Stripped Contract Values?

[Drewski77]

Looking for our first DVC contract and of course more stripped contract are available than those with points ready to use or coming next year.

Am I missing something as it seems to me a contract with no points coming until say June of 2017 is far less valuable. However, listing prices don't seem to think so as they aren't much lower.

How do you value or devalue a stripped contract, or do you avoid them all-together?

Thanks!

 

[ziravan]

Listing prices never seem to reflect the lost value of a stripped contract.

As there is more demand for resales, especially small resorts like BCV, there is no reason for sellers to discount for stripped contracts.

If I were selling in today's market, I'd strip my contract and make $12/point in a quick rental and then sell it for $2/point less for being stripped...

 

[lgpav1]

They are to me. If I were to look at buying one of them - I would offer less and it would be take it or leave it. Just like if there were contracts that had banked points, I would be more likely to pay close to or the asking price.

 

[ziravan]

They are to me. If I were to look at buying one of them - I would offer less and it would be take it or leave it. Just like if there were contracts that had banked points, I would be more likely to pay close to or the asking price.

A seller would still be better off holding on to a property for a few extra months and strip it for rental then sell.

You are a discriminating buyer. That makes you more the exception than the rule.

The market just doesn't reflect the $12-$14 difference in price that should exist for a stripped contract.

Shoot, seems to me that there's even a slight stigma on loaded contracts that they're more likely to ROFR.

 

[supersnoop]

Some folks will value a stripped contract by subtracting $12-$14 per point missing based on the money you could realize by renting out the points. I value a stripped contract by subtracting the maintenance fees for each point missing, plus about $3/point. Even then, stripped contracts are way, way overpriced. You'll get a much better deal on a loaded contract than a stripped contract.

 

[Dean]

Looking for our first DVC contract and of course more stripped contract are available than those with points ready to use or coming next year.

Am I missing something as it seems to me a contract with no points coming until say June of 2017 is far less valuable. However, listing prices don't seem to think so as they aren't much lower.

How do you value or devalue a stripped contract, or do you avoid them all-together?

Thanks!

The lower value is rarely reflected in a price low enough to make up the difference. A contract with all current or banked points is worth about $24 a point more than one with no points until the second UY date. That assumes you're paying this yrs maint fees on the loaded contract and the fees due in Jan but no additional fees for the banked points. I get that by giving a value of $12 per point for any full use points and $6 pp for the banked points but deducting $6 pp for the dues not owed for the year one buys. In reality the price difference is going to be less, maybe $15-20 a point all else equal when you consider the paid price and the dues one has to pay in Jan for points/months not available to the buyer but who still owes the dues. For this reason I think a truly loaded and well placed contract is generally worth more overall even if one doesn't need the initial points. I also think that for many a well timed UY can be worth a full yrs points or more. And that for some resorts/packages sizes, it may not be worth waiting on a better contract. One has to take their individual situation and decide what's best.

 

[Minniesgal]

They are to me. If I were to look at buying one of them - I would offer less and it would be take it or leave it. Just like if there were contracts that had banked points, I would be more likely to pay close to or the asking price.

To you maybe but there are buyers out there who will pay full asking or close especially for small contracts.

At the end of the day 1 years points out of a 40-50 year contract isn't worth much more than 1.5 to 2.5 dollars a point

 

[jnjhuddle]

Looking for our first DVC contract and of course more stripped contract are available than those with points ready to use or coming next year.

Am I missing something as it seems to me a contract with no points coming until say June of 2017 is far less valuable. However, listing prices don't seem to think so as they aren't much lower.

How do you value or devalue a stripped contract, or do you avoid them all-together?

Thanks!

IMO, a stripped contract with no points available until 2017 is prepaying for something that you can't use for 2 years. The seller has "dipped in the till". I could definitely find better use for my money, especially if you are taking out a loan (also don't reccomend) and paying interest on something you can't use. Would you buy a car and make payments on it to sit in the lot for 2 years before using? I think not. Better contracts come up ALL THE TIME, you just have to be on the look out because the good ones don't stay on the market for long. Be ready to make an offer as soon as you see the right contract. There is a search engine that brings up most of the major brokers listings all on one site. If you keep your eye on that throughout the day you may have better luck. Be patient and you will find the right contract. If you need the points right away, you are better off renting and waiting for the right contract to come up. The ONLY way a stripped contract is worth it is if you don't need the points right away and you AREN'T paying a premium for it. Of course, sellers won't agree with this concept, but I'm quite sure they are smart enough not to buy a stripped contract themselves for a premium!

 

[Drewski77]

I get that a small 25-50 stripped contract still retaining most of its value due to an owner having difficulty finding add-on points with the same use year.

However, as others have pointed out, with a 160 plus point contract with zero points coming for two years, why pay close to the same price for a contract with points? Why even bother purchasing a contract in which you won't get points for almost two years, why not just wait for a better contract since you'll have to wait for the points anyway?

 

[dsnydaddy]

I watched this with wonder for over a year now too. Loaded contracts going for the same or less than stripped ones. Makes sense for sellers to strip their contracts before selling to maximize the amount of money they get if there is no downside. I know that the contract that I bought had no current year points, but did have points for the following year which is why I bought it. I actually had my eye on another contract at first that was listed as having 2014 points (albeit just a portion of them) and all 2015 points. But when I went to make an offer, the points available suddenly disappeared. Seller must have realized that renting those points rather than selling a loaded contract was a better plan. I dropped the purchase and went looking again.

 

[Tunseeker1]

I look at things differently.

If I bought a contract at BLT in July 2013 here are the numbers.

160 points coming on 2/1/15 and 160 points coming on 2/1/16. Priced at $96 per point
I would owe $764.80 for dues in Jan 2014 for points I do not get. If I ask for credit for the dues based on the year before it would have been a credit of $720. I would lose $45.

At the same time there was another BLT contract I looked at.
20 points currently available and 220 points coming 2/1/14. Priced at $92 per point.

I didn't even look at replacing the points pulled out or the value of the points if I rented them I only looked at the cost per point and the dues I would have to pay.
I offered $89 a point for the first one and didn't even get a counter offer.

 

[Dean]

I get that a small 25-50 stripped contract still retaining most of its value due to an owner having difficulty finding add-on points with the same use year.

However, as others have pointed out, with a 160 plus point contract with zero points coming for two years, why pay close to the same price for a contract with points? Why even bother purchasing a contract in which you won't get points for almost two years, why not just wait for a better contract since you'll have to wait for the points anyway?

To me I don't think it's a big deal if one isn't getting points for 1.5 years, its unusual to get close to a full 2 yrs out and one can borrow a year ahead so the worst one could be at the start of the process is less than a year from being able to use points. One might need a slightly larger contract or cushion in number of points for this scenario but it's really a math issue, nothing more. I would agree that often buying the large contract can be a better choice as long as one is OK with the additional cost and risk involved.

 

[Drewski77]

To me I don't think it's a big deal if one isn't getting points for 1.5 years, its unusual to get close to a full 2 yrs out and one can borrow a year ahead so the worst one could be at the start of the process is less than a year from being able to use points. One might need a slightly larger contract or cushion in number of points for this scenario but it's really a math issue, nothing more. I would agree that often buying the large contract can be a better choice as long as one is OK with the additional cost and risk involved.

If you borrow from the year ahead don't you pay the MF upfront?

Unlike traditional real estate in this case we are only buying points at a home resort and not a specific room, so I don't see the reason to buy a stripped contract as if you have to wait why not just wait for a contract with points??

 

[supersnoop]

If you borrow from the year ahead don't you pay the MF upfront?

Nope. You don't pay maintenance fees until January.

 

[jnjhuddle]

To me I don't think it's a big deal if one isn't getting points for 1.5 years, its unusual to get close to a full 2 yrs out and one can borrow a year ahead so the worst one could be at the start of the process is less than a year from being able to use points. One might need a slightly larger contract or cushion in number of points for this scenario but it's really a math issue, nothing more. I would agree that often buying the large contract can be a better choice as long as one is OK with the additional cost and risk involved.

I'm confused. Are you saying that it makes perfect logical sense for a first time buyer to buy a 160+ point fully stripped contract at a price equal to a loaded or semi loaded contract? What would be the advantage for the OP here vs waiting for a better contract to come along? He isn't trying to match use years since he is not yet an owner. I often see the DIS veterans reccomending watching and reading for 6 months prior to buying anyway. I would in no way call myself a DVC expert, however, I'd like to think I have some logic and it seems to me that the OP does too. I'd be curious to hear your reasoning why you don't mind purchading a fully stripped contract at a premium price.

 

[Drewski77]

I'm confused. Are you saying that it makes perfect logical sense for a first time buyer to buy a 160+ point fully stripped contract at a price equal to a loaded or semi loaded contract? What would be the advantage for the OP here vs waiting for a better contract to come along? He isn't trying to match use years since he is not yet an owner. I often see the DIS veterans reccomending watching and reading for 6 months prior to buying anyway. I would in no way call myself a DVC expert, however, I'd like to think I have some logic and it seems to me that the OP does too. I'd be curious to hear your reasoning why you don't mind purchading a fully stripped contract at a premium price.

Thanks for articulating my thoughts better than I have. I'll be curious what the other person has to say about your post, I'm thinking along the same lines.

Also, while it is not a mathematical aspect, my wife would have a difficult time spending $20,000 to $30,000 cash and our first trip happening in two years...happy wife most definitely has to factor into any scenario

 

[Dean]

If you borrow from the year ahead don't you pay the MF upfront?

Unlike traditional real estate in this case we are only buying points at a home resort and not a specific room, so I don't see the reason to buy a stripped contract as if you have to wait why not just wait for a contract with points??

Possibly, I was simply pointing out that mechanically getting a stripped contract wasn't a big deal. Mathematically it's usually not the best value when comparing otherwise like for like contracts because the discount almost never compensates for the lack of points even if one doesn't need the points for a while. It really just comes down to the math of what you're losing. As for dues, dues are paid on a calendar year basis. That means dues you pay in Jan, 16 for a Dec UY are for 11 months of the 2015 points and 1 month of the 2016 points. So it's likely one who completes a sale during the preceding year will be paying dues on the points they don't have. This can be calculated into the price or into the closing as a credit, it's all about realizing what you're and are not getting and negotiating. It's even possible to stretch this anomaly out for 2 years if someone has borrowed the points ahead such as for a cruise. BTW, this happens routinely even if the contract is not completely stripped. For example, if one bought points for a Dec UY with all 2015 points there but nothing else and you pay the dues for this year, you just overpaid by 11/12 of the yearly dues.

I'm confused. Are you saying that it makes perfect logical sense for a first time buyer to buy a 160+ point fully stripped contract at a price equal to a loaded or semi loaded contract? What would be the advantage for the OP here vs waiting for a better contract to come along? He isn't trying to match use years since he is not yet an owner. I often see the DIS veterans reccomending watching and reading for 6 months prior to buying anyway. I would in no way call myself a DVC expert, however, I'd like to think I have some logic and it seems to me that the OP does too. I'd be curious to hear your reasoning why you don't mind purchading a fully stripped contract at a premium price.

As I pointed out above, I'm not suggesting overpaying for a stripped contract, but just that the fact it's stripped alone doesn't make or break the deal. I'd also suggest that the larger contract is often the better deal for many, again it comes down to numbers. See post #6 above how I'd personally view that issue. I do feel UY can be very important, actually more so for many new buyers than for existing owners. I'm one of the main ones insisting it does take 6 months of active investigation to get up to speed enough to buy. I'd also suggest that trying to hurry and buy to get that next trip is often costs far more than it saves in a number of ways.

 

[Dean]

Also, while it is not a mathematical aspect, my wife would have a difficult time spending $20,000 to $30,000 cash and our first trip happening in two years...happy wife most definitely has to factor into any scenario

One needs to take a long term view and have patience where a timeshare is involved. You've got to investigate enough to get past this type of emotional approach to make good decisions.

 

[Drewski77]

One needs to take a long term view and have patience where a timeshare is involved. You've got to investigate enough to get past this type of emotional approach to make good decisions.

This was merely an attempt to bring some levity to a rather mathematical discussion.

With that said, if you strip all emotion from a decision to purchase a timeshare or not, I would suspect that no timeshares would be sold.

Ironic that you talk about removing emotion when one thinks about what it is that compels most of us to visit and spend so much at Disney...the emotions a visit to Disney creates well before we arrive, and well after we leave.

Or do you find your Disney expenditures to be void of any emotion? If not, why should a purchase of the DISNEY Vacation Club have no emotional component?

 

[Dean]

This was merely an attempt to bring some levity to a rather mathematical discussion.

With that said, if you strip all emotion from a decision to purchase a timeshare or not, I would suspect that no timeshares would be sold.

Ironic that you talk about removing emotion when one thinks about what it is that compels most of us to visit and spend so much at Disney...the emotions a visit to Disney creates well before we arrive, and well after we leave.

Or do you find your Disney expenditures to be void of any emotion? If not, why should a purchase of the DISNEY Vacation Club have no emotional component?

Obviously one can't remove all emotions but buying too early or when emotions are too high often causes one to make worse choices than they would otherwise. I missed the attempt at humor but it is a common issue we see with new buyers, they take a far too short term approach.