real estate

Trapped in time share with sinking value

Steve McLindenQuestionDear Real Estate Adviser,
Help! We bought a time share in Florida in 2007 and haven't used it since. We're unable to afford this extra expense anymore, and we're wondering if there's anything we can do to get rid of it and what would happen if we stop paying on it.
-- Vickie M.

AnswerDear Vickie,
Get ready for a few sobering thoughts on time shares. If you haven't already discovered this fact, reselling a time share these days is a challenge because the supply outstrips the demand significantly.

I'm sorry to note that in this economy, hordes of people are dumping their time shares at eye-opening value losses in relation to their purchase prices.

Folks reselling units on Internet resale sites have been cutting them loose for 40 percent to 70 percent off their "new" sales price for quite a while now. I put quotes around the word "new," because in my book, a time share is only new once, and that's when the first sharer occupies it.

Why are they selling so cheap? Well, when you strip away the cost of all the freebies and other marketing veneer, which accounts for up to 40 percent of the initial price, what you have left is a base price of sorts. And that's before you factor in the economy-related soft demand.

If you try to sell your time share on the numerous resale sites -- just search for "sell my time share" and you'll find a bunch of them -- please be wary. Do not pay several hundred dollars or more in upfront fees some of these "guaranteed" sites ask for under the pretense that your monies will go to appraisal fees (unneeded) and various marketing efforts (typically lackluster).

Other than a small one-time listing fee ranging from $10 to $30 or so, you shouldn't have to pay anything. Get on these sites and see what similar units are actually selling for, then price yours accordingly.

Know that sellers who try to hold out for what they paid for their unit almost always strike out. You could try renting out your unit as well.

A note about resale buyers: They are usually people who are knowledgeable about the resale market and are looking for a rock-bottom bargain. Another caveat: The payoff balance on the note usually has to be cleared before any sale can be finalized.

If you do decide to simply stop paying your loan and maintenance fees, your credit rating will take a sizable hit. Lenders and credit agencies usually don't take into account the nature of your obligation -- they just look at the numbers. Talk to your financial office before deciding to default.

Sometimes, selling a newer unit back to the resort company at a steep discount can work, particularly if you offer to pay double commission to the sales manager. But that could be a problem for a nearly five-year-old unit.

You may have a legal option. If you feel the time share sales reps misrepresented material facts or failed to disclose information that would have kept you from buying, you might be able to get a refund or partial refund through an attorney. Do a search for "time share attorney" or "time share cancellation attorney" and again, you will find several sites.

Some people have had success donating their units to charity when they couldn't dispose of them by conventional means. But if you're in the 28 percent tax bracket, your savings will only be about 28 percent of the fair market value of the unit. And realize the IRS is taking a closer look at claims of fair market value these days. Also, if the unit's value is more than $5,000, you must have it formally appraised to claim it.

Sorry to hear of your predicament. Good luck.

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