So, Your Client Wants to Exit a Timeshare

So, Your Client Wants to Exit a Timeshare

The vast majority of timeshare buyers live to regret it. According to research out of the University of Central Florida, the average retraction rate of timeshare contracts is 15%, which is about equal to the number of people who buy after a sales presentation. Conversely, 85% of all buyers regret their purchase decision.1

In a related article, Buying a Timeshare: Just Don’t Call It Investing, we discussed why millions of Americans buy a timeshare and how the industry is evolving. Nevertheless, broad dissatisfaction with timeshares has many individuals looking for ways to get out of their contractual obligations.

Five Timeshare Exit Strategies

  1. Seek Relief from the Developer or Management Company—A growing number of timeshare companies offer “deed back” programs that allow owners to surrender the deed. It may not recover an owner’s initial investment, but for aging retirees who no longer plan to visit or whose finances are strained, it will release them from paying annual maintenance fees.
  1. Selling in the Resale Market—There is a resale market for timeshares, though owners should have no illusions about getting a price close to their original purchase amount. A sale will free the owner of future financial obligations and any sales proceeds should help take the sting out of a bad decision.
  1. Gift It—There are some legal fees associated with changing ownership, but the option of gifting it to a friend or family member allows the owner to free him or herself from future costs, while the successor owner gets ownership with the annual maintenance fee as their only cost to a weekly stay at a vacation location.
  1. Relief and Redemption Companies—This option is fraught with issues, including unethical companies that are only looking to take an owner’s money and may not exist long enough to see through the entire timeshare exit process. Beware fear-mongering and upfront fees. The first whiff of either and the owner should move on. 
  1. Seeking Legal Relief—An owner can hire a lawyer specializing in timeshare contracts to determine what legal options they have. Of course, going to court to fight the contract may prove to be costly, but having a lawyer may help speed up the process of negotiating an exit agreement. Importantly, by hiring a lawyer, if an owner decides to stop paying maintenance fees, the owner is shielded from third-party debt collectors until and unless the attorney becomes unresponsive.

Financial advisors may have a limited role in helping clients exit their timeshare, but helping them understand their options is something they will appreciate.



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