New $500 Resale DVC Transfer Fee

[DonMacGregor]

5-10% of buyers, yep. Let’s take that 25 point example at a different resort. Poly. About $180pp. Plus $20pp extra now for the $500 fee. But for $35pp more, you can use those points at all resorts and, if you don’t have it, a step toward a blue card. And closing costs are lower, thereby lowering the delta. It’ll shift some

I’m not sure I agree. Assuming a 25-point Poly contract is listed at $180 PP (I don’t see any currently, but it I’ll accept it), Poly direct is currently $235 PP, going up o $243 concurrent with the new fee. A difference of $63 PP ($43 if you add the pro-rata fee).

However, a new buyer can’t get 25 Poly points, that’s only available to current members adding on. A new buyer is going to have to buy at least 100 points at a total of $24,300. That 25 point resale they were looking at is still only costing them $5,000 (25x180+500).

Current members adding on, yes it’s getting pretty close ($6,075 versus $5,000 with lower closing costs maybe bringing it closer), but that’s a smaller subset of potential resale buyers. I’m still not buying the idea that the fee will cause a seismic shift in the resale market, and it will really only possibly affect some of the higher priced resale resorts.

 

[HyperspaceMountainPilot]

I just cant imagine that anyone contemplating a DVC purchase is walking away for $500.

Emotionally or perhaps even logically, I was nodding along with this comment—but then I remembered the number of contract negotiations that have fallen through in the rejected offers thread for less than $10/pt, sometimes less than $5/pt. It definitely happens with some frequency for people with a set idea of how much they will pay per point max.

 

[zavandor]

Ok, I read all 851 posts and while I don’t have a dog in the fight (my recent resale purchase was sent in 12/30), most of my curiosities have been addressed one way or another. Except one.

How, exactly, does the $500 fee lower the value of a resale contract? If I’m going to sell one of my resale contracts, why would I need to lower the price by $500? It’s not like the buyer is going to find another contract without the $500 fee. He might find one listed at a lower per-point cost, but that possibility already exists today. If a seller with a contract listed at market value decides to lower their per-point cost to lure a seller, that’s on them, and it already happens. If no one lowers their price, the market price remains stable.

Every single resale contract will cost the buyer $500 more, without exception. If they don’t want to pay it, they simply won’t buy ANY contract. If the buyer says “Well, I am going to have to pay Disney $500 more in closing costs so you’ll need to lower your price, I’m simply going to say “Cool, go find a contract without the $500 fee.”

Even on small 25-50 point contracts, where the pro-rata share of the $500 is significantly higher, if a buyer wants a small contract, they’re going to pay the fee.

On larger contracts, say 150 to 200 points, the pro-rata share, per point, of that fee starts to become de minimis. $2.50 per point is well within the standard deviation of the current pricing, and sellers make concessions well above that every day to sell contracts. For a 300 point contract? Gimme a break.

Regardless, with the fee applied as closing costs on every single resale contract, the playing field remains level. A rising tide lifts all boats, as JFK would say.

If this is true, why in the last year, before the fee, all resale contracts weren't priced $500 more?

 

[DonMacGregor]

If this is true, why in the last year, before the fee, all resale contracts weren't priced $500 more?

Huh?

Are you suggesting that if someone is willing to pay current prices plus the $500, then why weren’t all of the prices already $500 more (because maybe the market might support that pricing)?

That’s not how it works. The current prices are at an organic equilibrium due to supply and demand. The $500 fee is what is called, in economics, an external force or a (non-classical as they are intended versus unintended or accidental) “externality”. It’s the effect of a third party outside of the organic supply and demand. It throws the system out of equilibrium (disequilibrium). The system then needs to find a new equilibrium (which includes the externality).

It’s not too dissimilar to the national debate about tariffs. Would retailers lower their prices and absorb any tariffs, keeping prices intact, or would they simply add the tariff costs onto their existing prices, passing the tariff onto the consumer?

Here, it’s a little bit different. This is like the retailer selling you the product, then Uncle Sam showing up on your doorstep a month later asking you to pay the tariff. It has nothing to do with the retailer, so why should the retailer lower their prices, simply because a third party (Uncle Sam) has decided to charge you a tax/tariff/fee for buying that product? Also, if the retailer knows you’ll have to pay that fee no matter what and regardless of who you buy the product from, where is the pressure on that retailer to lower their prices (and profits)? Are you going to walk into that retailer and say “Hey, Uncle Sam is going to show up next month and charge me $XX for your product, so you need to lower your pricing to keep my net cost the same”?

Plus, if all retailers selling that same product maintain their current pricing, without trying to undercut each other (see the creation of OPEC), then there is no pressure to lower pricing beyond affordability, and I don’t think at $500, that affordability will really create that much downward pressure.

 

[walt34]

Huh?

That's how I'd put it: If the price is what people are willing to pay for a contract (and someone is willing to sell for that price): For a potential buyer, the price of a DVC resale contract has now increased $500. If they were willing to pay $500 more last year, why didn't prices increase?

The limitation I see is that people might not be fully aware or at least don't fully factor the contract costs into the price point. So as long as the fee is not high enough for potential buyers to step back from a price that looked acceptable to them, it might not change much.

 

[walt34]

Also, if the retailer knows you’ll have to pay that fee no matter what and regardless of who you buy the product from, where is the pressure on that retailer to lower their prices (and profits)?

But this is exactly it: the new fee only affects resale contracts. Assuming the old prices were what people were willing to pay considering the limitations of a resale contract as compared to direct, why would prices stay the same, if buying the contract resale is now $500 more expensive after the fee.

I'd recommend staying clear of talking about tariffs as a comparison. Might be seen as too political for these boards.

 

[DonMacGregor]

That's how I'd put it: If the price is what people are willing to pay for a contract (and someone is willing to sell for that price): For a potential buyer, the price of a DVC resale contract has now increased $500. If they were willing to pay $500 more last year, why didn't prices increase?

The limitation I see is that people might not be fully aware or at least don't fully factor the contract costs into the price point. So as long as the fee is not high enough for potential buyers to step back from a price that looked acceptable to them, it might not change much.

Read my whole response.

No one is paying $500 more for the contract. They are paying the same price, but also paying a $500 fee to Disney. They are two separate things.

You guys seem to like throwing out the “what if Disney decided to charge $10,000” hypothetical. If they did, does that mean the seller actually owes the buyer $8k on that $2,000 OKW contract they just sold them (because it’s the sellers responsibility for making buyers whole due to a fee Disney charged them that is totally out of the hands of the seller?

And the tariff analogy isn’t political. Tariffs have been around forever. Good, bad, whatever. It’s just a very analogous example. It could also be your state DMV on your doorstep asking for additional registration fees, or your county tax collector looking to get paid on a new assessment. Those work just as well.

 

[walt34]

Read my whole response.

Yeah, when I wrote mine, "Huh?" was the whole response. You edited later.

 

[zavandor]

Huh?

Are you suggesting that if someone is willing to pay current prices plus the $500, then why weren’t all of the prices already $500 more (because maybe the market might support that pricing)?

That’s not how it works. The current prices are at an organic equilibrium due to supply and demand. The $500 fee is what is called, in economics, an external force or a (non-classical as they are intended versus unintended or accidental) “externality”. It’s the effect of a third party outside of the organic supply and demand. It throws the system out of equilibrium (disequilibrium). The system then needs to find a new equilibrium (which includes the externality).

It’s not too dissimilar to the national debate about tariffs. Would retailers lower their prices and absorb any tariffs, keeping prices intact, or would they simply add the tariff costs onto their existing prices, passing the tariff onto the consumer?

Here, it’s a little bit different. This is like the retailer selling you the product, then Uncle Sam showing up on your doorstep a month later asking you to pay the tariff. It has nothing to do with the retailer, so why should the retailer lower their prices, simply because a third party (Uncle Sam) has decided to charge you a tax/tariff/fee for buying that product? Also, if the retailer knows you’ll have to pay that fee no matter what and regardless of who you buy the product from, where is the pressure on that retailer to lower their prices (and profits)? Are you going to walk into that retailer and say “Hey, Uncle Sam is going to show up next month and charge me $XX for your product, so you need to lower your pricing yo keep my net cost the same”?

Plus, if all retailers selling that same product maintain their current pricing, without trying to undercut each other (see the creation of OPEC), then there is no pressure to lower pricing beyond affordability, and I don’t think at $500, that affordability will really create that much downward pressure.

A certain type of contract on the resale market costs on average 10k, random number, because people have decided it's what they are willing to pay. It's an average, it means that a motivated buyer might want to buy it for 10,500, others prefer to wait it goes down to 9,500. Now, the person who is not willing to pay 10k and is waiting for it to be a little bit cheaper, will not even offer 9,500, because of the fee, they'll wait for 9k or not buy at all. Someone will still be motivated to buy at the old price and pay the fee too, but others won't. It won't happen overnight, we will not see all resale contracts be discounted 500 tomorrow, but in the long term, I think all resale contracts will be priced $500 less then they would be without the fee.

Others have reported this is exactly what happened with Marriot. Every time they have increased the fee to wash resale points, resale contracts have decreased by the same amount.

ETA: Fidelity charges the buyers an admin fee. Fidelity is still in the market, but their prices are usually lower than other brokers.

 

[walt34]

Read my whole response.

No one is paying $500 more for the contract. They are paying the same price, but also paying a $500 fee to Disney. They are two separate things.

You guys seem to like throwing out the “what if Disney decided to charge $10,000” hypothetical. If they did, does that mean the seller actually owes the buyer $8k on that $2,000 OKW contract they just sold them (because it’s the sellers responsibility for making buyers whole due to a fee Disney charged them that is totally out of the hands of the seller?

It would be great if you could decide what to write and then poste. Going back to add additional points to your post after posting makes it really hard to have a conversation.

For the buyer, it doesn't really matter who they pay the extra $500 to, does it? It's what they are paying to get the contract.

I don't think the hypothetical is very helpful. If Disney charged an absurd resale fee $10,000 for a contract, there would be no price at which someone would buy resale (apart from very high point contracts), so no sale would be happening.

 

[BeachClub2014]

How, exactly, does the $500 fee lower the value of a resale contract? If I’m going to sell one of my resale contracts, why would I need to lower the price by $500? It’s not like the buyer is going to find another contract without the $500 fee. He might find one listed at a lower per-point cost, but that possibility already exists today. If a seller with a contract listed at market value decides to lower their per-point cost to lure a seller, that’s on them, and it already happens. If no one lowers their price, the market price remains stable.

Nailed it.

 

[DonMacGregor]

It would be great if you could decide what to write and then poste. Going back to add additional points to your post after posting makes it really hard to have a conversation.

That post was all written out, but I went back and re-read it and realized that, given the predilection on this board for sophomoric pedantry, I’d be better served by cleaning it up and removing anything that people like to glom on to as an “a-ha!” moment, or something that someone could isolate and muddy with a ridiculously rare outlying scenario (“Well, sure, but what if you had”…followed by the most outrageously impossible hypothetical imaginable.)

Because the board doesn’t allow deleting posts, I cut everything after the first sentence and just left that while I edited the rest of the post. (Plus there were some typos as it was like 1am and I was in my phone dealing with jet lag).

 

[Sandisw]

I mean look at the response to Disney offering an additional $1000 in direct incentives in a given cycle. Sales fluctuate by 10 percent or more. Luxury goods are generally very price elastic. I’m not saying it’s going to kill the market, but it would be really abnormal if the $500 price increase didn’t impact sales a little.

There is a difference in saving an extra $1000 off a direct purchase if one is contemplating it vs someone who is buying resale because direct is already too expensive.

At this point, new buyers won’t even be aware of the difference unless they are involved in forums like this.

The bulk of buyers are not so anyone looking into DVC for the frost time is just going to see it as the cost of buying.

Take Poly…100 points resale might be $15.000 vs direct at $23.500…

Do you really think that extra $5O0 matter to the bulk of buyer that the walk away? I just don’t!

 

[byurick]

Every day in other parts of life we're getting nickel and dimed with fees while the prices of goods goes up. This $500 transfer fee will be no different. A year from now no one will be talking about it since it will just be the normal cost of buying/selling.

 

[walt34]

Because the board doesn’t allow deleting posts, I cut everything after the first sentence and just left that while I edited the rest of the post. (Plus there were some typos as it was like 1am and I was in my phone dealing with jet lag).

This doesn't seem like the most sensible approach. Maybe remove the complete post while editing? or leave a hint that you are editing? I might be mistaken but it appears that you regularly edit posts to add more points? If you do, someone trying to write an outrageously impossible hypothetical might not get to read it, as the quote won't change anymore.

 

[Dodgerburt8]

There is a difference in saving an extra $1000 off a direct purchase if one is contemplating it vs someone who is buying resale because direct is already too expensive.

At this point, new buyers won’t even be aware of the difference unless they are involved in forums like this.

The bulk of buyers are not so anyone looking into DVC for the frost time is just going to see it as the cost of buying.

Take Poly…100 points resale might be $15.000 vs direct at $23.500…

Do you really think that extra $5O0 matter to the bulk of buyer that the walk away? I just don’t!

Not to the bulk of buyers but to some. In my own case I was DVC curious for a while and seriously on the fence for nearly three years. I was very price conscious, and whether rational or not, closing costs, annual dues and price per point all mattered a lot to me. I think had every contract effectively cost $500 more, I would have stayed on the fence longer. I needed reasons to buy, not reasons to wait. If say, 5 percent of price sensitive buyers decide to wait or pass all together, or buy Poly direct etc., then inventory will build up and resale prices will decrease. Maybe only by a few dollars per point on average.

 

[muppets3d]

People walk away from car and house purchases for $500, so to think that this new fee isn't going to affect the resale market is pie-in-the-sky stuff.

 

[DonMacGregor]

This doesn't seem like the most sensible approach. Maybe remove the complete post while editing? or leave a hint that you are editing? I might be mistaken but it appears that you regularly edit posts to add more points? If you do, someone trying to write an outrageously impossible hypothetical might not get to read it, as the quote won't change anymore.

You do it your way, I'll do it my way (which has worked just fine for the better part of 5 years and 6,600 posts). It's a DVC message board, not the UN General Assembly, and we're not debating international human rights here, just DVC resale contracts. Regardless, the pedantry always finds a way, so no need to worry.

 

[eticketplease]

Whether the posts have been edited or not I have always found @DonMacGregor posts informative and sometimes shine things in a different light that hadn't crossed my mind.

 

[DonMacGregor]

People walk away from car and house purchases for $500, so to think that this new fee isn't going to affect the resale market is pie-in-the-sky stuff.

And every single day, people offering/negotiating on DVC resale contacts increase their number by $500 (or more) in the blink of an eye (especially if it translates into only one or two dollars per point. Also, I just saw a SSR "list price offers only" contract that was priced $15 more than similar contracts sell, so it does work both ways. Probably the right UY at the right time, but it did sell (and I know it sold for the full price because I made an offer on it. LOL)

To be clear, I'm not suggesting that there won't be ANY downward pressure (there have already been strong arguments regarding high-priced resale resorts being an exception, especially with the gap between resale and direct being so close) but even those are really only add-on contracts for existing owners. I just don't believe the effect will be all-encompassing and debilitating to the resale market, nor a harbinger of its demise.