Declined from DVC

[100percentDisney]

Has anyone ever heard of DVC declining ownership? There are some many people who own at least one resort that I wonder how many people have wanted to own but was declined. I just have never heard of any negative stories. Although I suppose people wouldn't write about it. Just curious.

 

[tjkraz]

You'll probably have a very hard time finding anyone. In getting 10% up front, DVC has more than covered its administrative and closing costs on the timeshare purchase. By contract, if one was to default on the loan through DVC, the points simply revert back to DVC. They re-sell the points and move forward.

In other words, there's really no financial reason for them to decline anyone. There have been stories of people being asked to put 20% down instead of just 10%, but even those appear to be few and far between.

 

[Dean]

We've seen people on this board that were declined financing and others that had to go up to 20% to qualify. It does appear difficult though.

Most timeshares have roughly 50% overhead to include, sales staff, marketing, etc. While DVC may be lower, no way it's less than 10%. I'd estimate 30-40%. Even on a ROFR, I'd guess it to be greater than 10% just to fool with it.

 

[tjkraz]

Thanks for the follow-up Dean. I didn't realize the sales costs were so high...

 

[G8RFAN]

I should hope that their credit department would have the same underwriting guidelines as any other timeshare financing source. While the incentive to keep timely payments is the use of the points, this is a discretionary purchase and one that is low on the priority list when you compare it mortgage/rent, car, and utilities. Therefore, your risk is higher as a lender. Foreclosure on defaulted loans is also rather expensive. The incentive obviously is to help sell timeshares which I'm sure is a very lucrative business, so loan losses may be absorbed from the profitability of each DVC resort. But, I would imagine they would never finance someone with a credit history and score predicting someone that is a single lost paycheck away from bankruptcy (there is an unbelievable number of people that fall in this category).

 

[Terry S]

Actually, they will approve someone who has recently filed for Bankruptcy with 20% down. (Just so you know, this is not me, but I know of a case where it did happen)

 

[pumpkinboy]

Originally posted by Terry S
Actually, they will approve someone who has recently filed for Bankruptcy with 20% down. (Just so you know, this is not me, but I know of a case where it did happen)

Actually, folks who have recently declared bankruptcy are a decent credit risk, from a lender's perspective, since they cannot declare bankruptcy again for another 7 years. Any debt incurred after the bankruptcy resolution can not be escaped, so it would make sense to grant someone a loan in this circumstance since the property used as collateral is worth more than the debt incurred. If there is any difficulty servicing the loan, DVC can simply foreclose on it, and sell off the points to cover the balance.

The folks they want to watch out for are those who might file for bankruptcy, as G8RFAN correctly notes, tho if they get enough down (20% would about cover it) it becomes unlikely DVC is gonna lose much money in the deal.

 

[Desperado]

I wonder if there has ever been a case of ownership revoked because of disruptive/destructive/unacceptable conduct (with ownership amount returned, of course).

 

[Dean]

Originally posted by Desperado
I wonder if there has ever been a case of ownership revoked because of disruptive/destructive/unacceptable conduct (with ownership amount returned, of course).

I haven't heard of anything like that. I can tell you that DVC offered me my money back due to misinformation given out to me during the tour. That's even though I ended up buying resale. I though this unprecedented.

 

[JimC]

Disney covers their financing and administrative costs associated with issuing credit (including risk) with the interest rates they charge.

 

[Geoff_M]

To add on to what tjkraz said, there's another risk with traditional secured debit that DVD doesn't have to deal with... On a default, DVD always gets the asset back in 100% condition. The asset doesn't depreciate greatly like a automobile.

 

[TheRustyScupper]

1) As mentioned, DVC can repossess and get full value.
2) I can't remember anyone turned down at the 20% level.
3) Disney financing is very liberal in their underwriting standards.
4) Non-Disney financing would be different and more stringent.

 

[debbiedoo]

I know of a friend that had sent them 3000 and they told her that she needed to send another 1000 by dec 31st. She is canceling. If you have too many credit lines, then they can turn you down just like any other loan. She was only only going for 150 points. I know that we had to put down all venues of income and what we were paying out, plus they ran a credit report. I was ok with on ly the 10% down.

 

[G8RFAN]

I know DVD has the infrastructure to easily sell any foreclosed timeshares, but foreclosure like I said is not cheap. Second, the finance arm is not endlessly bankrolled. If a loan goes bad, the capital that was allocated for that loan is now not earning interest income, is not covering the finance arm's overhead, and monies are being paid to recoup the collateral. Even tho DVD can resell the points, there were probably significant costs to sell those points such as commissions, marketing and other closing costs. By having to recycle these points thru the "system", DVC loses the return on their investment, even if they "chargeback" the commissions paid on a purchased finance deal gone bad which is done in other indirect finance industries. An interesting thought tho is that DVC is likely to "repurchase" the points at contract cost, as it is more likely to be lower than current market "not resale". You have a legal issue when DVC owners have significant equity in their points and have their timeshare foreclosed. They will have to show an earnest attempt to sell the property at market values. Those people with negative equity will likely have a judgement placed against them. So quite honestly, I really do not think they would knowingly make a loan that on paper would likely go bad. That would just be bad business.

 

[jmminarik]

Originally posted by 100percentDisney
Has anyone ever heard of DVC declining ownership?

Did you mean Disney outright saying "Nope, your money is no good here, we don't want ya, go away"? Everyone's answer seems to be based on financing...

From what I recall, Disney wants DVC to be a family thing, and will refuse sales to businesses. If true, they would refuse that, but then the owner/ceo/grand pooba of the company can just buy them themself and use them as they wish.

There is some limit on the number of points you can own, if I recall correctly...that would be the only reason I could think Disney says 'no'. That limit's pretty high though...no mere mortal would ever approach it.

-Joe

 

[Dean]

Originally posted by jmminarik
From what I recall, Disney wants DVC to be a family thing, and will refuse sales to businesses. If true, they would refuse that, but then the owner/ceo/grand pooba of the company can just buy them themself and use them as they wish.

Not true at all, DVC is very happy to sell to a business for their use. What I suspect you are referring to is that DVC has wording in their leterature that addressees using DVC as a rental business. We've discussed that issue many times. The other thing is they have wording about having a business on property at at DVC resort, much like some businessees operate out of a warehouse or storage area.

 

[jmminarik]

Thanks for the correction Dean.

-Joe