Navigating the world of timeshares can seem like a daunting task at first, but with a little education, the closing process for a timeshare resale is actually quite straightforward. Just as in traditional Real Estate, a closing company is employed to assist in the transaction and there are costs associated with their services. Whether you’re a buyer or a seller on the secondary timeshare market, it’s crucial to know what closings costs entail, and how they impact your transaction.
This article explains the details of timeshare resale closing costs, providing a thorough breakdown of all fees, their importance, and what to expect during the closing process.
What Are Timeshare Resale Closing Costs?
Timeshare resale closing costs refer to the charges incurred during the various stages of transferring a timeshare. These fees typically cover the services provided by a closing company, transfer documents required for ownership verification and transfer, as well as transfer costs that are charged by the timeshare developer.
Explanations of Timeshare Resale Closing Costs
Timeshare closings encompass various fees that facilitate the smooth transfer of a timeshare resale. While some transactions will require just a few of these fees, we’ve created a comprehensive list of all fees that could be present in a resale transaction, and provided descriptions for each.
Here are some of the fees buyers and sellers may see during a timeshare resale transaction:
Transfer Fees
These are developer-imposed fees charged for transferring the timeshare to the buyer’s name. The costs vary depending on the timeshare being transferred, but they must be paid in order to transfer the timeshare ownership.
Escrow & Title Fees
These fees are paid to a timeshare closing agency for the cost of services. Services include document preparation and verification, holding the buyer’s funds in escrow throughout the closing process, verifying the seller’s property details, and other necessary closing services.
The closing companies ensure that all the necessary documentation is properly executed and recorded, guaranteeing a smooth and legal transfer of ownership. They manage escrow services, mitigating the risk of fraud by holding funds securely until the transaction is completed. Also, they will work directly with the developer to ensure the transfer takes place as quickly as possible.
Estoppel Fees
Some resorts require the payment of a fee in order to issue an estoppel letter, which confirms the attributes of the ownership and the ownership financial status. This step ensures that the buyer receives exactly what they were contracted to receive and verifies that the seller has cleared all outstanding maintenance fees and loans.
Title Insurance (Optional)
This optional fee covers any title defects, liens, or encumbrances that may have been previously undiscovered. This protects the buyer for the purchase price they are paying for the property, should title defects be discovered at a later time, clouding their title.
Developer-Specific Fees
There are a few special cases in the world of timeshare resales where there are additional fees that are imposed by the developer. While these are not traditionally considered closing costs, we wanted to mention them so you can familiarize yourself with these fees.
Right Of First Refusal Fees
Applicable to most properties in the portfolio or Hilton Grand Vacations, Marriott Vacation Club, Disney Vacation Club, Vistana Signature Experiences, Breckenridge Grand Vacations, and others.
Depending on the timeshare, fees associated with the developer’s right of first refusal process may need to be collected. Some developers reserve the option to buy the timeshare from the seller before it is transferred on the secondary market.
After reviewing the purchase agreement between the buyer and seller, the developer can exercise their right to purchase the timeshare directly from the seller, or they can waive their right, and the transfer will proceed with the contracted buyer.
In case the developer exercises their right, and purchases the ownership directly from the seller:
- the buyer will be refunded any deposits in the escrow account
- the developer will assume all of the buyer’s responsibilities that were stated in the purchase agreement including paying the same price for the property, as well as any other stipulations such as reimbursement of maintenance fees
- the seller will receive the same amount of money at closing
While no broker can guarantee that the developer will waive their right to purchase the seller’s property, it is recommended for buyers to consult with an experienced broker to determine the likelihood that the property will be purchased under the right of first refusal. Often times, a broker can offer guidance to their buyers which can reduce the probability that the developer will exercise their right of first refusal.
Enrollment / Activation Fees
Hilton Grand Vacations
Some developers do charge an activation fee that is paid by the buyer once the transfer has been completed. This enrollment / activation fee is a one-time fee that buyers pay when they initially join Hilton Grand Vacations. This fee is paid by the buyer, directly to Hilton, after the transfer process has been completed.
Owner Education Fees
Marriott Vacation Club Points
When purchasing Marriott Vacation Club points, if the buyer does not already have an existing Marriott points ownership, they will be required to pay a one-time owner education fee. If the buyer does have an existing Marriott points ownership, this fee is waived.
The Importance of Paying Closing Costs
Paying closing costs is crucial for both parties involved in a timeshare transaction. It ensures the safety and legitimacy of the timeshare purchase and protects both the buyer’s funds and the seller’s property.
By holding the buyer’s funds in an escrow account, the closing company can ensure that the funds are protected, and that the seller would be dispersed the proceeds of the sale upon completion of the transfer process.
Also, the closing company will be sent a copy of the purchase agreement, so they can ensure the contract is upheld exactly as specified in the agreement. This can include: confirming the details of the seller’s property match what has been contracted to be sold, ensuring any past dues balances are paid or disclosed, or verifying that any upcoming usage is available as expected.
Estimating Timeshare Closing Costs
The cost can vary significantly depending on the specific services needed, the property being purchased, and even the resort’s location. Since closing costs can vary based on your particular situation, it is best to consult with a knowledgable broker to inquire about the closing costs needed for the particular property you are interested in buying or selling.
Who Pays Closings Costs? Buyer or Seller?
It’s generally the buyer’s responsibility to pay for timeshare closing service costs, but in some cases, the parties can potentially negotiate to share costs.
Timeframe for Timeshare Closing
The process to transfer and close on a timeshare sale can vary greatly but generally takes about 90 to 120 days to complete. To get a more accurate understanding of how long the closing for your particular situation would take, it’s recommended to consult with a trusted resale broker who has extensive experience with transferring the timeshare you wish to buy or sell.
If you’d like to learn how to sell your timeshare before the next maintenance fee is due, and avoid the most common mistakes sellers make, check out our step-by-step guide here: How to Sell Your Timeshare Before The Next Maintenance Fee is Due.
The Risk of Not Using a Closing Company
While it is possible to purchase a timeshare from a private party and transfer the timeshare independently, it’s a risky endeavor. The use of a third-party closing company for every transaction is recommended to ensure the protection of buyer’s funds and the seller’s property throughout the transaction.
Utilizing a third-party closing company in timeshare resale transactions provides an added layer of security and predictability. In essence, they act as an impartial party, safeguarding the interests of both buyer and seller, making the resale process seamless and worry-free.
Wrapping Up
In conclusion, understanding timeshare resale closing costs is essential when buying or selling a timeshare on the secondary market. Any purchase agreement should clearly state all closing costs that apply to your transaction, and a knowledgeable broker can provide valuable guidance in understanding each line item.
We hope you found this article helpful, and that it helped to demystify the process of purchasing or selling a timeshare on the resale market. Feel free to contact us if you have any remaining questions or concerns regarding the timeshare resale process.
If you’re thinking about purchasing a timeshare from the secondary market or selling your existing one, our team of licensed agents is ready to assist you. Our team has decades of experience with all the popular name-brand timeshare developers and are more than happy to walk you through the process of buying or selling on the resale market.
