeshare. It can be tempting, then, to just stop paying. If you do, however, you may be subjected to the timeshare foreclosure process, which can cause further financial ruin.
This article will take a look at the timeshare foreclosure process: what it is, what triggers it, how it can hurt you financially, and strategies for avoiding it. If you find yourself in the middle of the timeshare foreclosure process, we’ll look at potential ways to reverse it.
Historically, foreclosure has been used as a remedy by home loan lenders to recover the money they’re owed when the borrower stops paying. The basic idea is that, because the borrower used the loan to buy something of value like real estate, the lender then takes the real estate (or other property) for itself and sells it to get back the money it loaned.
It is critical to note that foreclosure doesn’t only apply to mortgages. Foreclosure has also been used by homeowners’ associations to recover unpaid HOA fees and governments to recover unpaid property taxes. Timeshare developers similarly use it when owners fail to pay their maintenance fees, special assessments, or other amounts due under the timeshare contract.
No matter what amounts the developer is trying to get from you, they will typically use a process known as “non-judicial foreclosure,” which means that, if they follow the specific laws, they don’t have to go before a judge to take your property from you.
Though we hear the term “foreclosure” used as if it were a simple process, the truth is a bit more complicated. It’s more accurate to think of it as several different processes that end in the result of a foreclosure. While the exact methods differ from state to state, foreclosure generally contains the following legal steps.
For an example of how the process works, let’s assume that you have a deeded timeshare, meaning that there is a legal real estate interest upon which a timeshare company can record a lien. This lien is recorded in different ways in different states. Let’s assume here that you took out a mortgage loan to purchase a timeshare in Las Vegas, Nevada.
At the time of the loan, the developer would record a deed of trust (known in some other states as a mortgage) against your property (i.e., the timeshare interest) stating the existence of the loan. If you pay everything in full, the deed of trust is removed when the loan is paid.
Note that there would also likely be a separate document indicating that you need to pay things like maintenance fees and assessments. That document would also give the right to the developer (or the HOA, which is most likely controlled by the resort developer) to foreclose for payment of those amounts.
When you fail to make payments you promised, the company can record a Notice of Default against your property, and they also have to send a copy of that notice to you. You have a certain amount of time (in Nevada, three months) to pay what you owe. If you pay that money, the process stops.
If you don’t pay the amount listed on the Notice of Default, the company will record and send you a notice of sale saying when your property will be sold at auction. Either a third party will buy it or the company will sell your deeded interest to itself for a reasonable amount (known as a credit bid).
Nevada and some other states have an extra step. If the developer or HOA did not get all the money it is due from the foreclosure sale, it can sue you in some states for a deficiency judgment to get the balance. This matter is a court case that would go before a judge and would likely require you to get a lawyer.
Foreclosure can be devastating to your credit and finances. According to Experian, a foreclosure will stay on your credit report for seven years after your first missed payment.
Multiple missed payments will tank your credit score fast, lowering it by 100 points or more. A foreclosure will also hurt your credit score by 100 points or, in some cases, much more, making it more difficult for you to get approved for loans or favorable interest rates. Losing at least 200 points on your credit score will spell doom for future credit, and you’ll be paying much more for any credit you get (if you can get it) in the near future.
If that weren’t bad enough, a deficiency judgment case against you is a full legal proceeding that could cost you thousands, or even tens of thousands, of dollars not only in missed payments but in legal fees and costs. To add insult to injury, you might also have to pay fees and costs for the timeshare company, depending upon whether your timeshare purchase agreement has an attorney fees clause.
Given the serious and lasting effects of foreclosure, you should never listen to any timeshare exit company that tells you to stop paying fees to a developer — which unfortunately is the guidance most of them give. To add insult to injury, many timeshare owners are paying companies for this terrible advice. That’s not an exit service, and certainly not something you should be charged for.
Suffice it to say, failing to make payments on your timeshare will only cost you money and peace of mind for years. You’ll likely also need credit counseling and repair services to get your finances back to where they should be.
Yes, the timeshare foreclosure process can be avoided and/or reversed. While paying the amount you owe in full will stop a foreclosure, that is not always a realistic option. In cases where you can’t make your timeshare mortgage or fee payments, it is important that you speak with an expert immediately. A team like the one at Centerstone Group can help you find a less costly, more workable solution.
For example, Centerstone Group has years of experience working with timeshare companies, and it knows their pain points. It can use that knowledge to mount a proprietary pressure campaign and persuade a developer to allow you to exit the contract. Unlike other timeshare exit companies (e.g., Timeshare Compliance, Resort Advisory Group, or Wesley Financial Group), Centerstone Group will never advise you to stop making payments on your timeshare as an exit method.
For clients that qualify, Centerstone Group also has an escrow option that can take the financial pressure of a timeshare away from the owner while our team negotiates with the timeshare developer. We also have a great transfer program that has helped many people get out of the financial dead end created by their timeshare.
Finally, we also offer credit repair services, as well as attorney and law firm referrals, to owners who have already been financially damaged by the timeshare foreclosure process and need further financial aid or legal advice.
Foreclosure is never a good option for getting rid of a timeshare. Though you might think it will save you money, that is only a short-term benefit that comes at the expense of long-term financial pain.
Centerstone Group is acutely aware of the problems caused by timeshare contracts and has used its expertise to help thousands of people just like you. We are an accredited company with the Better Business Bureau (BBB), where we enjoy a 4.77-out-of-5-star rating from our clients.
If you are facing possible timeshare foreclosure, you need to act fast. Contact us as soon as possible for a free consultation and case evaluation.
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