The Vine: May 29, 2013
I own a charming cottage timeshare in Sedona, but I made a mistake choosing to buy it.
Going to the timeshare presentation in the first place was probably a bad idea — I’m kind of a sucker. I’m not dumb; I don’t fall for check or internet scams, but a good salesman who has (paid for) my attention for 90 minutes could probably convince me of anything.
Now that it’s been a year, I’ve realized it’s not worth the money to me. I paid about 10K for a week every other year. The resort offered me less than 2K to buy it back. If I’d paid cash, I might have just cut my losses. But I still owe 8K on a 13% loan.
First, can I sell it? I contacted two realtors, but neither of them had a clue. I’d like to know if there’s “a place” or “a person” that specializes in selling timeshares, and of course whether I can get anywhere near what I owe for it.
I’m not usually this terrible with money (I got caught up in the moment!), so it pains me to think about the loan terms. I want to get rid of this debt badly, but I know opening an assortment of 0% credit cards to pay it off is probably a dumb move. I am wondering whether refinancing my house to cover this loan makes any sense. I owe probably 15-20% under the value of my home. Even though I bought my house in 2009, mortgage rates are quite a bit more favorable than the 15-year 4.5% one I have.
At the end of the day, I just want to know how to best minimize what I pay for this thing. What are my options?
Signed,
Staying away from extended sales pitches
Dear Stay,
I would get a real-estate attorney. Explain the situation as you understand it, turn over all the relevant paperwork, decide what’s more important to you — getting what you owe, or getting out of it — and advise her to formulate a plan based on that goal. I’ve never considered a timeshare of this type, primarily because I’ve heard so many horror stories about people overestimating the time they’d spend there and how trying to get out of the damn thing turned into a part-time job. Prepare to spend a little more money so that someone else with realty/contract experience can represent you.
If it’s more important to you to get full value, see if you can’t make some money back with a sublet of some sort — nothing illegal or sketchy, just letting friends use the timeshare and giving you some money if possible. But I would set my sights on dumping it, honestly. Take the resort’s offer, and focus on paying down the loan, which should be a regular reminder for a while that owning property you don’t live in is…for rich people.
Yes, you should probably look into refinancing your house anyway, but as far as the timeshare, hire someone to translate the situation for you and/or get you out of it.
Tags: budget 'n' finance
We actually purchased a timeshare from a resale agent several years ago. If you go the resale route, there is virtually no chance that you will get all of your money back going this route, but it will get you out of your maintenance payments and get this monkey off your back. I have no idea if the agent we used is still working, but his name is Dustin Smith from GMAC International Properties and his email is Dustin dot Smith at internationalgmac dot com.
If you decide to go the refi route (and if you are planning to stay in your house for at least a few more years, you probably should anyway), I wouldn’t go cash out. Just refi to a lower rate and then apply the difference in your mortgage payment toward paying off the timeshare faster. At current rates on a 15-year loan, you can probably shave 1.5-2% off your rate.
If you can, 2 professionals worth hiring: a real estate lawyer for the legal advice and a fee only financial planner to help you put together a budgetary plan.
It might be best to mentally consider all the money from the time share completely gone and irretrievable. Then if you get any sublets or manage to sell at a price that isn’t terribly low, it’s good!
In a few years you will be wiser and on top of your mortgage issues. This is one of those life lessons you hear about. They usually cost us something big to learn. This cost is actual money.
There is definitely an after market for selling timeshares. Run a Google search for “selling timeshares Sedona” and they’ll pop up. You want to use an agency that is familiar with your area and your complex, ideally. The timeshare place is going to offer you bottom dollar, but don’t expect to make much more than $2K from the after market.
I would also look into renting the unit – the realtors may offer those services as well.
I like Amanda’s idea re: refinancing and using the extra monthly cash to pay this down faster.
Also, consider the $10K a sunk cost, as hard as that is. Don’t think about recouping the $8K, but rather focus on avoiding the future monthly interest and annual maintenance fees.
There’s nothing wrong with getting a real estate attorney, but those are generally an East Coast thing. If the letter writer is west coast, we don’t generally hire attorneys for real estate transactions so there isn’t a large pool of them for small transactions. The real estate agent and bank do the same work.
My first thought: I’d sell at a loss, then fold the debt into my home loan by re-financing. I’d do a whole lot to get out from a 13% loan. I’m not sure that’s the best move, but it is my first inclination.
You should definitely look into a refi, but be warned that if you have less than 20% equity (and it sounds like you’re on the bubble, and in my experience appraisers will NOT help a brother out on that) you’re likely not going to get the best rates and may not be able to do it at all without bringing cash to the table. I refinanced my house last year and it was a pain in the ass (but worth it in the end).
No experience with timeshares, sorry. Thank god, though, it sounds like.
I’m going to preface this by saying that I am a lawyer though I’ve never dealt with time shares. You may need a lawyer but hiring one may not be the first step.
Do you have any friends who are lawyers who can look through the paperwork and explain it to you? That friend can let you know whether there is a chance that you have legal ways out of the obligation before you go around hiring somebody to do the work for you.
Part of the problem is the financial equation here – you paid $10k. That means that potential lawyers would have to be able to do the job for WAY less than that amount to be helpful to you. It’s hard to find a good one who can work for that little – again, unless they’re friends or family.
The other part of the financial equation – if I understand your letter correctly – is that you are paying $1,040 per year for interest on your loan but only have access for one week every 2 years. That would mean that you’d need to sublet the share for $2,080 just to keep your head above water. Hopefully, you meant that you’re using it about once every 2 years and there are more weeks that you could rent it …
Now, here’s the part where a lawyer can help – before you can decide whether to sell, rent or abandon the property, you need to know the fine print of your contract. For example: (1) Does the contract allow you to sublet your share? (2) Is your loan “recourse” or “non-recourse”? This means, if you default on the loan can the bank (or other lender) do anything other than foreclose on the property? If it’s a non-recourse loan (meaning they can only foreclose), you may be able to walk away and only lose the amount you’ve already spent; and (3) Does the resort have the right approve or disapprove of anyone to whom you might want to resell?
The next layer is whether any of Arizona’s consumer protection statutes might help you out.
I guarantee that a lawyer could construct a complaint for you that makes you sound like a victim who deserves all of his or her money back. Whether that complaint would hold up in Court is a different question. Unfortunately, you won’t necessarily get an honest answer to which type of case this is unless you have reason to trust the lawyer with whom you first consult.
Without reading your contract, I can’t tell you how sticky a situation this might be. I suspect there are at least a couple ways out but picking the right one starts by finding out the legal contours of the problem before wasting too much time pursuing a path that might be ruled out from the start.
There’s a lot of good info about reselling timeshares out there. I Agree with Megan that getting a real estate attorney is nice, but not necessary. Here are a few links to helpful timeshare resale info:
http://www.consumer.ftc.gov/articles/0073-timeshares-and-vacation-plans
http://www.tug2.net/advice/howtosellyourtimeshare.htm
tl;dr version – the biggest thing to be mindful of (aside from the fact that you are in no way going to get your purchase price back out of this deal) is the possibility of being scammed by a resale company. If they ask for any fees up front, run.
If you decide to wait a bit and rent it out while you figure out your options, I hear http://www.vrbo.com is great. A lot of my coworkers use it to find rentals for their vacations, and a few use it to market their own places.
Mildly apropos – I did a collateral audit for a loan to a timeshare developer once. Part of the endless day I spent in the title company’s windowless cage of a records room involved reading hundreds of purchaser files for timeshares in FL. After looking at the terms of a ziptillion timeshare sales, I came away with this: some of them are a really great option if you a) like to vacation in a specific place on a regular basis and b) you can either pay cash or pay it off in the first year. The interest rates on all of them are just insane, and unless you end up using all your time there for the rest of your life, you are far better off banking what you’d make in payments and spending it on a hotel (or, hey, rent someone else’s timeshare!). It was eye-opening, to say the least.