I hate time-shares, and so should you
By Michael Taylor
March 3, 2017 6:33pm
I’ve previously urged readers to never buy a variable annuity. Last fall I broke my self-imposed rule to never mention the word “bitcoin” in print. Some day soon I’ll write about never buying gold.
This column is dedicated to why I hate time-shares. I hate the way they’re sold. I hate the way time-shares give the appearance of an “investment,” when they are, in fact, the opposite of an investment. I hate the way financially distressed people buy time-shares.
Taken together, time-shares, variable annuities, bitcoins and gold are the Four Horsemen of your Personal Financial Apocalypse. All four share the characteristic of being packaged and sold as sound investments, when really they’re expensive, money-soaking tricks.
For your benefit, I signed up for a time-share pitch last week. I sacrificed an otherwise pleasant afternoon to multiple aggressive and manipulative sales techniques packed into 90 minutes. You’re welcome. I deserve a medal for bravery.
Roberto, my personally assigned salesman at Wyndham Resorts, asked me for 15 minutes about what kind of vacations I usually take, where I like to go, and who I go with. As I warmed up to describing skiing and camping trips with my daughters, he asked me to share the “feelings” I experienced with them while on vacation. Oh, Roberto, thank you for asking. I mean, really, he was great.
Plunging deep into the hazy mist of emotions and family, I learned that time-shares are a legacy to pass on to my daughters. They promise “ownership” in perpetuity, yet every month charge “maintenance fees” that never go away.
My editor at the newspaper here is an heiress who “inherited” a Hilton Disney World time-share from Dad after he couldn’t find anyone to buy it. Hey, thanks, Dad! It costs her $1,200 a year to maintain. With a handsome legacy like this, she may never be able to retire.
Once made dizzy by this emotional journey, Roberto began to bludgeon me with the fuzzy logic of time-shares. Since I already spend a certain amount of vacation money per year on my family — as he scribbled some numbers on a page — wouldn’t I like to “own” rights to vacation spots rather than “rent” as I have been doing through traditional hotels? What if I could do that at less cost?
More number scribbling followed, plus I would gain “Deed and Title” to vacation ownership. Roberto wrote “D&T” on the page and underlined it twice, so I’d really grasp the solidity of this type of ownership.
“Deed and title?” That is such garbage. Ask anyone who has ever had tried to book time-share vacations with points and you will quickly enter a world of “exchange fees,” added fees for “guest certificates,” fees for membership in the points exchange company, and heavy restrictions on usage. Can’t book your vacation with 1½ years’ lead time? Sorry, all the places you want to go, at the listed “points” price, are blocked.
Ever noticed that carnivals and video-game centers always work on a tokens or tickets system rather than money? Time-share venders use points for the same reason. So do casinos. It’s so much easier to forget you’re spending real money once its converted into points, or tokens, or tickets.
But back to my afternoon with Roberto.
He repeatedly used the classic “anchoring” sales technique of saying the full price of their vacation point package would be $100,000, only to eventually offer a very similar package for around $27,000. Wow, I should have been thinking, what a huge discount. All just for me?
Actually, he made two offers, a bigger price and a smaller price. Given those two, he asked, which one seemed more attractive? This is the sales technique of making me feel like I’m cleverly in charge and actively choosing a smart, low-cost option.
Were the offers affordable? Well, of course they were, because I can make a low down payment and borrow the rest. Wyndham offered to “finance” part of my purchase of the “deed and title” to their vacation points, at 13.99% interest. So that was really nice, assuming I don’t mind paying subprime mortgage interest rates. (The average rate for a 30-year, fixed-rate mortgage with 0.5 points, by the way, was 4.16 percent last month, according to Freddie Mac.)
When he heard I was in finance, my salesman focused on the clever “inflation hedge” aspect of these time-shares. Since the cost of hotels would be increasing by 10 percent to 14 percent in coming years (an #AlternateFact, but whatever) I should know that my points would be worth the same amount forever, so I’d be better off buying today rather than waiting.
Speaking of today, in a classic red-flag sales technique, Roberto would not allow me to take any of their marketing materials or specific offers home to “think about it.” The offer, of course, was “this day only,” with assurances that on any subsequent day I came back the offer would likely be worse.
After I declined to purchase the package, I was sent to an exit interview with a new person. Following a few cursory “how was your experience today?” questions, she hit me up again with an offer to purchase a smaller package, at an even lower price. Today only, of course.
In an earlier professional life, I networked with bankruptcy trustees, the people who sell off valuable assets of the estate of a person who goes bankrupt. You’re not going to believe this, but trustees always, always, always had time-shares to offer.
The simple problem for bankruptcy trustees is that time-shares are worth nothing. No, that’s not quite right. Time-shares are worth less than nothing. They have negative value because they cost money every year to maintain.
This is why eBay is full of offers for time-share vacation weeks, and hundreds of thousands of “points,” for $20, or $1. Or even $0.01. Check it out here.
Caveat emptor, or buyer beware, on any particular offering on eBay, obviously. But a scan of time-share message board confirms that paying full price for a time-share is a mug’s game.
All bankruptcy trustees become inadvertent experts in time-shares, and not just because they can never seem to sell these so-called “assets.” There’s clearly a positive correlation between people who go bankrupt and people who are tricked into believing time-shares are a good investment. Bankruptcy trustees tell a joke among themselves that by law in the U.S., nobody is allowed to go bankrupt unless they have first purchased a time-share.
The slogan of the entire industry should be: “Time-shares: All the costs of renting, none of the benefits of owning.” Catchy, no?
Michael Taylor is a former Goldman Sachs bond salesman and writes the Bankers-Anonymous.com finance blog. firstname.lastname@example.org