Delayed closing on stripped contracts - great idea

[macman123]

I have a PVB contract I had an offer accepted 2 months ago.

It was 0/0/220 and passed ROFR about a month ago.

Closing in November as must have a booking.

But it actually does me a favour. Even though its stripped, I had $143pp accepted and it passed ROFR

So between the offered accepted, ROFR and closing, it will only go up in value.

Therefore a delayed closing contract only increases in value.

Or am I just barking mad?

 

[Jmazzuca243]

Consider the other option of immediate closing. Holding all other variables constant (UY, points, price), both contracts (whether you close today or close later) will have the same future price. So no net gain.

Although this isn’t truly what happens in the market. Many people value getting the contract and points sooner, and delayed closing contracts are slightly cheaper. The drawback is that if prices increase enough, an educated seller may back out of the agreement. In your case, the seller would have to pay the estimated 8.5% commission (roughly 12pp) to back out of the agreement. If they can get a price higher than selling price + commission, then they still come out ahead. Last month, Poly averaged 175. If the seller backed out, they could make 20pp with a newer contract (after accounting for the commission). They might have to list with a different broker, but they could easily make more. I doubt many sellers will do this since it’s more difficult. But as prices rise, I think this becomes more likely.

 

[poofyo101]

There are times when it goes down in value.....
just a special time we are living in right now.

 

[DebbieB]

I bought a VGC contract in January 2020. The listing had a delayed closing for May. It was stripped. I didn't plan a trip last year, so I was OK with that. After I made my offer and it was accepted, the agent emailed me and said he reviewed their point histories and the points they were using for the reservation were in another contract, so I could close on time. Closed at the end of January.

Move forward to May or June 2020 and out of the blue it hit me. What would have happened with the resorts being closed? Their reservation was obviously cancelled and points returned. Would my contract have been cancelled or have to be rewritten?

 

[sethschroeder]

Or am I just barking mad

And when they cancel your agreement?

I wouldn't do delayed closing unless I got paid if the seller didn't fulfill their end.

 

[sndral]

The value could go up, in which case you locked in your price assuming the seller doesn’t have a change of heart in the 7 months you wait to close.
The value could go down, in which case you are locked in to paying more than what you could have paid.
The value could stay the same, in which case you are waiting longer hoping the seller will sign the closing documents when the time comes.
I avoided can not close before contracts as I feared that the sellers would have a great last DVC vacation & change their minds about selling - after all the broker only gets their commission when I pay & probably wouldn’t proceed against a defaulting seller due to cost to collect.
Resale is nerve wracking enough, those who do delayed closings have nerves of steel

 

[RobDoc]

We are currently in the position of selling a stripped contract.

The past few years we have been transferring points from the next Use Year so the June Use Year contract had no banked points from the 2020 Use Year and no points from the June 2021 Use Year. We had borrowed 10 points from the 2023 Use Year for a reservation for our daughter's family this October - so because of that reservation, the contract could not close before late October.

Our agent from DVCResaleMarket suggested an asking price and we said we wanted a little room for negotiation so it was listed 1$ higher than suggested.

Two weeks later we were contacted by DVCRM with an offer $8 per point less than the asking. We countered at $7 higher than that offer, which was the original suggested price and the buyer accepted our counter-offer.

The contract was submitted for ROFR and this week we learned that DVC had exercised ROFR on the contract.

The closing is now in the hands of DVC (and not a local Title company) and we are supposed to receive closing documents about a week prior to the closing date. We will receive the same amount we accepted. We are still paying maintenance fees for the 2021 points which were transferred last year and for the 10 points borrowed from the 2022 Use Year. DVCRM will also still receive their full commission.

So this contract had only the ability to borrow up to 50% of the 2022 Use Year points for a reservation through May 31, 2022 and a full complement of points in 2023 going forward.

DVC is able to re-package the points to suit their sales needs and even provide "current Use Year" points by supplementing with points from other unused contracts they have at their disposal (the same resource they use for OTU points although they will need to use points that can be banked for use in 2022). Since these were OKW points, they will also now come with the 2057 expiration date.

I do feel badly for the potential buyers who now have to return to looking for a contract.

 

[princesscinderella]

We are currently in the position of selling a stripped contract.

The past few years we have been transferring points from the next Use Year so the June Use Year contract had no banked points from the 2020 Use Year and no points from the June 2021 Use Year. We had borrowed 10 points from the 2023 Use Year for a reservation for our daughter's family this October - so because of that reservation, the contract could not close before late October.

Our agent from DVCResaleMarket suggested an asking price and we said we wanted a little room for negotiation so it was listed 1$ higher than suggested.

Two weeks later we were contacted by DVCRM with an offer $8 per point less than the asking. We countered at $7 higher than that offer, which was the original suggested price and the buyer accepted our counter-offer.

The contract was submitted for ROFR and this week we learned that DVC had exercised ROFR on the contract.

The closing is now in the hands of DVC (and not a local Title company) and we are supposed to receive closing documents about a week prior to the closing date. We will receive the same amount we accepted. We are still paying maintenance fees for the 2021 points which were transferred last year and for the 10 points borrowed from the 2022 Use Year. DVCRM will also still receive their full commission.

So this contract had only the ability to borrow up to 50% of the 2022 Use Year points for a reservation through May 31, 2022 and a full complement of points in 2023 going forward.

DVC is able to re-package the points to suit their sales needs and even provide "current Use Year" points by supplementing with points from other unused contracts they have at their disposal (the same resource they use for OTU points although they will need to use points that can be banked for use in 2022). Since these were OKW points, they will also now come with the 2057 expiration date.

I do feel badly for the potential buyers who now have to return to looking for a contract.

Thanks for sharing your experience, it’s nice to hear the sellers perspective, especially when it’s taken by Disney.