BWV Analysis: Purchase vs Sale Prices

[dmunsil]

As part of an ongoing series I like to call, "Keeping occupied when I can't actually make a reservation because Disney can't get my points into the system", I have been doing a variety of analyses of deeds recorded in Orange County Florida for DVC contracts.

For this one, I just wanted to see a comparison of what people paid for their contract versus what they received when they sold it. And I'm interested in Boardwalk since that's why I bought. It's a sort of snapshot to look at the question of whether people are mostly making money on their contracts or mostly losing money. There's a persistent belief that most people, if they hold the contract long enough, end up holding contracts they can sell resale for more than they paid, even if they bought direct originally.

I picked January 2013 because it had a smallish number of sales and I wasn't sure how much work it was going to be to track down all the numbers. As it turns out, for most contracts it's relatively straightforward, but for maybe a third of them it wasn't. In some cases the original contract with the original sale price was misfiled, or the notes didn't say "BOARDWALK" anywhere, or the deed had been retitled, or the seller owned like 8 different contracts some in the same unit at the same resort, and figuring out which was which was a pain.

As it turns out, January was not a super high point for DVC resales, but it wasn't the low point either. They're certainly trending up since then, but no one knows if they'll go back down or stay high. A lot depends on Disney. Personally I think as long as Disney has attractive new WDW properties to sell (Grand Floridian), they'll be less interested in moving resale contracts and will ROFR somewhat less. But hey, that opinion and $2.50 will buy you a cup of coffee...

Anyway, here's all the sales by third parties of BWV for January 2013, including both the purchase and sale price. I also included the year they bought it (the year they solid it is obviously 2013). I divided the chart into the ones who bought new (most of them) and the ones who bought resale originally.

Originally Purchased New
Points  Yr Prch Prch Price  Sale Price  Prch Per Pt  Sale Per Pt  Profit(loss)
150     2000    $ 9,800     $ 9,800     $65.33       $65.33       $      0.00 
150     1998    $ 9,500     $ 9,800     $63.33       $65.33       $    300.00 
300     1999    $19,500     $18,300     $65.00       $61.00       $ (1,200.00)
50      2006    $ 4,600     $ 3,500     $92.00       $70.00       $ (1,100.00)
150     1999    $ 9,500     $ 8,700     $63.33       $58.00       $   (800.00)
300     1998    $18,900     $16,500     $63.00       $55.00       $ (2,400.00)
150     2000    $10,100     $ 9,200     $67.33       $61.33       $   (900.00)
210     1998    $13,200     $12,900     $62.86       $61.43       $   (300.00)
400     1998    $25,100     $25,500     $62.75       $63.75       $    400.00 
150     1998    $ 9,500     $ 9,900     $63.33       $66.00       $    400.00 
100     2000    $ 6,500     $ 6,800     $65.00       $68.00       $    300.00 
100     2000    $ 6,500     $ 5,600     $65.00       $56.00       $   (900.00)
150     2000    $ 8,600     $ 8,300     $57.33       $55.33       $   (300.00)
300     2000    $19,500     $20,500     $65.00       $68.33       $  1,000.00 
30      2003    $ 2,600     $ 2,100     $86.67       $70.00       $   (500.00)
175     1998    $11,000     $ 9,700     $62.86       $55.43       $ (1,300.00)
150     2000    $ 9,800     $ 8,300     $65.33       $55.33       $ (1,500.00)
150     1998    $ 9,500     $ 9,800     $63.33       $65.33       $    300.00 
150     1999    $ 9,500     $ 8,000     $63.33       $53.33       $ (1,500.00)
350     2000    $22,800     $23,100     $65.14       $66.00       $    300.00 
150     1998    $ 9,500     $ 9,200     $63.33       $61.33       $   (300.00)
100     2000    $ 6,500     $ 6,000     $65.00       $60.00       $   (500.00)

Purchased Resale
166     2011    $ 8,300     $10,300     $50.00       $62.05       $  2,000.00 
150     2008    $12,300     $ 8,600     $82.00       $57.33       $ (3,700.00)
200     2012    $ 9,600     $12,800     $48.00       $64.00       $  3,200.00 
270     2012    $17,100     $16,500     $63.33       $61.11       $   (600.00)

I don't know what this tells us, other than really, the value has held up better than pretty much any other timeshare I've ever heard of. For lots of people to hold a timeshare for 10-15 years and then sell it for something close to what they paid is a minor miracle. That not all of them made money seems less important than the fact that very few of them lost big money.

Anyway, this is the data. I can take requests, if anyone wants to see some other month or resort. Is there another question I can take a stab at?

 

[Minniesgal]

Ironically the biggest loss was a resale purchase initially.

 

[Nabas]

I don't know what this tells us, other than really, the value has held up better than pretty much any other timeshare I've ever heard of. For lots of people to hold a timeshare for 10-15 years and then sell it for something close to what they paid is a minor miracle. That not all of them made money seems less important than the fact that very few of them lost big money.

I once did an analysis of the future of DVC prices. Assuming Disney continues to keep WDW a place that people want to visit, it's difficult to imagine WDW DVC prices dropping below $50/point in 10 years, with $75/point being a very realistic number. Essentially, in 10 years with typical WDW resort room increases (~3%), DVC should retain a significant value since the gap between room rate and DVC purchase will only widen. In 10 years, even the deeds with the least amount of time left will still have 19 years on them, which is a long time to save money.

To me, you're data suggests the same pattern occurred in the past. I'm encouraged by you data because it's consistent with what I predict should happen for the next 10 years, barring some unforeseen catastrophe.

 

[abner1776]

The only thing I can get out of this analysis is that DVC is better than most other timeshares as far as holding their value which benefits all of us DVC owners as that reduces the overall cost of our vacations.

It also helps me in countering my DW's argument each year when she says" now explain to me exactly why we purchased a timeshare in the first place ?"

 

[crisi]

The only thing I can get out of this analysis is that DVC is better than most other timeshares as far as holding their value which benefits all of us DVC owners as that reduces the overall cost of our vacations.

It also helps me in countering my DW's argument each year when she says" now explain to me exactly why we purchased a timeshare in the first place ?"

Careful though.

2009-2012 showed us that we can't COUNT on DVC holding its value. Its a luxury purchase, and in a down economy, its going to take a price hit.

Unfortunately, in a down economy is when you are most likely to need to sell because your own life has been impacted.

DVC is a little like having your money in the stock market - if the economy tanks and you loose your job and you have to live off your savings - you are better off having some "recovery savings" in something non-volatile like cash - not something heavily volatile, like stock or DVC.

I say this because in the mid-2000s there were plenty of people who bought DVC being able to afford the payments under the logic that it held its value - or even gained - and if they'd need to sell, it wouldn't be at a loss. Some of them lost thousands on DVC when they could least afford it.

ASSUME when buying a resale value of $0 when doing the calculations on affordability.

(I think its great that I could sell my BWV points for what I bought them for in 2002 - and unexpected. But I wouldn't want to imply someone buying now might have the same result).

 

[wdrl]

How did you determine the original purchase price for deeds bought directly from DVD? In the past, the Sale Consideration amount and the deed tax amounts displayed on the OCC website reflected the gross retail price and not the actual sale price that may have included incentives.

 

[dmunsil]

How did you determine the original purchase price for deeds bought directly from DVD? In the past, the Sale Consideration amount and the deed tax amounts displayed on the OCC website reflected the gross retail price and not the actual sale price that may have included incentives.

I can't include incentives that are not accounted for as a straight discount, because they aren't recorded on the deed. Has Disney ever had incentives that amounted to more than 10% of the purchase price?

Keep in mind as well that I didn't account for the 10% you typically pay to the listing agent when you sell.

 

[JimMIA]

If you are trying to draw some comparison between direct purchases and resales, there are several fatal flaws. The first is obviously the very small sample size.

More important, the direct purchases were held MUCH longer than the resales -- an average of 8.77 years for direct vs 2.25 years for resale. 3 out of the 4 resales were held two years or less, with HALF of the resales held only one year. Obviously, a very skewed sample of resale contracts.

That makes a big difference if someone is trying to make a comparison between direct and resale. The picture would be HUGELY different if you compared purchases bought in the same years and held 5 years.

And of course, the biggest problem with this kind of comparison is "...that was then and this is now." Direct contracts aren't selling for $60-$90 today, they're selling for $125 or more...sometimes much more.

Interesting comparison, though.

This comparison doesn't prove it, but there is no doubt that DVC historically has held value better than most timeshares...although that's like saying your chances of surviving a plane crash are better if you're in a light plane that crashes while landing.

Timeshares do not hold their value, and anyone who buys in thinking they will is living in a dream world. The only way to get a timeshare to "hold it's value" is to buy one on eBay for $1.

 

[wdrl]

I can't include incentives that are not accounted for as a straight discount, because they aren't recorded on the deed. Has Disney ever had incentives that amounted to more than 10% of the purchase price?

Keep in mind as well that I didn't account for the 10% you typically pay to the listing agent when you sell.

I'm not familiar with the history of BWV sales, so I can't say what incentives might have been offered for that resort. But just in the last four years I can think of a few incentives for other resorts that exceeded 10%. In early 2012 or thereabouts DVD offered 20 'free' points with purchases of 100 points for both AKV and Aulani. In early to mid 2009, BLT and AKV, and perhaps VGC, too, had a base price of $112 but incentives brought them down as low as $96/point.

I'm sure there were other times when the discount exceeded 10%.

 

[Chic]

Timeshares do not hold their value, and anyone who buys in thinking they will is living in a dream world. The only way to get a timeshare to "hold it's value" is to buy one on eBay for $1.

I'm not trying to disagree with this statement but here is my experience. I bought several 160 point Saratoga Springs contracts in 2008. Every contract was fully loaded meaning they had all points banked from the previous year, all current year points, and all points for the upcoming year. I paid $60 a point for each. Now, I am seeing Saratoga Springs contracts going for around $70-$75 a point and they are not fully loaded and typically have few or no points available for the current year. Simply stated, I have a total of 640 points purchased in resale contracts which cost me $60 a point. I feel confident I could sell these for around $70 a point today which would give me a profit of $6,400. Whether or not this trend continues is of no importance to me. My family enjoys using the contracts and has no intentions of ever selling.

 

[KAT4DISNEY]

I'm not trying to disagree with this statement but here is my experience. I bought several 160 point Saratoga Springs contracts in 2008. Every contract was fully loaded meaning they had all points banked from the previous year, all current year points, and all points for the upcoming year. I paid $60 a point for each. Now, I am seeing Saratoga Springs contracts going for around $70-$75 a point and they are not fully loaded and typically have few or no points available for the current year. Simply stated, I have a total of 640 points purchased in resale contracts which cost me $60 a point. I feel confident I could sell these for around $70 a point today which would give me a profit of $6,400. Whether or not this trend continues is of no importance to me. My family enjoys using the contracts and has no intentions of ever selling.

It would be a little less profit than that since you need to account for commissions and other fees when selling. Still not bad at all!

 

[dmunsil]

If you are trying to draw some comparison between direct purchases and resales, there are several fatal flaws. The first is obviously the very small sample size.

More important, the direct purchases were held MUCH longer than the resales -- an average of 8.77 years for direct vs 2.25 years for resale. 3 out of the 4 resales were held two years or less, with HALF of the resales held only one year. Obviously, a very skewed sample of resale contracts.

I don't disagree. This is not a definitive analysis of DVC profit/loss; it's one data point. I agree with you that DVC is not a good investment at all.

I do think this underlines that DVC has, so far, kept some kind of resale value pretty well. That makes it very unusual in the timeshare biz. Obviously this can't continue indefinitely. Eventually the oncoming expiration date, at minimum, will start to substantially erode the value of the contract.

So I think your criticisms are exactly on target. But given that the most common trajectory for a timeshare's resale value is for it to go quickly and permanently to zero, Disney's bucking the trend.

Timeshares do not hold their value, and anyone who buys in thinking they will is living in a dream world. The only way to get a timeshare to "hold it's value" is to buy one on eBay for $1.

As a rule of thumb, yes. But there's nothing that says that a timeshare couldn't hold its value as well as a condo. The fact that nearly all timeshares do not, in fact, hold their value like a condo is a testament to how sleazy the timeshare industry is.

I really am curious to see what Disney's plan is as some of these timeshares start heading into the home stretch on their contract life. Will they start offering extensions like OKW? Will they start a whole new 50-year chunk and offer current owners incentives to "re-up"? I suspect we won't actually get the answers to those questions until 2030 or so.

 

[iluvthsgam]

You almost always see people saying "do not think that a timeshare is an investment" - and I agree with that principle. And then there is "DVC is not a good investment." And that really depends on how you define "investment" - are you solely talking about ROI in dollars and cents? Or are you talking about money saved? Experiences? Memories?

Obviously different people are looking for different results, but I would argue that the blanket statement of "DVC is not a good investment" is not necessarily true. If you are strictly talking dollars and cents ROI - on average, no it is not a good investment. But even then, there are some owners who bought, for example, at $48 and sold at $64 and either vacationed or rented points along the way. So it is possible to get "some" return and would again circle back to what you definition of a good return on "investment" would be. 3%? 5%? 10%? etc

 

[dmunsil]

You almost always see people saying "do not think that a timeshare is an investment" - and I agree with that principle. And then there is "DVC is not a good investment." And that really depends on how you define "investment"

I can't speak for everyone, but I use investment to mean something you expect to make money from. Like stocks are an investment; you expect that the stock will produce dividends and/or capital gains. It might not, but the expectation is that on average stocks will return money to the investor.

So DVC doesn't look to me like a good investment. That doesn't mean it's not a good purchase. Obviously I think it is a worthwhile purchase, because I purchased DVC. I would liken it to buying into a discount program that gets you a good deal on, say, restaurant meals. It can be a good purchase that will save you money on future purchases, but it is not itself an investment.

The fact that people have, in fact, made money on their DVC purchase when they resold it years later has people thinking that maybe it's an investment, like a vacation home could be an investment. I don't think it works because I don't think you should have the expectation that your contract will go up in value, period, much less up in value more than a safer investment.

On the other hand, it's really great to know that if you suddenly decide DVC isn't for you any more, you actually will likely be able to realize some value from the remainder of your contract. If you actually come out ahead at the end, that's a bonus, but I think it would be foolish to assume you will.

 

[JimMIA]

I paid $60 a point for each. Now, I am seeing Saratoga Springs contracts going for around $70-$75 a point and they are not fully loaded and typically have few or no points available for the current year. Simply stated, I have a total of 640 points purchased in resale contracts which cost me $60 a point. I feel confident I could sell these for around $70 a point today which would give me a profit of $6,400.

I'm not sure where you are looking for those numbers, but what I see on the ROFR thread is 160 point contracts going for $62-63, and that's only because of the recent bump in prices. If you go back only two months, you find this:

Illini Al --- 170 SSR (Feb), $49, 0 13 pts, all 14 pts, seller pays mf, buyer pays closing (sub 3 /4, passed 4/3)

$49 per point AND the seller pays MFs. And there are other similar reported sales.

But the big point here is not what I paid in 2005 or you paid in 2008. That was then...and it's irrelevent. We can't turn back the clock.

This is now: People buying direct now are paying $125 or more and people buying resale are paying half that, and often less than half.

In dollars, a person buying direct who pays $125 per point pays $20,000 for 160 points. Even if they could get $65 per point (which they apparently cannot), that would be only $10,400 and their contract would lose $9,600 the moment it closed.

 

[Mickey'sApprentice]

We bought into BWV in 2006 by paying $84/point.

Since then, we've seen points commonly go for $60/point.

Did we lose money? No.

Why?

1) We haven't sold our contract.
2) We've gone on many trips and used our DVC points.

Frankly, in 2042 my BWV points will be worth $0.

We enjoy going to WDW. We enjoy staying at BWV. It was the right choice for us.

 

[ELMC]

It's an interesting analysis, but I'm not quite sure what role it plays going forward. Given today's current market, I don't think those results are repeatable. Certainly, many people who own BWV currently can expect a similar outcome should they decide to sell, but the likelihood that someone can buy BWV now with the expectation of recouping the purchase price upon exit is highly unlikely. That being said, your larger point of DVC holding its value significantly better than other timeshares is valid. How much value it holds really depends on what price you buy in at. I shudder to think what this analysis would look like if you performed it for AKV or SSR. (Hint hint).

 

[ELMC]

We bought into BWV in 2006 by paying $84/point.

Since then, we've seen points commonly go for $60/point.

Did we lose money? No.

Why?

1) We haven't sold our contract.
2) We've gone on many trips and used our DVC points.

Frankly, in 2042 my BWV points will be worth $0.

We enjoy going to WDW. We enjoy staying at BWV. It was the right choice for us.

I curious why you feel the need to defend your purchase.

 

[Nabas]

We bought into BWV in 2006 by paying $84/point.

Since then, we've seen points commonly go for $60/point.

Did we lose money? No.

By paying $84/point in 2006, you've saved a lot more than someone who paid $60/point in 2012 (when prices bottomed). I think of it as follows:

$84 - $60 = $24/point spread out over 6 years, or $4/point per year. Add that to your MF and that's how much your vacations cost for the years 2006 to 2012. With a MF below $6/point for those years, you paid less than $10/point for your DVC stays for those years. That's well below what Disney would charge even with a 40% "Room Only" discount, which puts you way ahead of the game compared to someone buying at $60/point in 2012.

By effectively depreciating your points to be the equivalent of $60/point in 2012, going forward, you're going to end paying exactly the same as someone who bought low in 2012. But, in terms of total savings, you'll remain ahead of them forever because of the savings you realized before they became members.

Note that this assumes you would have vacationed at WDW from 2006 to 2012 anyway.

 

[iluvthsgam]

So DVC doesn't look to me like a good investment. That doesn't mean it's not a good purchase.

This I agree.