Diaz: Time Share Scams

July 27, 2001 -- Vacation time shares sales are a booming business. More than 3 million Americans own a piece of a time share vacation resort, and many of them are very satisfied with their purchase. Fortunately, this is no longer the industry that was once infamous for salespeople who operated with the instincts of a Great White Shark.

But while your chances of being fleeced have greatly decreased, insiders say there are still enough unethical salespeople — known as "heat merchants" — out there that vacationers need to be wary.

How They Find You

These hard-selling salespeople use high-pressure tactics to sell overpriced time shares — aided by misrepresentations and even outright lies.

How do vacationers end up in these salespitches? Typically they've responded to a mailing promising them a cheap travel package — usually including hotel stay and a short cruise. Or in many vacation areas, so-called tourist information storefronts bring in travelers, and then convince them to visit a nearby resort for a sales presentation in exchange for a freebie of some kind — tickets to a local attraction, for instance, or dinner at a nearby restaurant.

When you buy a time share you're getting a week of time at a vacation resort, which you have the right to use year after year. You can return that same week each year, or you may be able to exchange it and stay at a different resort at another destination.

When you show up for the resort's presentation, you may be in for more than you bargained for. So to prepare you in advance, here's a list, along with some quotes from actual sales pitches at prominent Florida and South Carolina time share resorts that demonstrate some of the most common misrepresentations and questionable statements you may hear.

Remember that, even if your salesman isn't a full-scale heat merchant, there's a good chance you'll hear at least some of these whoppers along the way — it's just standard operating procedures in many resort sales offices.

It won't take long:

Claim: "The sales presentation will only last about 90 minutes."Reality: Possibly true, as long as you sit like a deaf mute and don't say a word. Plan on being there for at least two hours, three if you make the mistake of asking many questions. They know that the longer the pitch lasts, the more likely you are to break down and open up your checkbook.

Time shares are a good investment:

Claim: "I know this stuff has doubled in the last five years — oceanfront — cause there's none left … You know a time share is not sold as an investment opportunity … but think about it … we've gone up $2,100 in seven months, where do you think we're gonna be in 10 years?"Reality: As a financial investment, many time shares are just about as bad as it gets. In fact it's like buying a new car — the moment you drive it off the lot, it's worth much less. Industry sources say that the majority of time shares immediately drop in value by at least 20 percent to 30 percent One big reason for that is that the marketing costs to sell the unit to you run as high as 50 percent of the sales price.

Time shares are easy to re-sell:

Claim: "Why don't you try it at least one time? If it doesn't work, sell the darn thing. What do you have to lose?"Reality: You could have a lot to lose if you don't like it. Time shares are notoriously difficult to resell. If you slash your price to far less than what you paid, you might eventually find a buyer, but chances are you'll lose money. And in the meantime, you still have to pay off your loan plus the annual maintenance fees (which run into the hundreds of dollars) no matter what.

It's easy to rent out:

Claim: "If you can't use it one year, you could rent it out."Reality: Renting is also notoriously tough to pull off. Many who try end up losing even more money, since they pay advance fees to rental agencies who often don't find any interested parties.

Time shares are a tremendous value:

Claim: "Paying for hotels while on vacation is a waste. Over the next 10 years of weekly vacations, you'll spend thousands more than if you bought a time share here."Reality: A big expense is sometimes left out of this equation. When doing this time share vs. hotel price comparison, they may point out, for example, that 10 years of hotel rooms will cost you about $18,000 after inflation. Meanwhile the time share costs a few thousand less over that same period of time. But make sure interest on the time share loan — and hundreds of dollars in annual maintenance fees — are included when they do the math. Suddenly a much different picture may emerge.

Use your time share to travel anywhere:

Claim: "You can exchange your time share week here for one at any resort you want … and visit Hawaii in the winter, Paris in the spring, anywhere, anytime."Reality: Exchanging your time share week for one at another resort, anywhere in the world, is one of the biggest attractions of time sharing — and potentially the source of its biggest disappointments. That's because many people find that the "anywhere, anytime" claim is an exaggeration. Top vacation spots such as Hawaii can be very hard to exchange into, especially if the week you own is not during high season and in a top property. But if you're willing to be flexible about dates and locations, you could do very well for yourself.

We have a special price for you:

Claim: "The value of a one-bedroom-for-one-week time share is $28,250. We'll give you a $4,000 discount."Reality: Typically you'll first be quoted a false high price, which is then dropped automatically. That way buyers are led to believe they are getting a bargain, when the truth is the salesperson doesn't really expect anyone to pay that inflated first price. If you keep bargaining though, you can usually get them down much further.

It's now or never:

Claim: "If you don't buy today, you'll have to pay full price."Reality: Insiders say that if you come back the next day, chances are you can still get the same deal. Still, this is one of the most common misrepresentations. In fact, some South Carolina resorts go so far as to have you sign a piece of paper warning that, according to state law, the offer is only good that day. But this is just another bogus pressure ploy — the state Real Estate Commission says no such law exists.

So as you can see, you could be in for quite a ride — although the good news is that there's a good chance that you'll be very satisfied with the time share itself once you get past the salespeople. Some tourists know what to expect — but they take the tour anyway for the free goodies or cash offers they receive for sitting through the whole thing. So if you don't mind wasting precious vacation time in one of these presentations, and you are ready to resist the pressure, then go for it.

The best way to make it as painless as possible — don't ask questions, make comments or give excuses for not buying. Remember, they have an argument to counter anything you might say. "We'll think about it," is always your best response. Arnold Diaz joined ABCNEWS' 20/20 in 1995, after establishing his reputation as one of the leading consumer and investigative reporters in the country during his 22 years at WCBS-TV in New York City.

Next: Tricks of the trade, from former time share salespeople. Plus, where to find great deals on time shares … and avoid the salespitch, too.