Contract value?

[MrInfinity]

The question is impossible to answer because I would not buy a stripped contract.

Alright, let's ignore the extremes of stripped/banked and just look at 2017 points. Say you're considering two options on 200-pt Sep BLT contracts:
1) Sep UY 100/2017, 200/2018
2) Sep UY 200/2017, 200/2018
2) has 100 extra points that are soon to be current. If you were formulating offers on those two, how much more would you pay for 2) than 1)?

I managed to capture this portion of your post despite the fact that you went back and edited it out. But it is a great example of how the things you have said in this post have not been accurate. Go back and read post #9 and you will see that I interpreted Dean's comments correctly.

Maybe, just maybe, I took that out because I went back to reread Dean's bit and saw you interpreted it right on the 15/15/7. So I took it out. Are you seriously faulting someone for saying something about you misinterpreting something, going to validate, seeing w/in seconds that you didn't, and removing it because what you said was actually ok? ROFL.

 

[ELMC]

Alright, let's ignore the extremes of stripped/banked and just look at 2017 points. Say you're considering two options on 200-pt Sep contracts:
1) Sep UY 100/2017, 200/2018
2) Sep UY 200/2017, 200/2018

2) has 100 extra points that are soon to be current. If you were formulating offers on those two, how much more would you pay for 2) than 1)?

Maybe, just maybe, I took that out because I went back to reread Dean's bit and saw you interpreted it right on the 15/15/7. So I took it out. Are you seriously faulting someone for saying something about you misinterpreting something, going to validate, seeing w/in seconds that you didn't, and removing it because what you said was actually ok? ROFL.

To answer your first question, I wouldn't buy either of the two contracts. Given that we are currently in the SEPT 2016 UY, both those contracts are stripped of current UY points. You should also know that if you buy either of those contracts, 8/12 of the money you spend reimbursing maintenance fees goes to points that you didn't actually get to use. Please tell me that you understand that.

For your second question, no not faulting you, we all make mistakes. But you have made a number of false statements and incorrect assumptions in this thread so I used that post to highlight a pattern of behavior. Our words here have an impact far beyond the participants in the discussions. There are many readers who may act based on what we say here. We owe it to them to be as accurate and intellectually honest as possible. I'm sure we can both agree on that.

 

[MrInfinity]

Given that we are currently in the SEPT 2016 UY, both those contracts are stripped of current UY points. You should also know that if you buy either of those contracts, 8/12 of the money you spend reimbursing maintenance fees goes to points that you didn't actually get to use.

I would not personally reimburse maint fees on either. I would pay the 2018 fees in Jan 2018. I never said anything about reimbursing fees on the deal.

To answer your first question, I wouldn't buy either of the two contracts.

Ok so give me an example of a type of contract you would buy. Let's start there.

 

[Dean]

For me, that value of those points is around $6-$9

But that's just it, one can easily rent the points if not restricted or too short notice. The floor isn't what someone subjectively values them but what they can almost certainly turn them over for. That's the amount they'd get through a broker. That's either $13 or $14 per point if one has at least 7 months to work with.

 

[MrInfinity]

But that's just it, one can easily rent the points if not restricted or too short notice. The floor isn't what someone subjectively values them but what they can almost certainly turn them over for. That's the amount they'd get through a broker. That's either $13 or $14 per point if one has at least 7 months to work with.

I agree with all this. But still just because points rent for $13, $14, or $15, does not mean that is what points sell for. The sale price is substantially less than the rental income potential. We all see this in the actual sales data. The potential to rent points for $15 might influence this sale price, but it is just one of many influences.

 

[ELMC]

But that's just it, one can easily rent the points if not restricted or too short notice. The floor isn't what someone subjectively values them but what they can almost certainly turn them over for. That's the amount they'd get through a broker. That's either $13 or $14 per point if one has at least 7 months to work with.

I agree with all this...

Points are not "worth" $15 at sale...They gravitate toward a more median value, which means the points are not worth $15.

You see how your argument is a constantly moving target, right?

But still just because points rent for $13, $14, or $15, does not mean that is what points sell for. The sale price is substantially less than the rental income potential. We all see this in the actual sales data. The potential to rent points for $15 might influence this sale price, but it is just one of many influences.

Nobody in this entire thread has claimed that they do. But you've put those words into our mouths and then fought tirelessly trying to argue the counterpoint. We have understood the point that you have been making from the beginning, and nobody in this thread suggested that the full $15 value of banked points is included in the asking price or selling price of contracts. But I have to say that after rereading this thread start to finish, I really don't think you understand the points that others are trying to make or the fact that you are conflating two separate issues.

 

[ELMC]

Ok so give me an example of a type of contract you would buy. Let's start there.

Start? Oh my, no thank you. I get the feeling that this conversation is at its end, not its beginning.

 

[Dean]

I agree with all this. But still just because points rent for $13, $14, or $15, does not mean that is what points sell for. The sale price is substantially less than the rental income potential. We all see this in the actual sales data. The potential to rent points for $15 might influence this sale price, but it is just one of many influences.

We've come full circle. It's a fact that points have a definable value and that stripped contracts generally don't reflect the lost value of the points so it follows that a stripped contract is a poor value comparatively speaking and that that value difference can easily be calculated by taking the points difference, price difference converted to $$$, dues one is reimbursing plus dues one is paying on points they don't have come Jan and possibly the next Jan. Since the contracts will be worth EXACTLY the same at some point, the question is figuring the differential to get to that point. One just needs to know and thus look at more than price per point when evaluating a contract. Maybe it's something they can't easily get (? VGC or VGF) but maybe it's something one can easily find a better contract for a better value (not price necessarily) by waiting a month or 2.

It does not follow that the price difference per point is a reflection of the true difference in value, actually it's 100% not true unless that and the number arrived at above are fairly close.

 

[MrInfinity]

Nobody in this thread suggested that the full $15 value of banked points is included in the asking price or selling price of contracts.

Ok, if you are good with the fact that points are not worth $15, then we're in agreement. I've tried to encourage you to put forth what you think they're worth and you won't, so the interesting aspect of discussing how much that gap is and why, kind of ends there.

Start? Oh my, no thank you. I get the feeling that this conversation is at its end, not its beginning.

No worries, I figured you would decline. Alright. I really don't feel like this discussion is going anywhere so let's move on.

Stripped contracts generally don't reflect the lost value of the points. [...] One just needs to know and thus look at more than price per point when evaluating a contract.

It would be interesting to explore this difference in rental value vs lost value of the points... and why those are not equal, perhaps explain the factors that go into determining the final price and what a good price is for extra points some time.

 

[DougEMG]

So, what constitutes a "good deal" when it comes to extra points? They could get you up to $15 as rental income. So, you probably won't pay over $15 for them up front. That wouldn't be a good deal. I presume you would go for them if free or a couple $$. So somewhere in between those two levels is your threshhold. What is that threshhold? At what level would it still be a good deal to you? For me, that value of those points is around $6-$9. If I can get points for $6 or less, I'd take them. If I was going to have to pay $9 or more, that's probably not going to be a good deal to me. You may consider it a good deal if you get them for $14 because you can rent them for $15 and you'd be happy to get $1 profit. Not me. What is your "good deal" value when it comes to buying a contract with extra points?

When I bought my contracts I considered good deal anything that had a total cost of $35-$40 per point after all costs and all rental income from the available points. My upfront costs though averaged $59.22 per point. My average cost worked out to be $33.90 per point, while the best deal I ever had was a contract that ended up costing me only $21/point for a 200 point SSR contract. And while that sounds really good, I know of other people that managed to get even better deals than that.

The point here is that I look at the overall total cost of the contract, what buckets those costs are in make no difference to me.

Now the reason I picked that price range was that with rentals back then of about $10/point and MF of around $5/point, that left a profit of about $5/point. Divide $35 and $40 by $5 and you have 7 and 8 years. So I looked at DVC as having a 7-8 breakeven time period (to keep the math simple I won't include opportunity costs). That was a time period I was comfortable with.

 

[ELMC]

Ok, if you are good with the fact that points are not worth $15, then we're in agreement. I've tried to encourage you to put forth what you think they're worth and you won't, so the interesting aspect of discussing how much that gap is and why, kind of ends there.

Please don't put words in my mouth, because that is not at all what I said. At this point I feel like you may be doing this on purpose, but I am going to clarify for others reading this thread.

To be clear, we are absolutely NOT in agreement. Quite frankly, it shocks me that you still can't differentiate between worth and factors that impact the ability to monetize that worth. You have been conflating those two issues since the beginning, and I think I'm ready to resign myself that you either can't see a difference between the two, won't see a difference between the two, or won't admit that there is a difference.

To summarize, I'll restate my stance simply and clearly.

• The points are worth $15 to the owner of the contract who can rent them out for that much money.
• The points are worth $15 to the buyer of the contract who can rent them out for that much money after closing.
• Market inefficiencies and other factors make it extremely difficult for a seller to realize the full $15 on those points in a sale of the contract. But these inefficiencies do not in any way change the worth of the points...which is $15. Value is lost through the resale process, but that is a function of the process and not the point rental market, which happens to be significantly more efficient.

To address your last statement regarding the size of the gap and the factors that influence it, it's impossible for us to get there because you haven't shown that you can differentiate between worth and the ability to monetize that worth. I believe that your analysis of the delta in price between those points rented vs. those points in a sale is extremely oversimplified and absent of mention of several critical factors that affect resale prices. However, if you're looking for a simple answer, the market dictates that the prevalent delta in price is $4 more or less for each year's worth of points that are present or missing.

 

[ELMC]

...while the best deal I ever had was a contract that ended up costing me only $21/point for a 200 point SSR contract. And while that sounds really good, I know of other people that managed to get even better deals than that.

Yes, me.

That's still a killer deal though. My deal was at VB, so long term you are going to crush me.

 

[Dean]

Ok, if you are good with the fact that points are not worth $15, then we're in agreement.

We've established the fact that currently points with a lead time have real $$$ value and a potential cost. We've further estblished that value to be as a minimum $13 per point but more realistically at least $15 per point. The costs on a resale vary, but likely to be the dues at most. Whether one elects to rent or not doesn't change this, the points still have that value at that time, esp since we're presumably talking enough volume of points to matter.

 

[MrInfinity]

I am going to clarify for others reading this thread.
It shocks me that you still can't differentiate[...]
You have been conflating[...]

Ok, you seem to be frustrated, and I don't really want to trade jabs about how it "shocks me that you can't differentiate..." You seem to be offended that someone does not share your viewpoint, but I'm open to discuss it if you would like to. If you are going to go this route tho, I would be okay with just moving on.

1) The points are worth $15 to the owner of the contract who can rent them out for that much money.
2) The points are worth $15 to the buyer of the contract who can rent them out for that much money after closing.
3) Market inefficiencies and other factors make it extremely difficult for a seller to realize the full $15 on those points in a sale of the contract. But these inefficiencies do not in any way change the worth of the points...which is $15.

I'll touch on your 3 bullets.
1) Agreed. This seller owns points that have a value, and by delaying his sale for a year which costs him in other ways, he can earn $15pp.
2) Agreed. This buyer can opt to buy more points now, and by doing the work to rent them and tying up his capital for a year, he can earn $15pp.
3) Market inefficiencies are likely one factor in pegging sale price, but they are just one of many factors.

You say the real value of the points is their expected rental income over time. That's just not how value works. We've gone thru lots of examples. We did the shovel example:

You buy a shovel for $20 at Home Depot. That shovel has a value of $20. Period. Now say you know in advance that you can rent that shovel for $3/day for 100 days. You make $280 of rental income. That shovel is NOT all of a sudden worth $300. It may be to you, but only because you have a way to convert that $20 shovel into $300 of rental income. You could not go to your neighbor and say -- Hey wanna buy a shovel? It's $300. You would get laughed at. Even if you show him proof how he could rent it out for $3/day for 100 days. It is still only a $20 shovel. He would likely ignore you, go buy a $20 shovel, and earn his own rental income. He wouldn't just pay you $300 for it. It's not worth that much!

In the case of DVC, you pay an amount (which we were trying to get to via this whole discussion) like $6-$9 for points (which is their maint cost plus a couple dollars more for the up front cost of the points). Then you rent them for $15 -- but around half of that is rental income. Sure you might say -- But I only had to do an hour of work. Or -- It took at most 4 hours of work. Great. So you're profitable. But that comes with having capital -- that is tied up not earning interest elsewhere. -- it is earning you rental income instead.

On the subject of this thread, it was asked. How do you price out contracts that have a few extra points. Some people said to value them at $15. I think that's bad advice, because well -- they don't actually go for that much. So, I spoke up. Extra points are not worth $15 at the time of sale. Actual sales data supports this. Most people value extra points much much lower than $15 for many diverse reasons -- one of which is that getting points now is not that important to most people. As long as your contract has enough points to meet your desired vacations, there is no reason to pay more for points that will just end up giving you a few more nights over the next 40 years.

And yes I do think we're in agreement on many things. I agree with you that the points are worth $15 to you. You call that your "value" (It's income from rental, but I don't care if you want to think of this as your internal value on the item).

Maybe this will help. You are saying that because you can rent out points for $15 later, they have an actual worth of $15 now. But why stop at year 1? Look at a 200-point BLT contract. Over its life, this contract has ~8,600 points. If you rent these for $15pp/yr, you'd earn $129,000. So is that contract "worth" $129,000 to you? That IS what you can rent them for after all..... If so, I've got a contract to sell you.

Market dictates that the prevalent delta in price is $4 more or less for each year's worth of points that are present or missing.

Yay! After 4 pages of posts, you've put forth your opinion on the number in answer to the original question. $4. Ok. I would personally say it's a little higher, but we differ there. I would definitely buy points if I got them for $4 because that's less than their maint/taxes.

 

[ELMC]

You seem to be offended that someone does not share your viewpoint,

Nope. I welcome disagreement. You are not disagreeing, you are distorting, and that is what I find unpleasant.

and I'm open to discuss it if you would like to.

No thanks.

You are saying that points are worth $15, and simply the "inefficiency of the market" (aka -- people don't understand their value) leads to points selling for less than their real value.

You are saying that it's simple. I said it was complicated, and a discussion beyond the scope of this thread.

But, you say the real value of the points is their expected rental income over time.

Nope, didn't say that at all. Was only talking about points with immediate access (banked, current, upcoming in current calendar year).

But that comes with having capital -- capital that is tied up not earning interest elsewhere. -- it is earning you rental income instead.

If I'm buying the DVC contract regardless, tying up capital is irrelevant.

You are saying that because you can rent out points for $15 later, they have an actual worth of $15 now.

Nope, didn't say that at all. Again, I was only talking about points with immediate access (banked, current, upcoming in the current calendar year).

Ok, you seem to be frustrated

A little. I don't like being misquoted or engaging in conversations with those who distort facts to prove their point. To that end, I'm done here. Have fun people.

 

[DougEMG]

Here is some simple advice for sellers and buyers to maximize their sale profit or minimize their purchase cost.

As a seller try and rent or transfer out as many points as possible before listing your contract, this will get you more money then selling the contract with those points on the contract.

As a buyer to get the cheapest number of points as possible look for a loaded contract and rent out the extra points, with stripped contracts you will be paying a higher rate per point.

 

[cheygirl]

I'm in the process of purchasing a stripped contract as I don't need the points for a few years, thought it was a decent price and know the process can take a long time. I wanted to buy at a decent price and I am not paying for MF unit 2019, but now I am thinking I probably over paid. Rats. I wish this thread was here before I signed the documents! ;-)

 

[Toreby]

I'm in the process of purchasing a stripped contract as I don't need the points for a few years, thought it was a decent price and know the process can take a long time. I wanted to buy at a decent price and I am not paying for MF unit 2019, but now I am thinking I probably over paid. Rats. I wish this thread was here before I signed the documents! ;-)

If it's been 10 days or less since you signed the contracts then you can rescind your offer. Not that I encourage you to, but it's an option.

 

[cheygirl]

If it's been 10 days or less since you signed the contracts then you can rescind your offer. Not that I encourage you to, but it's an option.

Thank you. Appreciate the follow up. Such a stressful process!!! My 10 days was up on Saturday and I saw this post on Wednesday. I do not think I got screwed, but from what I've read, I likely could have done better.

 

[Phatscott25]

I wouldn't say you got screwed either but do agree you could have got more bang for your buck. If you're happy with your upcoming purchase I wouldn't fret about it. As I mentioned above, my first purchase I neglected to realize the value of a loaded vs stripped contract and to this day I'm still happy with my contract. Of course hindsight being 20/20 I would've bought loaded but it is what it is, live and learn.