It’s an easy enough thing to convince people that their two weeks a year will be better spent on the beach at a guaranteed location year after year rather than overspend for last-minute reservations that may fall through anyway. But, plans often change and when they do people want out of these contracts, although many don’t succeed. Buyers will either have to find a buyer, trade it, rent it out to recoup losses or give it up for charity, although these options all carry different tax liabilities that must be considered first. For more on this continue reading the following article from JDSupra.
It seemed like a good idea at the time — buying a share of a pristine condo in a beautiful location for a week every year at the fraction of the cost of purchasing the entire property. Unfortunately, people who buy timeshares might find the real estate isn’t all it’s cracked up to be, and the contracts can be a royal pain to get out of once the buyer’s signature is on paper.
Consumers might decide they want to get out of a timeshare for any number of reasons. Their financial or family situation might change, making it unfeasible to continue paying fees or a loan on the property. The week or two out of the year that the timeshare is reserved might no longer be available for vacation, or the family might decide they prefer to go to a different location.
However, timeshares can be notoriously difficult to escape from. The binding nature of the contracts and shaky demand on the secondary market means that unloading the once-coveted vacation destination can be difficult, costly and time consuming.
“I always tell people that timeshare is a great product if it’s used on a regular basis,” says Scott Roberts, who manages a firm that specializes in timeshare law. “The problem is peoples’ lifestyles change. It made sense at one point, but then they’ve grown up or their grand-kids have grown up.”
Finding a Buyer
The prospect of dumping the timeshare might be daunting, but it is possible. “There are options for people,” Roberts says. “Owners have to be real careful. Selling or getting out of a timeshare requires a lot of patience and using someone who really knows what they’re doing.”
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Generally, the owner will have to find a way to sell the timeshare, or possibly trade for one in a different location or for a travel club with more flexibility.
The first step: Don’t get scammed. Never trust a cold call from an agent saying they already have a buyer lined up. Especially don’t fall for anyone who asks for upfront money to be sent via Western Union — always insist money is transferred via escrow or an attorney.
The key is to find reputable agents who will help to sell the timeshare. “There are people who will take their money and not provide any service, and people who will actually provide service and find buyers or provide an option that is legal and viable,” says Roberts.
Finding a buyer can be time-consuming, but possible with the right help. Sites like Vacationownership.com help connect buyers and sellers, but again it is best to consult with a professional first to avoid getting drawn in by some of the sleazier sites that just take upfront money for listing a timeshare and fail to attract buyers.
Due to the complexity of the transaction, sales can take three to six months to finalize even after a buyer is found.
Not an Investment
There are other options as well. If a family wants to get out early, most states mandate that buyers have a right to rescind their purchase if they change their mind within a certain period of time. If it’s too late for that, owners might be able to rent out their space to recoup some of the expenses, or possibly donate the timeshare to charity for a tax write-off. But beware: There’s little chance an IRS audit will accept the face value of the timeshare as an appropriate deduction. “If you had to give it away because you can’t sell it, it’s obviously not worth [the original price],” Roberts says.
An important rule is to never consider a timeshare an investment. It could be a good purchase if it will be used and enjoyed every year, but there is almost no chance of selling a timeshare on the secondary market for the original price, or even close to it, let alone recouping years of fees on the property. “The thought of the timeshare being an investment where you can return and make a profit is nonexistent, in my opinion,” the attorney says.
The simple answer to protecting yourself and your money is to consult with an attorney before you buy and before you try to sell. An appointment may cost a few hundred dollars, but can prevent problems down the road that could run into the thousands. “Everyone should protect themselves for a transaction of that size,” Roberts says.
This article was republished with permission from JDSupra.