What Happens in a Timeshare Foreclosure?

Written by: Chuck McDowell Updated: Sep 19, 2023 Published: Mar 02, 2021 6 minute read

While owning a timeshare may seem nice at first, it comes at a cost in the form of a few never-ending fees: annual maintenance fees, additional property fees, and – if it applies – a mortgage loan payment. The timeshare developers or management group could report you to a credit bureau if you cannot fulfill these payment obligations. Or even worse, they could take you to court over the residential foreclosure of your timeshare unit. 

Can You Foreclose on a Timeshare?

Failing to pay timeshare expenses such as the mortgage, annual maintenance fee, special assessments, etc., can give the resort reason to take legal action. While right-to-use owners will likely face repossession of the property, those with deeded timeshares are at risk of foreclosure and further credit damage as a result. Varying on the location, delinquent owners could face either a judicial or nonjudicial foreclosure process. And just like a residential foreclosure, this is a public record and will inevitably find its way to credit reporting agencies in which a drop in your score is likely.

How do timeshare foreclosures work?

There's a good chance your timeshare agreement permits the resort developer to take you to court over defaulted timeshare maintenance fees or other payments. When you fail to meet the agreed-upon terms of your signed purchase agreement, a foreclosure lawsuit is a likely consequence.

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What happens when a timeshare is foreclosed on you?

You Can Face a Deficiency Judgment

Regarding foreclosures, there are two types – judicial and nonjudicial. According to wikipedia.org, judicial foreclosure is by judicial sale and usually involves the sale of a mortgaged property under the supervision of a court. Often referred to as a deficiency judgment.

In rare cases, the borrower's total debt surpasses the foreclosure selling price. A "deficit" is the amount that exists between the sale price and the total amount owed. Say, for instance, that a timeshare has a total debt of $6000 but only receives $2000 at the foreclosure auction. The shortfall is $4,000. Some jurisdictions enable the foreclosing bank to obtain a personal judgment against the borrower for this debt amount, known as a "deficiency judgment." Judicial foreclosure is more likely to apply to a deeded timeshare. Some states authorize nonjudicial foreclosure if a power of sale clause or deed of trust clause is used instead of an actual mortgage.

How many missed monthly payments until timeshare foreclosures take place?

It's hard to say how long you have to make a payment before foreclosure becomes a severe threat, mainly because every resort company in the timeshare industry operates differently. While one resort may take a few payments as a call to action, others might be willing to be more lenient with you, especially if there is an established homeowners association that backs other timeshare owners. While this is rare, sometimes homeowner associations have reserves to help out timeshare owners struggling financially.

Another factor coming into play here is the state or country where you own your timeshare. Many states seem to have different laws on the foreclosure of property. Some states will even map this out differently, specifically for timeshare purchases. That should be something you research before buying your timeshare. You must know your rights and how they pertain to you based on your location, especially if you're buying a timeshare that's not in your current state.

Can additional fees also lead to foreclosure?

Yes, many resorts treat timeshare maintenance fees at the same level as the loan payments paid to the timeshare company itself. In the eyes of resorts, a maintenance fee payment is just as meaningful to the success of their property. Timeshare companies use the annual maintenance fee to ensure guests are getting to use clean and up-to-date facilities/amenities.

While fulfilling this payment can be challenging since it increases nearly every year, it is crucial to avoid late payments to prevent foreclosure and a bad credit report.

Can a timeshare hurt my credit?

The short answer? Yes. If you're a timeshare owner, your credit is absolutely at risk. When owners miss a monthly mortgage payment or fail to pay additional fees like maintenance, taxes, or special assessments, they put their credit standing on the line.

In most cases, after an owner misses their first payment, a collection effort will be made by either the resort developer or the homeowner's association. Consider this a warning because the management company hasn't gone to a third-party outlet yet. However, this so-called warning is just the start of a tarnished credit report.

Another factor in play here is the interest rate on your mortgage. Missing payments could spike your total amount due (high-interest rates), making it nearly impossible to pay off anytime shortly, hurting your credit in a roundabout way. In some cases, if you're fortunate, your timeshare management company may not report to credit bureaus or even a collection agency. In this instance, your chances of having your credit report hurt by timeshare could be foreclosure.

How does foreclosing on a timeshare affect your credit score?

According to nolo.com, a foreclosure can drop your FICO score at least 100 points. FICO credit scores, which happen to be the most popular type of credit score, range between 300 and 850. That means that a timeshare foreclosure could hand you a significant loss in your score.

Nolo.com discusses how a timeshare foreclosure will have more effect on an owner who holds a higher credit rating than an owner whose credit score is already lower. If you find yourself in a situation that continues to throw a financial burden on your family, you might want to start examining other options to get out of your timeshare.

Can you walk away from a timeshare?

Like owning a house, walking away from a timeshare can eventually result in foreclosure. Since timeshare property is real estate, the foreclosure process is the same. If you continue to stop paying on your loan, the timeshare company can go to court and file a foreclosure lawsuit to obtain the rights to your unit and take it back. While it mainly depends on what state you have your timeshare in, this process can take about one year.

Many individuals tend to argue that if they have paid off their timeshare loan payment in full, they should be able to walk away. However, that is not the case because of annual timeshare maintenance fees. As mentioned above, your yearly timeshare maintenance fee gets treated with the same priority as your timeshare loan payments.

The best option for leaving your timeshare

With so many financial obligations, timeshares often give owners nothing but a life full of stress. It’s honestly best to avoid timeshare companies altogether. Renting it out to others may be worthwhile as the maintenance fees you pay will be taxable income, but truthfully, that only prolongs the inevitable.

Fortunately, if you were lied to or misled during the sales proceeding of your timeshare, there is a better solution for you and your family – contact a timeshare cancellation company. Some might tell you to contact a law firm, tax attorney, or realtor, but selling a timeshare is very difficult to navigate. But, the price for a lawyer may be too high for a non-guaranteed termination.

That is why getting in touch with a trusted cancellation company is your best option. When searching for the right exit team, find a staff full of seasoned veterans who know what they're talking about. You will also want to make sure and sign on with a team that offers a 100% money-back guarantee. That way, you'll receive a full refund if they do not terminate your timeshare within an agreed-upon segment of time.

Defaulting on a Timeshare

Defaulting on a timeshare isn't fun for anyone. But you have to keep your head up and move forward, and you can't just stop paying. It's important to remember that it's always the timeshare owner's decision to stop making payments; no one else can be held accountable for halting actions but you. That is why you have to weigh your options and do your research. The last thing you want is to be bombarded with phone calls about how you're behind on your timeshare maintenance fees or missed timeshare payments altogether.

As you do with your bank or credit card companies, pay close attention to anyone you give access to your timeshare information. When looking for a cancellation company, remember to be careful with who you give your email address, phone number, or any other contact information. There are a lot of fraudulent and phony exit scams that will send your case to lawyers for tips and legal advice. It's best to sign on with a cancellation team that works from within and offers a 100% money-back guarantee.

Timeshare ownership can make for a lot of stress for families to plan their future finances. Luckily, companies such as Wesley Financial Group, LLC are available to help those who were originally misled into such a high-stakes financial decision.

Learn more to find out if you can cancel your timeshare | Wesley Financial Group


*Wesley Financial Group, LLC, and its affiliates, successors, or assigns are not lawyers or a law firm and do not engage in the practice of law or provide legal advice or legal representation. All information, software, services, and comments provided on this site are for informational and self-help purposes only and not intended to substitute for professional advice, legal or otherwise.

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