# Opinions on Buying Stripped Contracts

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

1. ### arthur06DDC #689

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Too bad. I would think that it would sit around for a while, but it only takes one person to offer list price.

No points for over 2 years (if you don't borrow) and can't close or close to 9 months, doesn't scream full price offer.

I see that there was a 25 point BWV contract that sold (or at least listed) at \$64 per point. No points for 2012, but all after that.

I think that there price is considerably high for what they are selling.

3. ### DeanDIS Veteran<br><a href="http://www.wdwinfo.com/dis

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Generally stripped contracts are not discounted enough to justify them but it's all in the numbers. It's fairly easy to compare contracts. Lets take the simple situation of the same UY and home resort. Then you're just assigning a value to every missing point. I'd generally subtract \$10 for each point that's missing from the stripped contract. That calculation also assumes you're not paying for additional maint fees on the non stripped contract and if so, you'd add that back in to the \$\$\$ difference between the 2. Remember that DVC charges maint fees based on a calendar year not a UY. If the UY are different, you'd simply adjust up or down by 1/12 of the points in a given year times the \$10. For different home resorts you simply have to make an assumption of the difference if value on a purchase price between the 2. Here is a simple example and this assumes that the closing costs (\$500) and total points are all the same and 100 pt contract and \$5 a point fees for simplicity and closing 1 Sept. Generally you don't add much of any value for banked points but would subtract for borrowed points.

SSR completely stripped (no 12 or 13 points) vs non stripped Feb UY but no additional banked points. assume \$60 a point for simplicity for the non stripped. Cost for non stripped SHOULD be \$6600 with fees due in Jan for the new year. The stripped should be \$4500 (or \$4600) with fees still due in Jan adding in another \$500. Of course many resale companies would want the initial price to be an additional \$200 for the non stripped contract wanting you to pay all fees for the calendar year and since you're giving full value to the points gone, that isn't unreasonable.

4. ### taaren"There is more treasure in books than in all the p

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The main reason I would probably buy a stripped contract is if you are looking for a rare resort and/or a rare use year to match what you already have. Ours had only half the points for 2011, we bought in late 2010, but there weren't that many VGC contracts on the market, and particularly not in the size we wanted. Plus we didn't really "need" the points we just wanted to know we had them going forward. In retrospect they are a bargain at \$82 per point, but really for us stripped or not didn't matter we just wanted the right size at the right resort. I imagine the same holds for people who want to match a rarer use year or other of the smaller resorts where there simply isn't as much activity on the resale market, and it may be just a matter of finding what you want at a price that's cheaper than direct.

5. ### zavandorDIS Veteran

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As taaren said, I would consider a stripped contract if the size (under 50, even better 25) and UY (december) comes out on the resale market.
I've seen on Fidelity a 25 points stripped contract for SSR priced not too much high (\$60 pp), but it was for a wrong UY, so I didn't make an offer (I would have had offered \$50). However, two days later it was sold.

6. ### fmer55DIS Veteran

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That is a lot of assumptions even for you Allie

My most recent 90pt contract was a Jun UY with 180 pts currently available. Only paid 156 towards MF, obviously less than a buck a point and you DEFINATELY do not need to pay a fee to anyone to rent your points, just saying

Even at \$9 -1MF=8x2yrs pts. Looks like 16 bucks a point to me

7. ### fmer55DIS Veteran

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If they get asking soon they should be locked up for robbery

8. ### Kidanifan08DIS Veteran

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And it's sold! I would have to believe that it went for asking price this close to the listing date. I really thought this one would sit for awhile. I guess BWV is a highly desirable location and a small point contract is worth waiting for . . . even if it's two more years until points are available.

9. ### cz4everImagineer-in-training

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Amazing. Seems like sellers are not the only ones who do not value points in nearly the same way as I do --- loaded contracts in the 50s or stripped contracts in the 60s (especially stripped that hard) make me wonder.

10. ### DeanDIS Veteran<br><a href="http://www.wdwinfo.com/dis

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There's something to be said for finding the right contract, one must weight that and the efforts and time involved (both personal and lost usage) in waiting for something else.

11. ### Kidanifan08DIS Veteran

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I agree. For a contract like this, you would think \$50/pt would be a winner for the seller. But, a \$1000 difference is probably not worth quibbling about if you just need 125 BWV points to go to F&W every year or EOW; starting in 2014 or 2015, of course.

12. ### arthur06DDC #689

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To me, it's a gamble. Can't close until May 2013. Wait another 8 months and see what the resale market does. You could potentially buy a better contract in 8 months (and possibly today) that has current points and possibly banked points as well for the same price.

I have a small BWV contract that has points, I could ask for big \$\$\$ with some of these buyers.

13. ### ELMCDIS Veteran

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One thing I've learned from reading these boards is that different people have different motivations. If your motivation is to get a good deal, or if you are at all driven by the math behind the contract, then typically speaking you should probably stay away from stripped contracts.

However, there are people on here who have different reasons for buying. Maybe it's the perfect size/UY. Maybe they're not going on vacation until 2014 anyway and they don't want the hassle of renting out points. It could be any number of things. If this describes you, and you see a contract you want, then some would say to just go for it regardless of how much of a deal it is or isn't. (I can't say that because I'm still held captive by the numbers). Keep in mind that even with a stripped contract, you're probably still saving money by buying resale. Although it's not how I look at things, I've figured out that there is a lot more that goes into buying a resale contract than just the math. So figure out what type of buyer you are, and you'll have your answer.

14. ### belias21DIS Dad's Club Member #717

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Maybe it's just me, but I must really be missing something on the "math" side of this. Worst case I see is that you might be paying for a year you're not using. Regardless, this is a 30 year (at least) investment so it really means nothing beyond that first "stripped" period.

I've seen mention on this thread that stripped contracts should be worth \$20 or \$30 less per point, but I guess I'm not understanding that. I'm paying \$54/pt for my stripped OKW contract. Per point dollar amounts haven't really gone any lower than that (and gotten through ROFR) so I guess I'm missing something.

Not trying to spark a debate, just trying to get a better understanding so I know for next time.

15. ### ELMCDIS Veteran

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No worries, you're not being argumentative at all. Let's leave ROFR aside for a moment because that is a whole different variable. (Although I will grant you that lower price OKW contracts have not passed whereas many higher priced contracts have passed). That being said, here is a real life example comparing two OKW contracts (yours and mine). Full disclosure, mine did in fact get taken by ROFR (at \$41pp). I'm also going to leave closing costs out of the example to make sure we are comparing apples to apples. Also, even though my contract offer was for less than \$54 a point, I am going to use that price in both examples to insure that I'm still comparing apples to apples.

My contract: \$54 pp. Seller pays maintenance fees and the contract had full 2011 and 2012 points. So my out of pocket cost was \$5,400 and I can then rent the 2011 and 2012 points for \$10 each, bringing my total net cost of the contract down to \$3,400. The next time I will be able to use points is in 2013.

Your contract: \$54pp. I'm assuming that the seller paid the maintenance fees as well because they used the points. Your out of pocket cost is \$5,400, and the next time you will be able to use points is 2013.

So as you can see, a stripped contract is significantly more expensive than a non stripped one, in this case \$2,000 more. Had I been able to find a contract with 2010 points as well, the difference would have been more like \$3,000. So that's the explanation of the "math" perspective of buying. But like I said before, for many people there is a lot more to it than the math, which is totally understandable.

One thing you did say that I respectfully disagree with though is when you alluded to the fact that it's not that big of a deal over 30 years. While I can see how you would say that, it's a somewhat fallacious argument because although you own this contract for 30 years, you are paying for it right now. So it's not \$2,000 over 30 years, it's \$2,000 cash right now in today's dollars.

That being said, I think it's ok to pay a little more if you're getting what you want. You're still saving money by buying resale and, like I always say, only one person can get the best deal. Everyone else overpaid.

16. ### Marionnette<font color=deeppink>Wishing On A Star<br><font co

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I just wanted to pop back into this thread and thank everyone for their input. It really gives great insight into the buyer's POV on stripped contracts.

I was asking this question for my brother, who is considering the sale of his SSR contract. He stripped it of all his 2013 points to use for a big vacation this past year. He's having a tough time post-divorce and figured that since the kids didn't really enjoy this last trip, maybe he should just sell the contract and use the cash to pay some bills. But from the looks of things, he would have to under-value the points considerably in order to sell it. He still has the mortgage to pay off, so he can't go too low.

I think that I'll point him to this thread, but also encourage him to rent out his points instead of selling at this time. Thanks again for the opinions!

17. ### belias21DIS Dad's Club Member #717

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Thank you for the response, I appreciate the detail...

I don't know - your points are certainly valid but I'm struggling with the fact that, just because you might be able to rent a year out, that the seller of a stripped contract should be expected to account for that and adjust their price accordingly. Maintenance fee negotiation?? By all means, yes... that is an annual cost so that makes sense.

It's \$5400 worth of points no matter how you look at it. If anything, divide that by the number of years left (\$5400/30 = \$180) and negotiate a little based on that since a stripped contract might have one fewer year.

If you're able to rent a year out because you don't have travel plans to use the first batch of points on a loaded contract - more power to you, and there is a definite financial advantage to doing that.

Like you said, everyone's situation is unique... The way I look at it, I saved a TON of money by not buying a loaded contract. If I had the points to use, we would probably have ended up planning an additional trip versus renting them. We all know how much more THAT would have costed. I guess points burn a hole in our pockets.

18. ### jennybdisMouseketeer

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I looked this morning and saw the sale was pending.

We are planning to buy next spring, which is one reason why I liked the closing date, but I would rather pay \$5 more pp for something I can use in 2013 (and hopefully will have some points available upon closing). I'm definitely not upset about losing this one--a better contract will surely be available next spring.

19. ### DougEMGDIS Veteran

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As a seller I would always try and sell my contract with the points stripped out and a couple of dollars less than what other contracts are selling for. After all, it only takes that one person to buy it. Remembe that having people over value stipped contracts is good when you are the seller!

20. ### DougEMGDIS Veteran

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The stripped contract worked out to be a good deal for you because it met your requirements/needs. For someone who's main goal is to spend as little money as possible, then buying a loaded contract and renting out those extra points will nearly always work out to be the best option.

It all comes down to how much are you paying for those extra points and how much are valuing those extra points.

If you end up paying the MF and then using the points yourself, that is a net of zero, but if you paid no MF and rent them out for \$11/point, you've reduced your cost by \$11/point.

21. ### cz4everImagineer-in-training

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Actually, the point should be that he would NOT have to under-value the points considerably in order to sell it. He would if he wanted the sharks here to make an offer, but as illustrated by the fact that the completely stripped BWV contract sold at its asking price of \$60 within days of listing, the general DVC buyer pool does not differentiate between stripped and loaded contracts nearly as much as "us".

Although I'm sure Disney would step in and put a stop to the practice if anybody tried to do it, there's money to be made buying loaded contracts, stripping them, and selling the resulting stripped contracts for a little bit less.