Buying Resale - How to value the available points?

[Kid_@_50]

I understand that contracts can be loaded, normal or stripped of points. When you buy a resale contract it comes with a potential pile of points (last years, this years and next years). I also understand that for points to have value you must be able to use them before they expire. (fyi - use year, banking and borrowing remain covered in a layer of dense fog that is thinning out as I read these forums.)

I've bought a few homes and even an investment property or two. Everything is negotiable. However, I also discovered that different parts of the country have different practices for the normal default expectation of who pays what at closing.

What is the normal expectation surrounding this pile of points? Are they valued at their maintenance fee? at the rental basis?

Real Estate developers want the recorded price on the deed as high as possible as it helps sustain the comps. They would rather provide additional concessions or incentives than reduce the selling price. As the real estate sales improve, they can both increase the price and reduce the incentives.

Does it help ROFR to keep the selling price high by getting the seller to pay for all current use year maintenance fees and an allowance for next years maintenance fees for any borrowed points. How does DVC ROFR value this pile of potential points?

 

[silmarg]

I am no expert on the matter, but it seems to me that folks who have loaded contracts are not usually fully compensated for the value of these additional points.

My way of valuing these additional points is what they can rent for - and $10 seems to be the fair price for rentals.

So, IMO a contract that is loaded with banked and current year points is worth $20/pt more than one that it totally stripped, but my sense is that the real world price differential is about half that amount. So I think loaded contracts are usually a better deal than stripped contracts in the resale market.

Its hard to say how stripped vs loaded or price per point vs maintenance fees impact ROFR. My sense is that Disney seems to go on ROFR binges from time to time while other times they let everything pass.

 

[mlayton14]

If I were buying, I would definitely offer less than $10 per point on excess points. This is especially true for points with a relatively soon expiration date (banked points expiring this year). Members and potential buyers have much less flexibility with these points.

Of course .. there is no rule, its whatever you can agree to.

 

[CNPHILLY]

I think $10 per point for these extra points is way too high to value them for purposes of purchasing them resale. In reality, I think it is somewhere in the $2-5 area, meaning that a stripped contract at SSR that would sell for $65 per point may sell for up to $67-70, but there is no way that loaded contract would sell for anywhere near $75 per point.

The real money to be saved for the buyer here would be negotiating for the seller to pay maintenance fees on the banked and current year points. After all, they have probably already paid the fees on the banked points, and are already currently paying the fees on the current year points, so they are likely to concede this if they really want to sell the contract. Plus, this is a substantial savings for the buyer that Disney may not care about too much on ROFR, as they just want someone to pay the dues and may not care which person does it.

 

[Kid_@_50]

Consider A 100 point September Use Year resale with 100 banked points, 100 current points, and no borrowed points.

Today's date is June 2010.
Banked points are from Sept 2008 and expire August 31, 2010.
Current use year for the contract is September 2009 [to August 31, 2010], and these points can no longer be banked (less than 4 months before end of UY). 200 points that must be used before August 31, 2010.


Consider the exact same listing description:
but Today's date is October 2010.

Banked points are from Sept 2009 and expire August 31, 2011.
Current use year for the contract is September 2010 [to August 31, 2011], and these points can be banked (more than 4 months before end of UY).
200 points usable points for home resort reservations more than 7 months out. 100 points that can be banked.

Exact same listing descriptions but with a major difference in the ability to use 200 points.

Assume maintenance fees are $5/pt, due and payable at the beginning of each UY, (not prorated and paid monthly). Let's assume two contracts get submitted for ROFR, in June 2010 for $60 pt, seller pays all maintenance fees for banked and current points. In Oct 2010 for $64 pt, seller pays all maintenance fee for banked points and current points.

In the second Oct 2010 example, if it passed ROFR then I have obtained 200 points for $400.

As a buyer what you don't want to do is pay a premium value per point for banked and current points, then unexpectedly get "stuck" with a standard (?) buy/sell contract which may say maintenance fees get reimbursed for banked points and current points.

Is my understanding correct?

 

[RobDoc]

Consider A 100 point September Use Year resale with 100 banked points, 100 current points, and no borrowed points.

Today's date is June 2010.
Banked points are from Sept 2008 and expire August 31, 2010.
Current use year for the contract is September 2009 [to August 31, 2010], and these points can no longer be banked (less than 4 months before end of UY). 200 points that must be used before August 31, 2010.


Consider the exact same listing description:
but Today's date is October 2010.

Banked points are from Sept 2009 and expire August 31, 2011.
Current use year for the contract is September 2010 [to August 31, 2011], and these points can be banked (more than 4 months before end of UY).
200 points usable points for home resort reservations more than 7 months out. 100 points that can be banked.

Exact same listing descriptions but with a major difference in the ability to use 200 points.

Assume maintenance fees are $5/pt, due and payable at the beginning of each UY, (not prorated and paid monthly). Let's assume two contracts get submitted for ROFR, in June 2010 for $60 pt, seller pays all maintenance fees for banked and current points. In Oct 2010 for $64 pt, seller pays all maintenance fee for banked points and current points.

In the second Oct 2010 example, if it passed ROFR then I have obtained 200 points for $400.

As a buyer what you don't want to do is pay a premium value per point for banked and current points, then unexpectedly get "stuck" with a standard (?) buy/sell contract which may say maintenance fees get reimbursed for banked points and current points.

Is my understanding correct?

I would not assign any particluar value for the banked points from 2008 or from the current point sfrom 2009 (which can no longer be banked).

I would make an offer based only on the size of the contract and the current points available. Depending on the interest of the seller to get rid of the contract I would make an offer based on the value (to me) of the contract itself without regard to the points which I may not be able to realistically use.

I'm not aware of any resale contracts that suggest that buyer reimburse the seller for banked points - only current points in the contract. I would not hesitate to expect that maintenance fees be pro-rated (just as DVC does) especially if the current points an no longer be banked. It also would depend on the negotiated price - as I would be willing to pay a higher price for a prorated annual fee with the expectation that the offer would withstand ROFR.

 

[Kid_@_50]

I would be willing to pay a higher price for a prorated annual fee with the expectation that the offer would withstand ROFR.

Thanks.