How Much Does It Cost to Get Rid of a Timeshare?

Exiting a timeshare can present a complex financial challenge. What initially seemed like a vacation investment can evolve into a recurring financial burden due to annual maintenance fees, special assessments, and other charges. Many timeshare owners explore various avenues to exit their contracts, each with associated costs. This article explores the financial implications of different timeshare exit methods.

Direct Exit Method Costs

Owners exploring direct exit options often consider working with the resort, selling on the resale market, or donating their timeshare. Each of these methods involves specific costs that can vary based on the timeshare property and resort policies. Understanding these expenses is important for an informed decision.

Some timeshare resorts offer buyback or deed-back programs, allowing owners to return their timeshare directly to the developer. These programs can involve administrative fees, ranging from $200 to $2,000, to cover processing and transfer paperwork. While some deed-back programs are free for owners who meet eligibility criteria, others impose charges. Owners forfeit their original investment in the timeshare.

Selling a timeshare on the resale market is another direct exit strategy, though it involves significant costs and a low market value. Listing fees for online marketplaces range from $50 to $1,500. If a real estate agent or broker is involved, commissions are between 10% and 30% of the selling price for transactions over $6,000. For sales under $5,000, commissions may be higher, subject to a minimum fee.

Beyond listing and commission fees, timeshare resale transactions incur closing costs similar to traditional real estate. These expenses include:
Title transfer fees
Escrow services
Document preparation
Recording services
Resort notification of transfer
Title search
Optional title insurance

These closing costs are paid to a timeshare closing agency and cover the administrative duties required to legally transfer ownership.

Donating a timeshare to a charitable organization is another exit route, though it has costs. Owners are responsible for transfer fees charged by the resort. If the donation is for a tax deduction, an appraisal fee may be necessary to determine the timeshare’s fair market value. These costs ensure the legal transfer of the timeshare to the charity, releasing the owner from future obligations.

Timeshare Exit Company Fees

Many timeshare owners turn to third-party timeshare exit or cancellation companies for assistance, a method that comes with its own distinct fee structures and service inclusions. These companies aim to help owners navigate the complexities of timeshare contracts and secure a release from their obligations. The financial commitment for these services can vary widely based on the company and the specific circumstances of the timeshare.

Timeshare exit companies employ several fee models, including upfront fees, contingent fees, or a combination. Upfront fees range from a few hundred dollars to $15,000. When legal representation is involved, costs can range from $4,000 to $15,000.

Contingent fee arrangements mean the company only receives payment upon successful timeshare cancellation. These fees are calculated as a percentage of the financial amount saved by the owner, such as future maintenance fees and outstanding loan balances. Contingency fees range from 20% to 40% of this saved amount. Some companies charge hourly rates for legal services, between $200 and $400 per hour.

Fees charged by timeshare exit companies cover services designed to facilitate the cancellation process. These services include an initial consultation and a legal analysis of the timeshare contract. They handle document preparation, negotiations with the timeshare resort, and, if necessary, legal representation through affiliated law firms. Some companies assist with financial and credit guidance related to the exit process.

While the primary fee covers core services, owners should be aware of potential additional costs. These can involve court filing fees if litigation becomes necessary or investigation costs. Some companies offer flexible payment plans, allowing owners to pay fees over an extended period rather than a lump sum upfront.

Financial Impact of Defaulting

Choosing to stop making timeshare payments, whether for the mortgage or maintenance fees, can lead to significant financial repercussions. This path, known as defaulting, can have far-reaching consequences that extend beyond the timeshare itself, affecting an individual’s credit, financial standing, and potential legal obligations. Understanding these impacts is crucial for anyone considering this option.

Defaulting on timeshare payments damages one’s credit score. Missed payments are reported to credit bureaus and can significantly hurt FICO scores, which are 35% based on payment history. Delinquencies can remain on a credit report for up to seven years. A timeshare foreclosure, similar to a residential foreclosure, can cause a FICO score to drop by 100 to 300 points.

A damaged credit score impacts an individual’s ability to obtain future credit or loans. Lenders may view a foreclosure as a significant risk, leading to denials for mortgages, car loans, or credit cards, or resulting in higher interest rates and reduced credit limits. This negative mark can also affect rental housing applications.

When payments cease, timeshare resorts and lenders initiate collection efforts, which can escalate. This involves the account being sent to collection agencies, leading to persistent contact and additional fees. The owner becomes responsible for attorney’s fees, court expenses, and administrative charges incurred by the resort during the collection and foreclosure process. These added costs inflate the original outstanding balance.

A deficiency judgment is another financial risk associated with timeshare default and foreclosure. If the timeshare is sold in foreclosure for less than the outstanding debt, the resort or lender may pursue a judgment for the remaining balance. This legal action can result in the obligation to pay the difference, potentially leading to liens on other personal property or wage garnishment. While some states prohibit deficiency judgments for timeshare foreclosures, it remains a possibility.

Beyond direct financial obligations, defaulting can trigger tax implications if the debt is forgiven. The IRS considers canceled or forgiven debt of $600 or more as taxable income. If a timeshare debt is forgiven, the owner may receive a tax form, which must be reported on their tax return as ordinary income. Certain exclusions, such as insolvency or if the loan was non-recourse, may reduce or eliminate the taxable amount. Claiming these exclusions requires filing additional forms with the tax return.