There are instances where the value of a timeshare hits rock bottom that owners are forced to sell it for practically nothing. Some timeshare owners might attempt to give back the deed of the property back to the timeshare developer, also known as a deed in lieu of foreclosure.
However, the latter option could either affect your credit rating negatively or positively depending on certain factors.
Do You Have a Mortgage?
A timeshare deed in lieu of foreclosure might impact your credit rating negatively if your timeshare is under a mortgage. The reason is that lenders, which are usually the developer of the timeshare in question, report borrowers who default on their loan. In general, a deed in lieu of foreclosure could reduce your credits score by up to 160 points and even higher if you have a higher credit score.
On the other hand, a deed in lieu of foreclosure could help your credit score, considering that your timeshare isn’t under a mortgage. In the event that you have unpaid fees, the developer could file a claim against you or sell your debt, which would wreak havoc on your credit rating. But if you could manage to make a deal with the developer to repay your unpaid fees by with your timeshare, this would avoid a negative record on your credit history.
Timeshare developers don’t always inform credit bureaus about a deed in lieu of foreclosure, but it’s best that you get the developer not to report it because you won’t have any leverage otherwise. You could, for instance, get a lawyer to negotiate with the developer and get the agreement in writing. If you don’t want to risk the potential effects of a deed in lieu of foreclosure, you have other options. You could swap vacation times with other timeshare owners at other timeshare developments or exchange timeshare ownership with them. You could also gift your timeshare to a charity and then benefit from the significant tax deduction. Consult an attorney experienced in timeshare to figure out the most appropriate option for your case.