Options for Getting Out of a Timeshare

The following is presented for informational purposes only and is not intended as legal advice.

On the face of it, a timeshare can sound like a really, really good deal. For a fixed and seemingly affordable price, you can have regular access to the vacation resort of your choice. Best of all, you own a piece of prime vacation property.

And while timeshares may work out for some consumers, they can quickly become a nightmare for others as what once looked like a smart investment quickly becomes a financial anchor that you can’t cut free no matter how hard you try.

So what is a timeshare exactly? How do they work? And if you’re unlucky enough to be stuck with a timeshare you no longer want, what are your options?

What’s a timeshare?

A timeshare can come in many forms and under many names, but it’s typically defined as a type of property ownership where multiple investors have the right to use a particular property, usually a vacation property, for a set period each year.

It’s often sold as an affordable alternative to buying your own vacation home. Rather than buying a property in Key West on your own, you become one of many owners of that property, which you can access for a specific amount of time each year.

Most timeshares are a form of deeded ownership, where the buyer owns a fractional share of a property. As the owner, you can then sell, rent, or bequeath that property as allowed by your purchase agreement (as long as your payments are up-to-date). Right-to-use is another form of timeshare where you lease a property for a set number of years rather than purchase it.

Depending on the timeshare, your options as an owner will be different:

• Fixed week - In this system, owners purchase access to the property for one specific week every year.
• Floating week - Rather than only having access to one specific week each year, owners can book one week within a defined range of options.
• Points-based - The most flexible option, this type of timeshare allows you purchase points rather than a specific property. Those points can then be used to book rooms in a variety of properties, depending on availability.

Costs of purchasing a timeshare

Timeshares are cheaper than buying your own house in Cancun, but those costs can add up all the same.

• Purchase price: The initial cost of buying a timeshare, which can range from a few thousand to tens of thousands of dollars. Certainly less than buying the property outright, but far from inexpensive. Unless you have the cash to cover this cost upfront, you’ll likely need to take out a loan, either from a bank or credit union, or directly from the timeshare developer.
• Annual maintenance fees: These cover property upkeep, utilities, and management fees. They typically range from a few hundred to a few thousand dollars annually.
• Special assessments: Over time the property may require major repairs or improvements, and those costs are typically passed on to the individual investors. Depending on your agreement, you may not have much of a say in these projects, so the costs can be high and come at unexpected times.
• Exchange fees: If participating in a timeshare exchange program, there may be fees for swapping your timeshare week with another property.

Costs will obviously depend on things like location, amenities, and more, but even a modest timeshare can set you back a few thousand dollars every year.

Drawbacks of owning a timeshare

The idea of a guaranteed vacation every year in the location of your choosing can be enticing, and for some people a timeshare works out perfectly. For others though, a timeshare can become an expensive commitment that’s hard to shake.

Unlike other vacation options, timeshares are an annual commitment. Whether you want to take a year off or not, you’re still on the hook for all of the loans and fees associated with the timeshare. And because life is unpredictable, there may be years when you simply can’t or don’t want to take a vacation. You may be able to rent or sublet your timeshare, but that can take effort and money you’d rather not spare.

Setting aside whether or not you want to use the timeshare each year, if you suddenly can’t afford to own the timeshare anymore you may have a very hard time getting out of that contract. And given that a timeshare is typically not a financial priority, you may find that you have no choice but to stop making your payments, which can be extremely damaging to your credit and finances. That’s because defaulting on a timeshare can hurt your credit in two ways.

First, there’s the loan you used to purchase the timeshare. If you become delinquent on that loan, just like with any other loan or line of credit, that delinquency will be reported and your credit will suffer.

Second, there are the maintenance or HOA fees. If you don’t pay those, the timeshare company will very likely report those fees are delinquent, creating an additional negative hit on your credit.

How do you get out of a timeshare?

Escaping a timeshare can be difficult, but there are some options to consider:

• Sell the timeshare: Unlike most properties, timeshares don’t tend to gain in value. In fact, because of the annual fees associated with the property, they can be extremely hard to sell. A market may exist depending on the property, but don’t expect to make your money back.
• Rent it out: Renting out your timeshare is a temporary solution, but if you can find someone willing to pay to use your property that can go a little way toward offsetting the costs of the loan and maintenance fees. Your timeshare company may offer assistance posting your listing and managing the rental agreement.
• Give it away: Can’t sell it? Can’t rent it? The next step may be to simply give it away and let someone else handle the loan and maintenance fees going forward. You won’t recoup any of your expenses this way, but it may be the fastest way to wash your hands and move on.
• Deed-back programs: In some rare cases, the timeshare developer may offer you the ability to sell the property back to the developer for a fee. Again, you’ll likely end up losing money in the process, but if available it’s a good way to get out from a timeshare you no longer want.
• Consult with an attorney: While some timeshare developers may be perfectly reputable, like any industry there are some bad apples that rely on strongarm tactics and deceit to get consumers to sign up for timeshares they can’t really afford. If you feel that you’ve been taken advantage of, it may be worthwhile to talk to an attorney and pursue legal action.

If you’ve got a timeshare that you can’t afford, don’t be passive. Simply not making your payments and ignoring the situation will likely do significant damage to your finances.

If you think you're going to need to miss an upcoming timeshare payment, be sure to contact your lender and HOA first to see if there are any hardship options available.

Should you use a timeshare exit company?

In a word, no. While some companies exist that claim to help buyers get out of timeshares — and some may very well be legitimate — it’s an industry that’s often been overrun with scams and bad actors. Most importantly, there’s not much a paid third party can do that you can’t do for yourself.

Has a timeshare or other regrettable investment put you in a difficult financial situation? MMI offers free financial counseling 24/7, online and over the phone. Let our experts review your situation and provide personalized advice to help you overcome your unique challenges.