Timeshare is a popular but often misunderstood financial investment. Many timeshare owners are unaware of the fees and pitfalls associated with owning a timeshare. In addition, some people who initially believe they would enjoy the benefits of a timeshare find out that it is not as ideal as they first had thought.
People purchase timeshares for many different reasons: family trips to Disney World, discounted vacations on the beach, or even keeping up with appearances by owning a large vacation home on Park Avenue. Often, though, these buyers do not make an informed decision on whether or not purchasing a timeshare matches their needs and goals before signing off on legal documents at their closing table (or online).
New timeshares are still being developed in exotic locations like Fiji, Aruba, and Hawaii; however, many companies are over-leveraged. Additionally, the secondary market (resale) of timeshares has all but disappeared due to continuing financial troubles at major banks like Bank of America and Merrill Lynch.
Owners who find themselves unable to pay fees or other timeshare maintenance costs may decide to take advantage of their right to cancel their timeshare under the federal law known as Due-on-Sale Clause . This provision allows lenders (like major financial institutions that provide loans for purchasing a timeshare) to demand repayment of the loan if the owner sells or transfers his interest in the property without first offering it back to the lender.
Many timeshare owners do not realize they can use this law to cancel their timeshare. When they learn of the right, these owners often decide that selling back their timeshare is a much better option than continuing to pay fees and other maintenance costs for a property they no longer use.
There are several steps in canceling a timeshare:
Step 1: Verify Ownership and Right to Terminate
This right only applies if an original buyer or subsequent owner wants to terminate his interest in the timeshare contract. The right does not apply when the lender initiates foreclosure proceedings on the property due to failure to make payments (as long as he has given proper notice). For example, Bank of America may foreclose on delinquent borrowers but any future occupants who want out of their timeshares must follow these steps.
To verify their right to terminate, owners should contact the seller and lender of the timeshare and ask for a statement in writing confirming that they can exercise this right. Some states allow lenders to add on additional termination fees but most will not charge anything extra when an owner requests termination or transfer of ownership.
Step 2: Solicit Offers from Multiple Parties
Buyers who want to solicit more than one offer should make sure the financial institution confirms interest before offering to sell back the timeshare. The contract typically allows sellers at least three weeks to rescind any sale if they choose to go back on the agreement (some companies like Wyndham resorts only give buyers one week – making it virtually impossible for owners). If someone does not honor the right to rescind, the contract is still valid and enforceable.
Step 3: Document Ownership Transfer
This process is complicated so if an owner wants to transfer his timeshare, he should hire an attorney or title company to handle all details. The initial contract for purchase typically lists specific documents that must be used in order to lawfully terminate the agreement (owners should request these documents from the lender). Notarization may be required along with filing any termination papers with state agencies. Some states have different requirements for ending a contract while others do not allow owners to sell their interests without first offering it back to the lender anyway.