Chapter 14
Fourteen Negotiating Tips

 

When you find a time­share to buy, a few nego­ti­a­tion tech­niques will help you get the best deal for your­self. (Time­share sell­ers should read this chap­ter too.)

Set a Price

The first step is to decide what time­share you want to buy and set a price you’re will­ing to pay. There are two impor­tant resale mar­kets for time­shares: the web and the locale. Prob­a­bly most time­shares bought and sold on resale are done so via a time­share web­site. Yet the local real estate mar­ket in the com­mu­ni­ty where the time­share is locat­ed may be anoth­er active mar­ket. Togeth­er all mar­kets where time­shares are bought and sold (after being orig­i­nal­ly sold by a resort devel­op­er) com­prise the time­share resale market.

There are many web­sites that make a mar­ket for time­shares. eBay is a good exam­ple. eBay has a spe­cial cat­e­go­ry just for time­shares and also spe­cial eBay trans­ac­tion rules for real estate. With a web­site such as eBay, a sell­er reach­es a nation­al audi­ence of poten­tial time­share buy­ers. Before the inter­net, the best way to reach a large audi­ence at a rea­son­able cost was adver­tis­ing in the clas­si­fied ad sec­tion of a large city news­pa­per. But that didn’t work well.

When peo­ple vis­it a time­share resort, they are in a good frame of mind to buy a time­share onsite. Many devel­op­ers take advan­tage of this by hav­ing a sales staff on hand to sell resales. But the local real estate mar­ket is also a log­i­cal place to have a resale mar­ket for the local time­shares too. Thus, you often find one or more Real­tors spe­cial­iz­ing in local time­shares, and you can find time­share in clas­si­fied ads in the local newspaper.

The resale mar­ket gives you the oppor­tu­ni­ty to find the fair mar­ket val­ue (FMV) for the time­share you seek to buy. Unfor­tu­nate­ly, the FMV is most­ly invis­i­ble; that is, the offer­ing price shows, but the actu­al price agreed is usu­al­ly unpub­lished. Nonethe­less, the offer­ing prices (adver­tised prices) can be informative.

For instance, sup­pose you find the time­share you want is adver­tised for $3,750, $2,800, $2,495, and $1,800 at var­i­ous web­sites in the sec­ondary mar­ket. After you inves­ti­gate the details, you find that except for the price they are all exact­ly the same. The one for $1,800 has been on the mar­ket for three months. You can then con­clude that the FMV is $1,800 or less.

A sub­scrip­tion to the local news­pa­per will prob­a­bly show some time­shares adver­tised in the clas­si­fied ads. That’s anoth­er place you can find offer­ing prices. Such ads or oth­er local adver­tis­ing may lead you to real estate bro­kers who spe­cial­ize in time­shares. Such bro­kers can give you a pret­ty good ide­al of what you will have to pay for the time­share you seek.

Final­ly, eBay has a sold data­base you can use (“Com­plet­ed list­ings”). For sev­er­al weeks after each eBay trans­ac­tion, you can access the eBay item and see the price at which it sold. This is only one por­tion of the entire resale time­share mar­ket, but it’s an impor­tant por­tion because it pro­vides you the most valu­able and impor­tant mar­ket infor­ma­tion: the actu­al pur­chase price.

Know­ing the FMV of the time­share you seek is the most impor­tant nego­ti­at­ing tech­nique and is worth spend­ing some time to estab­lish. If you pay more, you cheat your­self. If you offer much less, a sell­er may not take you seriously.

Once you have estab­lished the FMV, set a goal for your prospec­tive pur­chase. Under nor­mal cir­cum­stances there’s noth­ing wrong with pay­ing FMV. Nonethe­less, if you’re not in a hur­ry, you can wait for an offer­ing to come along that enables you to buy for less than FMV. On the oth­er hand, if you have to buy the time­share imme­di­ate­ly because you want to use it this sea­son, you may have to pay more than FMV, if the offer­ings are few. Be realistic.

If you want to make a super bar­gain pur­chase, you need make many low­ball offers, and you may have to wait a long time until a dis­tressed sell­er comes along.

Negotiate by Telephone

Very like­ly when you nego­ti­ate to buy a time­share it will be over a long dis­tance phone call. It will not be face-to-face. Although face-to-face is the most pro­duc­tive means of com­mu­ni­ca­tion, time­share own­er­ship is nation­wide, and the own­er is not like­ly to be in your community.

If you can’t nego­ti­ate face-to-face, what’s the best means? I think you’ll find that email nego­ti­a­tion just does­n’t work very well. Nego­ti­at­ing by tele­phone is much bet­ter. It’s eas­i­er and con­veys much more infor­ma­tion regard­ing human inter­ac­tion. With that in mind you need to devel­op a tele­phone nego­ti­a­tion strategy.

First, you’re not like­ly to nego­ti­ate a deal com­plete­ly in one phone con­ver­sa­tion. At the end of the first phone con­ver­sa­tion, there are always loose ends hang­ing out that have to be reviewed by both par­ties. Indeed, you should strive to keep the con­ver­sa­tion going over sev­er­al phone calls. The more com­mu­ni­ca­tion (com­mu­ni­ca­tion of a pos­i­tive nature), the more con­fi­dence you will build in com­plet­ing a trans­ac­tion with the seller.

That is not to say that writ­ten com­mu­ni­ca­tions have no place. They cer­tain­ly do. For instance, to show that you’re seri­ous about nego­ti­at­ing, you might send the sell­er an email sum­ma­ry of the essence of the first con­ver­sa­tion. Make it short and to the point and include items that you will want to dis­cuss in the next conversation.

Build Rapport

Your first order of busi­ness in the first nego­ti­a­tion con­ver­sa­tion via tele­phone is to build rap­port. A good way to start is to ask the sell­er about the time­share resort and the expe­ri­ences that he or she has had there. Build­ing rap­port can go in any direc­tion and to any top­ic, but it should always return to dis­cussing the time­share itself.

One part of build­ing rap­port is to always be truth­ful with the sell­er. If the sell­er catch­es you com­mu­ni­cat­ing some­thing that’s not true, that’s like­ly to be the end of the nego­ti­a­tion. Keep in mind you are build­ing the seller’s con­fi­dence in your­self as a per­son who can com­plete a pur­chase but also in the prob­a­bil­i­ty that a trans­ac­tion will actu­al­ly take place. That kind of con­fi­dence can weath­er a lot of prob­lems that may arise in the course of the transaction.

Like the Timeshare

The way to build rap­port is to avoid express­ing any­thing neg­a­tive in regard to the time­share. You’re nego­ti­at­ing because you like the time­share and you want to buy it. Let’s sell­er know that. That does not dimin­ish your nego­ti­at­ing pow­er, but rather increas­es it. It builds con­fi­dence that the trans­ac­tion will actu­al­ly take place and that the sell­er will not waste his or her time. If there are neg­a­tives regard­ing the time­share, save those con­ver­sa­tions for lat­er in the nego­ti­a­tion. Prob­lems that are dif­fi­cult to work out may be a lot less dif­fi­cult to work out once rap­port is established.

Listen

If you don’t want to pay all cash for the sell­er’s offer­ing price, you need to find out what kind of ben­e­fits you can pro­vide in a trans­ac­tion that will sat­is­fy the sell­er in lieu of a full cash offer. This requires a lot of lis­ten­ing. Although it’s hard to refrain from talk­ing, it will be much eas­i­er to deter­mine the needs of the sell­er by doing a lot of listening.

The way to lis­ten is to ask a lot of open-end­ed ques­tions. Ques­tions that start with who, what, where, when, why, and how are open-end­ed. Ask your ques­tion, and then shut up. Don’t be afraid of silence. Let the sell­er start to talk.

Put It in Writing

Phone con­ver­sa­tions are great for nego­ti­a­tion but fall short when it comes to putting down the actu­al terms of the con­tract to pur­chase the prop­er­ty. As I men­tioned before, a sum­ma­ry of the essence of the first phone con­ver­sa­tion via email is appro­pri­ate to send the sell­er. As nego­ti­a­tions progress over sev­er­al phone calls, you can fol­low up each phone call with a sum­ma­ry of the pri­or con­ver­sa­tion and what you need to dis­cuss in the next phone conversation.

Your sum­ma­ry might read some­thing like this:

“We’ve agreed upon a price range of $5000–$6000. You indi­cat­ed that you will inves­ti­gate the clos­ing costs, the escrow cost, and an appro­pri­ate clos­ing agent. I indi­cat­ed that I will inves­ti­gate the cost of title insur­ance. Let’s get this done by next Sat­ur­day and talk again. Regards.”

Few sell­ers will take you seri­ous­ly unless you make a spe­cif­ic offer soon­er rather than lat­er. Even if that spe­cif­ic offer is not agreed upon in a con­ver­sa­tion, you should make it in writ­ing in an email. The offer should be as detailed as pos­si­ble. You prob­a­bly won’t cov­er all the details nec­es­sary to con­sum­mate the trans­ac­tion, but you should cov­er as many details as pos­si­ble. At the end of the offer, of course, ask the sell­er to agree. At the end of such an email include a stan­dard phrase such as: “this offer is not bind­ing until accept­ed by the sell­er and until a stan­dard form writ­ten con­tract between buy­er and sell­er has been signed by each party.”

Don’t ever make the mis­take of not ask­ing the sell­er to do what you want done. Unless you ask for cer­tain actions and the sell­er agrees, it’s very unlike­ly that such an action will take place. What­ev­er you need, ask for it. The worst that can hap­pen is the sell­er says no. If the sell­er says no, you can move on to some oth­er solu­tion to the issue.

Offer Personal Property

If the mar­ket val­ue of the time­share being sold is sev­er­al thou­sand dol­lars and you do not want to pay cash, make an offer of per­son­al prop­er­ty. Keep in mind that every­thing that’s not real estate is per­son­al property.

A car worth sev­er­al thou­sand dol­lars might be appro­pri­ate to offer. The sell­er may have a kid in high school or col­lege, and such a car might be accept­able. A promis­so­ry note is appro­pri­ate to offer too. A promis­so­ry note is an install­ment pur­chase for you and install­ment sale for the sell­er. In essence, it’s an own­er car­ry­back loan. It can be for the entire pur­chase price or for only a por­tion of it.

Make the note rea­son­able. Pay­ments over 35 years with a low inter­est rate is prob­a­bly not going to be appeal­ing to the sell­er. It’s unlike­ly that the sell­er will want to secure the note with the prop­er­ty (the time­share real estate inter­est) so the sell­er may ask for some oth­er kind of col­lat­er­al. And the sell­er is like­ly want a rea­son­ably short term and a rea­son­able inter­est rate.

A note does not have to be a uni­form pay­ment at a uni­form inter­est rate over a num­ber of months. You can tai­lor the note to fit your par­tic­u­lar sit­u­a­tion. For instance, the note could be payable at $85 a month for the first three years, $100 a month for the fol­low­ing three years, and $150 a month for the last four years of a 10-year note. You may even change the inter­est rate for each set of payments.

Keep in mind, how­ev­er, that I do not rec­om­mend buy­ing a time­share on cred­it. A ten-year loan from a resort devel­op­er at 10% inter­est for a $20,000 time­share pur­chase is a large pay­ment each month: $167/month to be exact. On the oth­er hand, in the resale mar­ket, you may be able to buy the same time­share for $2,500. A note for $2,500 at 5% inter­est for ten years is a lot less ($27/month).

By doing a lot of lis­ten­ing you may be able to find out some­thing that the sell­er needs that you can give him or her in lieu of cash. But per­son­al prop­er­ty plus cash too is always more tempt­ing for the sell­er to accept than per­son­al prop­er­ty alone. Then too, if you have a vari­ety of per­son­al prop­er­ty items to offer, it may make such a trans­ac­tion more likely.

If you have only one item of per­son­al prop­er­ty that you can use to pur­chase a time­share (and no cash), that makes for a short nego­ti­a­tion. Don’t string out the sell­er with a long nego­ti­a­tion that ends with your very lim­it­ed offer. Both you and the sell­er will be like­ly to waste a lot of time, and the sell­er will prob­a­bly be angry. Make such an offer upfront close to the begin­ning of the negotiation.

Read Chap­ter 5 for more ideas on using per­son­al prop­er­ty in time­share transaction.

One-Time Offers

One nego­ti­a­tion tech­nique does­n’t require much nego­ti­a­tion at all. That is to make one-time offers, usu­al­ly in writ­ing, on every time­share that comes up for sale that you would like to pur­chase. This is a low­ball offer that most sell­ers will not accept.

This is essen­tial­ly a fish­ing expe­di­tion to find that one sell­er who is in dis­tress and needs to sell his or her time­share at any price. Most sell­ers will ignore such an offer at best and get angry at worst. It’s not worth your time and effort to have a per­son­al inter­ac­tion with them. How­ev­er, you will prob­a­bly have to nego­ti­ate with that one per­son you hook on your fish­ing expedition.

When you make such a one-time offer, make it con­vinc­ing. One-time offers are invari­ably most effec­tive when they’re all-cash with the promise of a quick clos­ing. To make your one-time offer most effec­tive, indi­cate that you are going to pay all-cash, close quick­ly, and pay all or half of the clos­ing costs. And it does­n’t hurt to say that you like that par­tic­u­lar time­share a lot, and you’ve been look­ing for one like it for a long time.

Remem­ber too that a fish­ing expe­di­tion often takes a very long time until some­one takes the bait.

Compromise

Com­pro­mise is as Amer­i­can as apple pie. Split the dif­fer­ence is also as Amer­i­can as apple pie. There’s noth­ing wrong with com­pro­mise, but split-the-dif­fer­ence can turn out to be a trap.

For instance, sup­pose the sell­er adver­tis­es the time­share for $7,000, and you make an offer of $4,500, which is the FMV of the time­share. Then the sell­er refus­es your offer but offers to split the dif­fer­ence. That would put the pro­posed sale price at $5,750, hard­ly fair to you, as it’s con­sid­er­ably over FMV. Nonethe­less, it is un-Amer­i­can to not split the dif­fer­ence. There­fore, it’s up to you to come up with a rea­son­able expla­na­tion, polite­ly expressed, why split­ting the dif­fer­ence is not accept­able to you. Then pro­pose some­thing else.

If you’ve been nego­ti­at­ing with the sell­er for a long time and you’re not too far apart, split-the-dif­fer­ence may be a sen­si­ble pro­pos­al. In the ear­ly phas­es of a nego­ti­a­tion, how­ev­er, it’s sel­dom fair to both parties.

Sup­pose you are con­fi­dent that the FMV of the time­share is only $4,500, and you’re not will­ing to pay any more than that. You can com­pro­mise and still hold your own in a nego­ti­a­tion. Sup­pose the sell­er coun­ters your offer to pay $4,500 with an offer to sell for $5,500. How­ev­er, that’s still a thou­sand dol­lars over FMV, and you’re not will­ing to pay such a high price. What can you do?.

Sup­pose the sell­er has agreed to pay for title insur­ance. You may counter his $5,500 offer with a new offer to pay $4,500 for the time­share but to pay an addi­tion­al $100 towards the cost of the title insur­ance. Use your imag­i­na­tion. Stick to your major nego­ti­a­tion objec­tive and com­pro­mise on minor issues.

Keep It Going

Keep the nego­ti­a­tion going. Nev­er stop the nego­ti­a­tion by sim­ply refus­ing the seller’s counter offer. Always come back with a change in the terms or some minor com­pro­mise that might entice the sell­er to seal the deal. I sup­pose the time will come when a very lengthy nego­ti­a­tion can wear out both par­ties, and it becomes appro­pri­ate to just call off the nego­ti­a­tions. But if you keep the nego­ti­a­tion going you’re like­ly to reach an agree­ment sat­is­fac­to­ry to both par­ties well before you both get worn out.

Don’t Lose Your Temper

Nev­er lose your tem­per in nego­ti­a­tion. That could be the end of it. Always keep stay friend­ly and remain rea­son­able. Always part with the sell­er on friend­ly terms. The great deal you missed because the sell­er would­n’t com­pro­mise on price or some oth­er major issue can some­times come back to you lat­er when the sell­er has changed her mind for what­ev­er rea­son. Indeed, in a buy­ers’ mar­ket, it’s not unusu­al for a sell­er to have a change of heart and con­tact you again after a week, a month, or even a year offer­ing bet­ter terms.

Make a Decision Quickly

When the sell­er makes a counter offer, make your deci­sion quick­ly as to whether you will accept it or not. Quick deci­sions help a nego­ti­a­tion move for­ward. Pro­cras­ti­na­tion is a killer. This is par­tic­u­lar­ly true for hot properties.

If the prop­er­ty is hot, that is, if it’s a prop­er­ty that will sell quick­ly, the sell­er knows it and won’t wait around all day or all week for you to make up your mind.

How­ev­er, after mak­ing a quick deci­sion you do not need to com­mu­ni­cate it instant­ly to the sell­er. If the sell­er makes a major con­ces­sion and you accept­ed instant­ly, it’s bad psy­chol­o­gy. The sell­er will think he has giv­en away too much. Instead, tell the sell­er that you think it’s a rea­son­able offer but that you need some time to think it over, (to con­sult with your accoun­tant, attor­ney, spouse, etc.) And then get back to the sell­er a short time later.

Don’t Overlook the Transaction Costs

The low­er the price of the time­share, the big­ger the trans­ac­tion costs seem. The trans­ac­tion costs for a time­share trans­ac­tion could be as high as $900 even though they are typ­i­cal­ly $300-$500. Chap­ter 13 cov­ers trans­ac­tion costs. You can’t leave trans­ac­tion costs out of the nego­ti­a­tion. Some­one has to pay them. Bet­ter it be the sell­er than you. It’s a mat­ter for negotiation.

Work with the Broker

If a time­share is list­ed with a real estate bro­ker, don’t try to go around the bro­ker and nego­ti­ate direct­ly with the sell­er. The bro­ker is like­ly to find out and invari­ably will get paid any­way. Com­pe­tent bro­kers can facil­i­tate nego­ti­a­tions and increase the chances of the par­ties reach­ing an agree­ment. Thus, it’s to your ben­e­fit to work with the bro­ker to make the trans­ac­tion happen.

The going rate for time­share com­mis­sions is a flat fee of about $1,500. And the bro­ker must be paid in cash. Keep that in mind when you nego­ti­ate. Top-end time­shares gar­ner even a high­er commission.

Note: You’re much less like­ly to make a pur­chase through a bro­ker using per­son­al prop­er­ty as pay­ment. First, you can’t eas­i­ly find out what the sell­er might take because you don’t get the chance to ask ques­tions and lis­ten to the sell­er. Sec­ond, you’ll need to put at least $1,500 cash in the deal to pay the broker.

Contract

The final step in a nego­ti­a­tion is to get a con­tract in writ­ing signed by both par­ties. As I men­tioned before, you can pin down the terms of a trans­ac­tion with an email offer and accep­tance. But you always want to use a stan­dard form pur­chase agree­ment to define the trans­ac­tion. Such a stan­dard form does­n’t have to be long, but it will almost invari­ably include provisions—although minor ones—that were not cov­ered in the nego­ti­a­tion. You can get var­i­ous stan­dard con­tracts for time­share sales via the web or per­haps from the clos­ing firm that will han­dle the trans­ac­tion. With­out such a con­tract, a time­share clos­ing firm will not agree to han­dle the transaction.

You can send that stan­dard form con­tract via email and PDF, or you can send it on paper for the seller’s sig­na­ture via fax or snail mail.