exposing the timeshare sales pitch

When you buy a house or car, you have access to four invaluable resources: personal experience, third-party counsel, competitive bids, and time. From childhood you’ve grown up among home and car owners. As you enter the market you glean wisdom from family and friends, from magazines or real estate agents. Competing offers lend you a sense of fair prices and how the market works. You take time to make a reasoned decision.

Timeshares are similar to homes because they’re real estate (albeit an unusual type), and similar to cars in terms of cost. But when people buy timeshares, they generally do so during a sales presentation in which they enjoy none of the resources above. They lack personal experience with timeshare ownership, they’re unable to consult third parties for advice, they have no competitive bids on the table to compare, and they’re expected to accept an offer on the spot.

Considering the amount of money involved and its potential long-term impact on personal finances, a more rational decision-making process is in order.

Over years of enduring timeshare presentations in exchange for free or reduced lodging, gift cards and other rewards, my wife and I have enjoyed picking apart the following threads common to all of them. Bluegreen, Fairfield — the methods are the same:

1. Vacation vs. lodging.
The salesperson discusses vacations and refers to the timeshare as a vacation because “vacation” conveys a wealth of positive associations. But a timeshare isn’t a vacation – it’s lodging. And while lodging ranks high among vacation costs, the total bill for any vacation includes travel, food, and activities that together may equal, if not top, the cost of lodging. The salesperson acknowledges this, but only briefly – then continues referring to the timeshare as a vacation.

2. Obligation.
You’re matched with one salesperson for a presentation scheduled to take ninety minutes, and that ends up taking between two and three hours (at our latest timeshare, Massanutten, 1:30 became 2:45). The salesperson spends the majority of this time cultivating a friendly rapport with you over free food, lively conversation and a tour, holding the actual sales pitch until the end. This amount of individualized attention builds a personal connection, a sense of trust … and a consequent feeling of obligation. By the time the sales pitch finally arrives, it’s harder to reject an offer from someone who’s spent so much time being nice to you.

3. Scribbling.
The salesperson gives you nothing published – no terms, no prices. Everything is scribbled on a blank sheet of paper. This conveys a sense of price fluidity, an impression of a deal being cut, of figures being negotiated downward. In reality, each timeshare has a bottom figure necessary for recouping costs, so the fluidity is more a sign of price inflation. Moreover, factors integral to the deal (maintenance fees, closing costs, property taxes, insurance, financing interest rate) may be left off the scribbling paper.

4. Urgency.
The offer is take-it-or-leave-it, and will never again be offered. You must decide then and there to accept, or forever lose the opportunity to buy at the same price. This adds a sense of urgency, making it more likely you’ll neglect to ask crucial questions or request details in print. It also separates you from third-party advice and competitive offers.

The actual deal closing is handled through a clever approach – but before analyzing it, a look at timeshare mathematics gives us valuable perspective.

Since timeshares are sold by the week, the math is simple: multiply the sale price by 50 weeks for an approximation of how much the company is poised to make on a unit. One week ownership at $15,000 may sound low in real estate terms, especially compared to typical one-week rentals of $1,000 or more – it would pay for itself (seemingly, minus ongoing fees and interest rate) in a mere 15 years! But multiplying that figure by 50 weeks reveals the whole unit is selling for over $750,000. Is this the fair market value? Not by a longshot – in fact the company obtains fair market value upon selling 10 or 20 weeks, leaving the remaining 30 to 40 weeks as pure profit. In this way timeshare companies achieve real estate profits up to five times greater.

(If you think the padded price covers the cost of property management, think again – one-time sales can’t cover perpetual costs without bankrupting a business, which is why timeshares charge annual maintenance fees.)

Now, with the price in perspective, consider how the deal unfolds:

5. Phased closing.
The sales pitch ain’t over until it’s over – and that’s not until you walk out the door. First to bat:

The Salesperson. The whole time you’re with the salesperson, you’re dreading the eventual sales pitch … which is ironic because his or her job is not to close the deal. Instead it’s to butter you up for the real deal closer, who comes later. The salesperson simply obtains your trust and sympathy, then presents two prices. The first is a high “anytime” price meant to scare you: it’s not a real price, no one ever pays it, and in fact some salespersons cross it out soon after writing it down. (At our last timeshare visit, Massanutten, the anytime offer for one week of a condo with two bedrooms, two baths was $22,500.)

On its heels comes the “first time visitor offer” which, contrary to appearances, is not meant to hook you (unless you’re gullible). Instead this offer ($18,000 at Massanutten) is meant to draw your rejection – so the salesperson can quickly back off, to your huge relief. This is a brilliant sales maneuver; in fact everything has been orchestrated to bring you to this exact point, because immediately you think, “Ahh, it’s over! Here I was expecting all this pressure, but it wasn’t bad at all. This sales operation must really be on the up-and-up.” By moving beyond the sales pitch, the salesperson removes the threat and fear of pressure, thus doing exactly what he’s paid to do – laying down the emotional groundwork for batter number two:

The Boss. The boss stops by to touch base on why you’re rejecting the offer. This is presented as a check on the salesperson’s performance, but the boss does intend to close the deal, and she (or he) is authorized to offer a smaller unit for a remarkably discounted price ($9,900 at Massanutten) – about half the previous offer. Because you don’t have a relationship with the boss, her pitch relies on a combination of reduced numbers and extra amenities, and it’s delivered with the faint suggestion that your salesperson is a learner who should have performed better. Note his demeanor: once gregarious, now he sits quietly, seemingly chastened. He may have accepted your rejection with a smile, but to his boss he feels apologetic for his failure. You like your salesperson; you’re grateful to him for not pressuring you; you may feel like helping him out by accepting the new low offer.

If you’re particularly stubborn you turn this one down as well. The boss and salesperson shake your hand and invite you through a doorway to receive your parting gift (typically a $100 gift card). It’s all over until …

The Boss’s Boss. In the next room an older boss sits down to interview you about your free stay, your tour, and your salesperson’s professionalism. Was he polite? Did he show you both swimming pools? Did he explain the pricing? This is safe territory – you’ve eluded two sales pitches, you’re close to the exit, and you’re thinking back over all that occurred, assuring the older boss that even though the sales rep didn’t make a sale, he was great. Suddenly an alternative is mentioned: a pricing plan ($5,400 at Massanutten) half the previous offer, and with even more amenities thrown in. The tables have turned – you’re in the thick of a third sales pitch, this one a quarter of the original price. What would have happened had you accepted earlier offers? How clever of you to have turned them down. How many buyers reach this point? Will you now pass up this secret deal?

None of this is wrong, per se – it’s only carefully honed psychic and economic conditioning meant to steer you into a hasty and ill-considered decision. Barring coercion and deceit, if both sides agree on a price, no matter how high, that’s how much the timeshare is worth. Clearly, though, in light of the process above, whoever accepts either the first or second offer is a sucker.

In fact you never can be sure just how low the offer may descend until you’ve stepped out the door into the parking lot. You’re a prime opportunity, a potential buyer; the sales team will use better and better bait in an attempt to hook you because they know that once you’re gone, you’re gone for good. Simple strategy means saving their best bait for last.

Depending on personal finances and lifestyles, and if maintenance fees and other costs are reasonable, timeshares may make sense for some people – as long as the decision to buy one is well informed. The following process may help you make a wise decision:

1. Talk to people who own timeshares to learn the pros and cons. Find out the real bottom-dollar costs, especially annual fees and exchange/rollover costs.

2. Obtain a catalog from a timeshare exchange agency such as Resort Condominiums International (RCI) to find four timeshares near you – two you may be interested in buying, and two you’re not.

3. Research fair prices for all four timeshares. Analyze your family budget and travel habits. Calculate whether a timeshare will save you money on lodging.

4. Practice! Visit the two timeshares you’re not interested in buying to familiarize yourself with the sales pitch. Decline the offers no matter what.

5. Before visiting your two preferred timeshares, draft a list of questions with blanks to fill out. Be sure this list includes all cost specifications.

6. Visit your top timeshare pick, feign little interest through all stages of the sales pitch, obtain the final offer … then bring out your list of questions. After that point, if they hike the price or throw in extra fees, walk out. Revise your list of questions to include the new factors you’ve learned, and try again with your second timeshare pick.

7. Consider alternate financing. Offers assume you’ll finance through the company while neglecting to mention the interest rate. Ask if they’ll let you pay cash, bring financing from another institution, or pay off their loan in full without a penalty. Probably not, but there’s no sense in letting them box you into a high-interest loan without at least squawking about it. If the sale means that much to them, they may be willing to forgo the extra financing commission.

8. If you do buy a timeshare and believe it was a bad decision, research your state’s rescission laws. Many states allow a rescission period of a few days (often five) in which you can cancel a purchase. The laws that protect you are from your state of residence, not the state of the timeshare.

Don’t feel guilty, by the way, in declining offers. You’re valuable practice for a salesperson, a veritable research subject. Testing how to “crack” you and seeing what fails will help him determine how to secure the next sale. Rest assured he’ll replay every interchange, tone and expression, both yours and his, in order to hone his craft. If you still feel bad about declining, use this surefire line: “This isn’t the way I feel comfortable buying real estate.” And keep in mind the $100 gift card, which is their bet you’ll buy. The company isn’t losing money on you : $100 is a researched probabilistic calculation. Considering the obscene profits involved, a salesperson needs only one sale out of five (or ten? or twenty?) to make those gift cards worth the gamble.

My wife and I don’t own any timeshares, but we’ve been fascinated by the psychological and financial machinations used to sell them. We’ve entered every presentation determined to decline, yet found ourselves swaying. Only sheer stubbornness enabled us to see how low the prices can drop.

Whenever you visit a timeshare, you can be sure of one thing: no one paid the same price to stay there. A little preparation and determination on your part can keep you on the low end.