Surging Property Taxes Contribute To Timeshare Foreclosures

Surging Property Taxes Contribute To Timeshare Foreclosures

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Owning a timeshare can offer some important benefits including allowing you to return to a favored vacation spot on a regular basis without worrying about hotel accommodations, unfamiliar surroundings, or dealing with nasty front desk personnel. Certainly, timeshares have some drawbacks including their high cost, low resale value, and difficulty getting the weeks you prefer to visit.

Yet, timeshares remain a favorite with some including those who were not talked into signing a deal they really did not want.

Timeshare Troubles

Hawai'iBut, now a more recent problem has emerged, one that could lead to a rash in timeshare foreclosures. That problem has to do with property taxes and, according to the Pacific Business News (PBN), has become a huge problem on Hawai’i. (see Maui time-share taxes surge)

Like so many other markets across the nation, Maui property values have been dropping, but property taxes on island timeshares has doubled or even tripled over the past year according to PBN. That move has sparked an outcry from timeshare owners, who have charged that they are being burdened at the expense of permanent residents who are not seeing a tax increase.

Maui Taxes

At issue on Maui is that the county government is experiencing a budget shortfall and is recouping some of its lost revenue in the form of property tax increases. That move has hurt recession weary timeshare owners with PBN reporting last August that hundreds of one week timeshares have been foreclosed on by time-share operators. (see Foreclosures on time-share units remain stable in Hawaii)

The American Resort Development Association (ARDA) is an advocacy group who represents the resort development and vacation ownership industries. The ARDA says that the county of Maui became the first local government to set up a separate tax category for timeshares in 2005, charging $14 per $1000 of assessed value, the highest tax rate for timeshares in the nation.

Timeshare Mortgages

The timeshare default rate in Hawai’i is still comparatively low, pegged by ARDA in 2009 at 5%, up from 4% the previous year. Unlike conventional mortgages written by commercial banks, timeshare mortgages are held by the resort owners. If a timeshare holder defaults on his mortgage or fails to pay the annual maintenance fee—typically $500 to $1000—then their share can be taken away.

Being a popular vacation destination has worked wonders for Hawai’i which favored by mainland and Japanese visitors. ARDA says that while timeshare prices have fallen, interest in the market remains good as bargain hunters seek timeshare foreclosure deals despite the property tax surge.

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Categories: Money News

Comments

  1. Ann Botti
    Ann Botti 12 March, 2010, 00:54

    I have received harassing phone calls to collect the maintenance fees for Sands of Kahana since January. I get up to 8 calls a day up to 9:00pm. They are RELENTLESS! Why would I pay my maintenance fees of $346.50 if come July we are assessed with taxes so high I’m unable to pay and will default anyway. I have tried to explain this and THEY don’t care! What are they doing to resolve this.

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