Opinions on Buying Stripped Contracts

Discussion in 'Purchasing DVC' started by Marionnette, Aug 24, 2012.

  1. Marionnette

    Marionnette Children see magic because they look for it

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    Just looking for opinions on purchasing stripped contracts. At what price would you consider them a good deal and what price would make you pass over one at any particular resort? What other factors would you take into consideration? Or are they generally considered to be a bad purchase?

    Is Disney less likely to exercise ROFR on them? Does the lack of available points make it less desirable to Disney since they cannot resell it immediately?

    I noticed a few contracts like that over the past few months and they still seem to sell. I'm just wondering if the lower $/pt. cost is worth waiting for months after making settlement before even being able to use your points.
     
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  3. Finally DVC

    Finally DVC Earning My Ears

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    There may be good reasons for buying them, but to me stripped contracts are really a gamble considering the direction resale prices have been heading. When I see a contract with no points until 2014, I always wonder how much less per point that resort will sell for in 2 years. On the other hand, maybe resale prices will start to swing up and you could actually save money by buying now. :confused:
     
  4. cz4ever

    cz4ever Imagineer-in-training

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    I personally do not (did not) consider stripped contracts at all, since it is almost impossible for one to be inexpensive enough to meet my price targets. To me, any points included in the contract reduce the effective price per point by $10, since you can rent them for that much to reduce your effective cash outlay. Adjust the $10 up or down as you see fit, e.g., points nearing expiration are worth less while points from a highly desirable resort are worth more, but $10 is good for quick and dirty calculations.

    Given that, a stripped contract would need to be $20-$30 less than a loaded one per point to be of interest to me. In practice, the gap is much smaller. For me, that's a purely financial consideration, not taking into account the need to wait before booking a room. If I were unwilling to rent out points and wanted them for immediate personal use, I'm sure I'd look at it differently.
     
  5. DannysMom

    DannysMom DIS Veteran

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    I did not consider stripped contracts when I was shopping either. Mainly as those would be my first points, and I did not see spending a lot of money for a product that I would not be able to use for 2 years or so.

    I **can** however understand an existing owner who has mapped out their point usage for the next few years being interested in a somewhat stripped contract. They figure they will be running short of points by 2014 or 2015, so if there are no points coming until 2014, that fits with their plans. Big IF being they can get the price down low enough that they don't mind paying the MF on those points for a year where they get nothing, as I have never seen a seller give any kind of concession for future MF on a stripped contract other than the lower price per point.
     
  6. gripp35

    gripp35 Mouseketeer

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    I completely agree with cz4ever since you could rent the points to get money back over a couple of years.
    The other thing that I didn't see mentioned, in addition to the "perceived loss" of money (the money you _might have_ gotten from selling points that you don't have) is the ACTUAL loss of money. YOU will be responsible for the MF bill that comes in January, for points that someone else got to use. You will be paying an extra $4-$6 per point for someone else to have enjoyed a grand vacation!!! :furious: So not only would the per-point price have to compensate me for the points that I don't get, but it would also have to compensate me for the MF that I am going to have to pay before my account actually has any points in it!

    ETA: Oh, just saw DannysMom did mention the MF thing...
     
  7. drusba

    drusba <a href="http://www.wdwinfo.com/dis-sponsor/index.

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    If your intent is not to use the points for some time, then purchasing a stripped contract can be considered but the issue is whether the price discount you can get is enough. In comparison to going resale price of contracts that have all their current use year points, you need to factor in three different discounts:

    1. Somewhat of a discount (maybe $1 a point) just for lower demand. Most people seeking contracts are seeking points they can use quickly and thus the demand for stripped contracts is less and price should be lower as a result.

    2. Another discount for the value of the lost current year points (and possibly future year if they have been borrowed). Some mention that you can rent them for $10 per point but that is an excessive discount. Maybe you can rent them for that amount but renting requires effort, risk, and cost and thus applying rental value leads to too high of an expected discount. A more fair discount is probably in the $4 to $8 range for that factor depending on how far out those first points are coming (e.g., buying a stripped June contract today with points coming in June 2013 results in less of a discount than buying a February contract that is stripped of everything including borrowed points and thus you get no points before Feb 2014).

    3. You also need a discount for dues. If you buy now, seller will likely agree to absorb all dues for this year (but you must make sure you insist on that as part of any offer) but you will start paying dues Jan 1 and you need a discount for the dues you will pay from Jan 1 until the time when your points first become available. You can calculate that discount by using the current per month dues and then multiply that by the number of months between Jan 1 of next year and when your points first become available. You could also add a little to that discount to reflect probable increases in dues.

    Using those factors, you can usually estimate what your discount per point should be any praticular stripped contract off of current resale price of a contract with all its current points. Likely, it is going to to be some discount in the $8 to $12 range per point depending on how far out those first points are coming and what you often see is that those offering stripped contracts do not have their prices low enough (although some negotiation can often get you there)
     
  8. belias21

    belias21 DIS Dad's Club Member #717

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    Interesting points... I guess I just have a different perspective. I'm in the process of purchasing my first contract and it is stripped:
    OKW42 - 100pts, $54/pt, AUG UY, 100 points coming on 8/1/2013.

    For me, that didn't matter so much because I don't plan on traveling until the second half of 2013. Also, I had a $6000 budget that this one fit nicely in to. Given that very few, if any, of the OKW contracts that have been getting ROFR'd lately have been stripped I figured that was also a plus.

    Yes, I pay maintenance fees in 2013 but I'm travelling that year as well so I didn't really think too much about that.

    Admittedly, I knew about the possibility of renting points out but I didn't factor that in to my contract considerations. Knowing my wife and I, odds are that if we had the points, we'd be itching to use them - not rent them. :rolleyes1

    Given all that, once this one closes I'm sure the addonitis will kick in and we'll be looking to tack on some more points in short order and end up planning a trip before the Aug 2013 points even drop in to my account. :laughing:
     
  9. belias21

    belias21 DIS Dad's Club Member #717

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    This is really the only thing I regret. If I had done a little more digging, I probably could have negotiated this better. I'm paying full 2013 MF in January but won't have points until August.

    What can I say, I learn something new on these boards literally every day.
     
  10. fmer55

    fmer55 DIS Veteran

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    There is a formula I use when evaluating contracts that I stole from another here on the dis and it brings my cost pp down to 34, but this is if I rented them, in reality it gave me a free vacation due to FF miles and AP.

    bottom line is if you are happy with yoru deal than you got a good deal

    Basically it comes down to each their own. When I look at your contract I see that it is a 100 pointer which are hard to come by. Also by the time you close you will already be in your 11-month window.

    I wound up with a 90pt add on when I was not in need of more points for 2 reasons. First, it was a June UY and was coming with 2 years points but second was the size of the contract, they really are so hard to come by, so I really did get lucky. And yes I did book another trip as opposed to renting and recouping some loot:lmao:

    The other reason I like a loaded contract is with banking you can really stretch out those extra points. The way it is planned out now I won't need more points until late 2015:rotfl2:

    Bottom line is if you are happy with yor contract than you have a good one, have fun with those points:thumbsup2
     
  11. DougEMG

    DougEMG DIS Veteran

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    This is the way I look at stripped contracts as well. Typically people that are selling stripped contracts are not listing them for $20-$30 less than the average loaded contract, I've never purchased or made an offer on a stripped contract.
     
  12. jennybdis

    jennybdis Mouseketeer

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    I am also considering putting in an offer on a super stripped contract--like no points for more than 2 years. We wouldn't be traveling again until 2014-15 anyway, so it would be OK for us, but I am curious if you think you can pass ROFR if you put in a super low offer (and if the seller agrees to your offer)?
     
  13. belias21

    belias21 DIS Dad's Club Member #717

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    I think a lot of that will depend greatly upon which resort (OKW and BCV seem to be getting snagged more frequently so I'd be extra cautious on those). I posted some ROFR stats a week or so ago that includes the lowest per point prices that were getting waived...
    http://www.disboards.com/showpost.php?p=45827474&postcount=3396
     
  14. fmer55

    fmer55 DIS Veteran

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    I completely agree with CZ and Doug and not sure why you would tie up your money for so long on what would not be a relevant savings. Even if you valued your points at only $7 pp you would need to find an OKW at $40, BWV at $45, BLT at$70, VWL at $43.......and so on and so on, just to make it worthwhile.

    Like I said before, the only time I could somewhat justify this is if it is a super-elusive contract that you think may never come along again.

    *DISCLAIMER*.....This is just one man's food for thought and should not be used in any way, shape , or form to base your decision, this is just a starting point for a conversation:smokin:
     
  15. fmer55

    fmer55 DIS Veteran

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    Just a thought that popped into my head......the only way I, personally, would buy a stripped contract, is if I were breaking a record on the ROFR database.

    But, again, this is just my opinion, best of luck with your contracts:thumbsup2
     
  16. tomandrobin

    tomandrobin DIS Veteran

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    I would buy a stripped contract only is it came with a stripped price!

    For example, if it was SSR, I would not pay more then $30.

    In fact, a good rule of thumb is to subtract (min) $20 off the low selling price.
     
  17. fmer55

    fmer55 DIS Veteran

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    :thumbsup2
     
  18. Brian Noble

    Brian Noble His Curmudgeonly Highness

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    In general, the market seems to over-value stripped contracts, and under-value loaded ones, relative to the "street price" of a point.
     
  19. arthur06

    arthur06 DDC #689

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    I just saw a contract on one of the resale sites today... it was:

    BW125-12-0823 Boardwalk Villas-$60/pt. December 125 $7,500.00
    Notes: 125 points coming on 12/1/14 and 125 points coming on 12/1/15. Can close 5/6/13. Priced at $60 per point.


    So, I look at this that it has no points until 12/2014 and you can't close until 5/6/2013. And they still want $60 per point.

    Why would they even list it now. Wait until March or so, then it doesn't look so bad. I wouldn't mind owning a similar contract, but there are just too many negatives with this one.
     
  20. AllieV

    AllieV DIS Veteran

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    I would consider a stripped contract if it was for a high-demand location and the price was good. For example, $50-55 a point for Beach Club or Boardwalk. Sure, a few people have gotten them for that price loaded, but it quite rare.

    If you're not going to use the points, then you'd have to buy into the disboards' "rent/trade" section in order to advertise. Not sure what that cost is. Then you have to consider the cost of the dues, which is in some way figured into the entire sale price. If you are have not rented before, you'll have to offer a lower rate. Add all that up and maybe you're getting back $4 per point by renting. You could go through David's to rent, which would yield $9 a point but subtract dues and you're back to $4 or less.

    So if you can get the price per point lowered by $5-6 over a loaded one, you are breaking even in my calculations. If you can get it $10 less, great, especially if you have to pay 2013 dues and don't get points till 2014.
     
  21. jennybdis

    jennybdis Mouseketeer

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    I put an offer in on that one. A very reasonable offer, but they're only considering list price. Ah well.
     

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