Purchasing a stripped resale?

[christianweecare]

I don't understand all there is to know about purchasing resale so I pose this question. Is there any advantage to purchasing a stripped contract? A contract that does not have points available until 2015 for instance?? Since there are no immediate points available would this be a good bargaining tool for the buyer? Can someone explain this to me?

 

[disneynutz]

Contracts with current points would have a higher value but the buyer would be expected to pay the dues on the points. Stripped contracts would have a reduced price and the seller should be expected to pay the dues on those points.

It's all about the price in the end, finding a contract at the right price, at your favorite resort, with the right UY.

Bill

 

[christianweecare]

Thanks! That was helpful!

 

[Deb & Bill]

Expect the seller to pay for 2014 dues as part of the closing. They give you the funds to pay those dues come Jan 1. Depending on the UY, you might even ask them to pay part of the 2015 dues.

 

[christianweecare]

Good suggestions!

 

[Nabas]

I don't understand all there is to know about purchasing resale so I pose this question. Is there any advantage to purchasing a stripped contract? A contract that does not have points available until 2015 for instance?? Since there are no immediate points available would this be a good bargaining tool for the buyer? Can someone explain this to me?

There was a run on DVC contracts this spring and summer. Prices shot up while available inventory plummeted. At certain popular resorts, many sellers began to sell off their available points and then put their contracts on the market. The frenzy has died down and inventories are back up again, but prices are still high and a lot of the available contracts are stripped.

At most resorts, it's possible to easily rent out points at $11/point through David's DVC Rental. So a seller could rent their 2013 and 2014 points for an combined total of $22/point.

In theory, the price of a stripped contract should be considerably less than the price of a contract with all it's current points. However, having watched the DVC market closely for a while, it seems that what's happening is that sellers are stripping their contracts and then putting their contracts up for sale at nearly the same price as loaded contracts.

I recommend staying away from stripped contracts since they represent a poor value. Asking prices are much too high for something that has no points for 1 or even 2 years. Again, having closely watched the market, I can tell you that many of these stripped contracts are not selling while contracts with point still move quickly, so it seems there are a lot of potential buyers who are doing the same.

 

[JustTinking]

I would not buy a stripped contract. It takes the excitement out of the purchase if at closing, you still need to wait a year or more to have access to your points. Plus, the market might be very different a year from now, and you will feel cheated if you see better contracts in 6 months time at a lower price. Sellers of stripped contracts are just trying to capitalize on the hot market, and yet not deliver the goods. That's just greedy. As PP said, recommend you stay away from stripped contracts - there is plenty of better inventory out there.

 

[Dean]

I don't understand all there is to know about purchasing resale so I pose this question. Is there any advantage to purchasing a stripped contract? A contract that does not have points available until 2015 for instance?? Since there are no immediate points available would this be a good bargaining tool for the buyer? Can someone explain this to me?

Historically the stripped contracts I've seen don't have sufficient savings for the points lost but ultimately it comes down to the value of a given contract to you. Side by side and adjusted appropriately for the lost points, I'd rather have a stripped contract because the points are going to be more flexible and usable. Essentially every point in the contract will be functional at the 11 month window and bankable into the future, unlike contracts that are more loaded. However, you might need a slightly larger stripped contract if looking at shorter term needs/goals.

It's easy to adjust prices between such contracts. I take the formula for maint fees that DVC uses and that is my starting point for dues accounting. I then deduct the maint fees from the value for any point I'm paying fees on that I don't get the points. For example, if I bought 100 points Feb UY with no 13 points but all 14 points and I paid the 2013 AND 2014 points, I'd be paying 13 months of res for points I did have, at $5 a point, that'd reduce the value of that contract by $550 in this example. I then deduce a further value for any point that I don't have for current or future UY in addition to the maint fees, $5 a point is also a good round adjustment there. In that same example you'd further reduce the value by $1000 (2 yrs of points). So the REAL difference in value a 100 pt Feb UY in the two examples I listed is conservatively $1500. That assumes that closing is the same either way and that you pay the dues on all points you get. It also assumes you can use the points, bank them after closing or they are banked before closing for the current UY if applicable.

Of course there are other variables such as finding the right smaller contract. I'd also add value for a loaded contract where you had more points than simply the current UY and all future such as banked but current points. How much depends but usually around $5 a points for anything that I could probably use or rent.

 

[Dean]

I would not buy a stripped contract. It takes the excitement out of the purchase if at closing, you still need to wait a year or more to have access to your points. Plus, the market might be very different a year from now, and you will feel cheated if you see better contracts in 6 months time at a lower price. Sellers of stripped contracts are just trying to capitalize on the hot market, and yet not deliver the goods. That's just greedy. As PP said, recommend you stay away from stripped contracts - there is plenty of better inventory out there.

If one needs the points for a planned trip the stripped contract won't accommodate, then one simply needs to look at the math. To make the decision based on the emotion of the purchase though does not seem reasonable to me as a specific. Essentially you're saying pay more for the excitement. As for future, I believe we're at a current artificial high. Thus one of the options might simply be to wait and look for the right loaded contract as I believe you'll be able to buy a loaded contract in 2-3 years as cheap or cheaper than a current stripped one even including considerations for cash paid for trips in the interim such as renting points.

 

[JustTinking]

If one needs the points for a planned trip the stripped contract won't accommodate, then one simply needs to look at the math. To make the decision based on the emotion of the purchase though does not seem reasonable to me as a specific. Essentially you're saying pay more for the excitement. As for future, I believe we're at a current artificial high. Thus one of the options might simply be to wait and look for the right loaded contract as I believe you'll be able to buy a loaded contract in 2-3 years as cheap or cheaper than a current stripped one even including considerations for cash paid for trips in the interim such as renting points.

No Dean, I'm not saying pay more for the excitement; I'm saying if I shell out money now I want the points available to me now. Why would I pay inflated prices now for points I don't see until 2015? I would choose to wait and see what prices are closer to the actual time when the points are available.

 

[MoreTravels]

Many buyers are very poor in math. They do not understand how their purchase is worth $10 per point less when the 2013 and 2014 are stripped.

That is why most sellers these days are stripping their points first because people cannot appreciate the difference. They would say look, that one is $98 instead of $100 per point for BLT. And there is no maintenance fee for 2014!

I would do it too. Until people start to pay real attention and value to those points, it is my opinion that this trend would continue.

 

[Dean]

No Dean, I'm not saying pay more for the excitement; I'm saying if I shell out money now I want the points available to me now. Why would I pay inflated prices now for points I don't see until 2015? I would choose to wait and see what prices are closer to the actual time when the points are available.

My thinking is that it's the long range options and the overall cost that matters. IF you're long term cost is the same by paying cash for 1 or 2 stays AT DVC or similar and the savings enough on the stripped contract to pay less overall, there's no deterrent to buying a stripped contract even if your own points aren't used for a stay or 2. It's simple math, anything else would likely be emotional.

Many buyers are very poor in math. They do not understand how their purchase is worth $10 per point less when the 2013 and 2014 are stripped.

That is why most sellers these days are stripping their points first because people cannot appreciate the difference. They would say look, that one is $98 instead of $100 per point for BLT. And there is no maintenance fee for 2014!

I would do it too. Until people start to pay real attention and value to those points, it is my opinion that this trend would continue.

Exactly. I'd point out it's around $10 a point only for points you don't pay dues on, otherwise it's less, around $5 a point. I also wonder if the brokers are complicit in perpetuating this issue as they are in the incorrect management of the dues on resale contracts.

 

[sndral]

To me it's like buying a house, given the choice between identical houses would you buy the one that you can't move into until 2015, or the one you can move into now?
Since I'm buying DVC to visit WDW, I want points I can use now to do so.
Inventory does seem to be drifting up, so I wouldn't commit to paying today's high asking prices for a stripped contract. If, however, you think resale prices will rise going forward then you might want to lock in today's price.

 

[lodge]

We wanted stripped. We weren't ready to use the points, but were ready to increase the number of home resorts. Our plan began to rotate the resorts we use (as our home 11 month bookings) and even if we had bought a current contract, banking would've thrown off the rotation. We don't feel comfortable renting points.

As a result, we bought into other resorts while prices were still low. An unexpected bonus to our plan.

 

[ELMC]

No Dean, I'm not saying pay more for the excitement; I'm saying if I shell out money now I want the points available to me now. Why would I pay inflated prices now for points I don't see until 2015? I would choose to wait and see what prices are closer to the actual time when the points are available.

Only time will tell if the prices are actually inflated. If DVC decides to once again increase direct prices on classic resorts, the current resale prices may look like a bargain. Conversely, if factors contribute to push prices down in the next 12-18 months, then you would be correct in saying that today's prices are inflated. My point is that nobody can see into the future. If you hold off on purchasing based on the speculation that prices will go down and instead they go up, you have cost yourself money. Remember, people made your exact same argument two years ago regarding stripped BWV contracts at $55-60 a point. As it turns out, the stripped contract would've been a very good buy.

 

[Dean]

To me it's like buying a house, given the choice between identical houses would you buy the one that you can't move into until 2015, or the one you can move into now?

Actually a better analogy with be if there were identical houses side by side. With one you close now and you're done, with the other, you can't close for 2 yrs but you're pretty sure you'll save a considerable amount of money and you can either go ahead and move in or stay where you are until then.

 

[JustTinking]

Fair enough. To get back to OP's question, is a $10/pt reduction for stripped a good starting point? Given the wide range of prices on different properties, this would be anywhere from an 8% to 15% reduction off of asking. Many of us start by offering 10% less than asking in any case. Should we be starting with an average selling price and take $10 from there?

 

[christianweecare]

I am the OP. Now that you all have me thoroughly confused me LOL!

In our situation we already have a 200 point contract that is bought and paid for. We are just doing some investigating into adding on another home resort. Trying to decide what the best option is for us since we don't know much about the resale market. Also, we can't decide if we would be better off to add on more points at our present home resort or venture out to another home resort.

 

[disneynutz]

I am the OP. Now that you all have me thoroughly confused me LOL!

In our situation we already have a 200 point contract that is bought and paid for. We are just doing some investigating into adding on another home resort. Trying to decide what the best option is for us since we don't know much about the resale market. Also, we can't decide if we would be better off to add on more points at our present home resort or venture out to another home resort.

Is 200 points enough to get you what you want at your home resort at 11 months?

If so, then buy the same UY, titled the same and you next favorite resort.

Bill

 

[christianweecare]

Is 200 points enough to get you what you want at your home resort at 11 months?

If so, then buy the same UY, titled the same and you next favorite resort.

Bill

200 points is enough for DH & I. It's the children, grandchildren, sisters, nieces, etc. that use up our points. LOL!