Timeshare Exit Companies: How They Work and What They Charge

You are number five on a list of eight

The developer sold you a timeshare with fees that rise every year and almost no resale value. Now a second industry wants to charge you to undo it. Before this page explains how exit companies work, it has to say where they belong, because the order matters more than anything else here.

There are eight ways out of a timeshare. Rescission, developer deed-back, and resale come first, and the first two of those are usually free. An exit company is the fifth route, and it is the first one that costs real money.

Most owners try it first anyway, because it is the only one that advertises. The resorts do not market their own exit programs, and exit companies spend heavily to fill that silence.

If you have not yet forced the developer to give you a definite answer on the free routes, close this page and go do that. If you have, and the developer said no and the interest will not sell, keep reading.

What you are actually buying

The service is contact and paperwork.

An exit company calls the developer, submits surrender or transfer documents, and follows up. Some route your file to an attorney. Some route it to a transfer company. Some do the whole thing in house with staff who are not lawyers.

Chasing a resort for eight months is genuinely tedious, and people pay to avoid tedious things every day. Even the industry’s own trade group, hardly a friend to owners, says on its exit site that the exit process is the same with or without an exit company.

The problem is the gap between that service and the price, and between the price and the outcome. The FTC’s plain warning is that some of these operations take your money and then simply contact the timeshare company on your behalf, which is something you could do for free. Washington’s case against Reed Hein described a business model that outsourced nearly everything, where the company itself did not know whether the vendor handling a customer’s file was pursuing an effective or even legal course of conduct.

In a lot of cases you are paying thousands of dollars for a phone call placed by someone with less standing with the resort than you have as the owner.

What it costs

The enforcement record gives real numbers in place of marketing ranges.

Washington State found that more than 2,800 Washingtonians entered into contracts with Reed Hein, marketed as Timeshare Exit Team, paying upfront fees ranging from just under $3,000 up to tens of thousands of dollars per exit. The company had contracted to provide more than 41,000 timeshare exits across North America, of which more than 16,000 were still pending, thousands of them for three years or longer.

In a separate FTC matter, customers of an operation the agency called Consumer Law Protection paid anywhere from $5,000 to $80,000.

Put those two facts side by side. Thousands of dollars paid, and 16,000 exits still pending at one company alone, thousands of them pending for over three years. The fee was collected on day one, and the exit was never assured.

Escrow versus upfront

One structural question tells you more than any review site.

Upfront. You pay before anything happens. The company holds your money whether or not it delivers. After the payment clears, nothing in the deal pushes it to keep working.

Escrow. Your fee sits with a neutral third party and is released only when the exit is documented and complete. If nothing is delivered, your money comes back.

Escrow will not make a company competent. It does tie the company’s pay to the outcome you wanted, instead of to the act of signing you up, and it is the closest thing to a filter this category has.

Washington’s consent decree required Reed Hein to set aside at least 20 percent of each customer’s payments for refunds and to more readily provide refunds, including a partial refund if the customer is not out of their timeshare three years from the date of contract. A regulator had to impose a refund mechanism that an escrow structure would have provided on its own.

The questions to ask

Ask these before you sign, get the answers in writing, and treat a refusal to answer as the answer.

1. Is my fee held in escrow by a third party, and released only on a completed exit? If not, ask why not.
2. Who does the actual work, you or a vendor? Get the vendor named.
3. Is an attorney involved, and is that attorney licensed in the state where my resort sits?
4. What exactly counts as success under your guarantee? This matters enormously. Reed Hein’s position was that anything terminating the ownership counted, which meant a foreclosure was a success and therefore not refundable.
5. What is your total fee, and what triggers each payment?
6. What happens if you fail? Define failure and tell me the refund terms.
7. Have you been sued by any state attorney general or the FTC?

The FTC adds two more: research the company by searching its name with the words scam or complaint, and study the paperwork on your own before you sign, because getting all promises in writing is your right.

The instruction that should end the conversation

If a company tells you to stop paying your maintenance fees, hang up.

The FTC lists instructions to stop paying your mortgage or fees among the signs of a timeshare exit scam. Nonpayment puts no real pressure on the resort. It sends your account to collections, damages your credit, and can end in foreclosure.

It can also be exactly what the company wants. If the company defines any termination of ownership as a successful exit, then driving you into foreclosure completes the job on paper and voids your refund at the same time. You lose the timeshare, your credit takes the hit, and the company keeps the fee. The advice usually arrives dressed up as a strategy against the resort.

This is general information, not legal advice. Some states regulate timeshare transfer and exit services directly, and whether a given company can lawfully do what it is selling you may depend on where you and the resort are. Before you sign an exit agreement, have an attorney licensed in your state read it.