A Helpful Guide to Non-Judicial Foreclosures.

A guide to non-judicial foreclosures

If you’re in the timeshare industry, you may have heard the term “non-judicial foreclosure”. In this article, we are going to explore the benefits of utilizing the non-judicial foreclosures process for timeshare resorts.

SPM has worked with the resorts we manage to develop successful plans that include non-judicial foreclosures, which include creating a budget and negotiating partnerships with law firms that specialize in timeshare non-judicial foreclosures.

Why is a non-judicial foreclosure an option resorts should consider?

When collections efforts have been exhausted, one question that associations need to answer is: what is the best way to handle the unused and unsettled accounts? The ideal scenario is to take the week back and sell it to someone who will pay the maintenance fees.

Getting the weeks back can be an expensive process, and judicial foreclosures can cost thousands of dollars, money most associations do not have to spend. Non-judicial foreclosures are an affordable way for associations to gain control of weeks to put them back into a sales program.

Before we discuss non-judicial foreclosures, it’s important to note that this is just one piece of the sustainability puzzle that needs to be in place. Trish Docherty, Regional Vice President of Operations, noted, “Timeshare resorts need to have a deed back policy and easy ways for owners to get rid of their timeshare, or they will turn to a transfer company to get rid of it, and often times, these transfer companies are not legitimate. There needs to be a plan in place.” SPM’s management team has put together many effective plans with boards of directors to address unused inventory. Plans should include: educating owners on timeshare scams, assessing the inventory, creating a deed back policy, formulating campaigns to get deeds back from severely delinquent accounts, implementing a cost-effective foreclosure program, and forming partnerships with sales companies to sell the inventory.

Related article: The Big Question: Can older timeshare resorts continue to be owner-controlled, run by a Board of Directors, and be successful?

What resorts are eligible for non-judicial foreclosures?

Non-judicial foreclosure processes are dictated state-by-state, so the first step is to read the association’s Master Deed and Bylaws to determine if the resort is eligible and what process the resort needs to follow. SPM guides boards through the legal process to determine if the association can utilize the non-judicial foreclosure process and to take the proper steps necessary to use the process.

 

What is the difference between a non-judicial foreclosure and a judicial foreclosure?

A non-judicial foreclosure does not go through a court, while a judicial foreclosure does go through a court.

Certain states allow non-judicial foreclosures as an option for timeshare resorts, which is a faster, more streamlined process and typically less expensive than the judicial foreclosure.

What states allow non-judicial foreclosures?

According to ARDA, more than 20 states offer non-judicial foreclosures, including:

  • Florida
  • South Carolina
  • North Carolina
  • Virginia
  • Massachusetts

The legal website NOLO has a list of all states using non-judicial foreclosures.

What can an association expect to pay for a non-judicial foreclosure?

Many firms are advertising cheap rates for non-judicial foreclosures, as the cost for these is significantly lower than a traditional foreclosure. However, there are still factors to consider when getting pricing information together for a non-judicial foreclosure program for your resort, and they can include:

  • advertising costs
  • process service
  • recording fees

There are hard costs associated with non-judicial foreclosures, and when getting estimates from companies, make sure all of the fees are included in the quote. For example, in South Carolina, there are required advertising costs but resorts in the state of Florida do not incur those additional fees.

SPM has partnerships with attorneys and title companies that provide the most competitive rates in the industry based on our volume. We are able to save resorts a significant amount of money on these costs due to our ability to leverage pricing on their behalf. We work with the board to budget for non-judicial foreclosures, and make sure the estimate includes all of the hard costs.

The HOA owns the week. Now what?

Taking the weeks back is only significant if the resort has a plan in place to sell those weeks.

First, it’s important to note that once the deed has been recorded with the state and county, your association records should also be properly marked. Managing inventory is essential for an active sales program, and the sales company needs to know which weeks are available to be sold.

In the interim, a successful vacation rental program will provide income to the association to make up for the loss in delinquency. SPM’s revenue management team is the best in the industry, and generates significant revenue for the resorts in our rental program, plus an active rental program brings new potential owners to the resort for the sales agents. The long-term solution is to sell the weeks.

Paul Goodrich, President of Palmetto Marketing, explains, “A good resales program is dependent on the weeks available to sell. Therefore, it is important to for timeshare associations to take control of the unused, delinquent inventory for an active sales program. Owners may want to buy additional off-season weeks for exchange, clubs may want a mix of weeks to buy in bulk, and there could be a number of opportunities to sell those weeks.”

The other aspect a qualified attorney will ascertain is the voting rights of the HOA weeks, and if the board will have control of all proxies. In the state of Florida, for instance, the board cannot vote the HOA weeks. This is not the case in all states, but some condominium documents stipulate the board can vote HOA weeks.

Next Steps: Create an Effective Action Plan 

If you’re a timeshare board member looking for information about non-judicial foreclosures, we are happy to refer you to a trusted law firm or help you create a debt recovery plan. Get a copy of the Board Member Strategy Planner which is a self-assessment tool for board members to evaluate resort operations and develop an action plan. Give Hatton Gravely, VP of Development and Marketing, a phone call at (843) 685-3514 or email hgravely@spmresorts.com to receive a copy of the planner.