Opinions on resale purchase: How much do you weigh contract exipiration?

[crisi]

Not really, a better analogy is buying at the organic store and paying more for a brand that might or might not be better compared to getting the best stuff at Publix or similar. The question is, are you or are you not getting more value if you spend more and is any added value worth it to the buyer. The reality is that no one new to DVC truly knows what will give them added value for the money. Other than those with a ton of experience from renting or vicariously from family trips, no new buyer is going to be able to know that paying more is worth it to them. Unfortunately many of them will think they know and buy into the hype thus paying more for something that doesn't add value to them. Like so many things in personal finance and purchasing, the reality is not really about the math but the end behavior. Think of it like buying a car where far too many people overpay and the emotions/hype takes over and supersedes the decision making. 100% of those who lease fall into this category and most who buy new do as well.

I don't think you give people enough credit. Plenty of people know they'd rather be near a park than away from a park. Plenty of people know they want to go for F&W and be able to walk home. Plenty of people LOVE the Poly from years of trips there, and waited until PVB opened before buying.

Maybe no one knows with 100% certainty, but no one knows even after they buy with 100% certainty - maybe after nearly 20 years of ownership, Riveria will be exactly what we wanted all along (doubtful). But I think most people know themselves well enough that they can say with some certainty that the corn syrup is just fine - or that they will always go for real maple, even if it costs more.

(My son loves the cheap "pancake" syrup. Cheaper for me. Everyone else in the house will go through the real stuff by the gallon).

 

[Dean]

Yeah I thought of that comparison, or name brand vs. Generic bread or something, as well. In all honesty I was eating pancakes when I came up with the syrup one.
The basic message I was trying to convey is that it is all good. If you are happy paying more or getting less years on a contract to stay at BCV for food and wine, that's great and I am glad you are happy. If you also feel that a longer contract would benefit you more (that applies to me, someone in my 30's with two young kids), that's also great. There really is no 'right' value for everyone to agree on because we all have different wants with these resorts and contracts. It is unique to everyone's resort desires, timelines, and budgets.

But that's just it, this is a decision of tens of thousands of dollars long term whether one buys SSR and it's a horrible choice or Poly and uses for SSR. Patience will allow a much better decision and will save significant dollars in most situations.

 

[Dean]

I don't think you give people enough credit. Plenty of people know they'd rather be near a park than away from a park. Plenty of people know they want to go for F&W and be able to walk home. Plenty of people LOVE the Poly from years of trips there, and waited until PVB opened before buying.

Maybe no one knows with 100% certainty, but no one knows even after they buy with 100% certainty - maybe after nearly 20 years of ownership, Riveria will be exactly what we wanted all along (doubtful). But I think most people know themselves well enough that they can say with some certainty that the corn syrup is just fine - or that they will always go for real maple, even if it costs more.

(My son loves the cheap "pancake" syrup. Cheaper for me. Everyone else in the house will go through the real stuff by the gallon).

We'll have to agree to disagree. IMO NO new buyer has enough info without real information, thinking they want something and knowing are 2 different things. To be clear we're talking those without a combination of on property and DVC experience. Some will luck out and hit it but many want. Obviously things and people change over time but that's not the issue here. Certainly someone buying site unseen will not know.

 

[Ben E N]

But that's just it, this is a decision of tens of thousands of dollars long term whether one buys SSR and it's a horrible choice or Poly and uses for SSR. Patience will allow a much better decision and will save significant dollars in most situations.

Yes, agreed there. I think it is a poor decision for anyone to look into buying DVC unless they know for a fact that they would be happy going to Disney World every other year for the next 15 years at least, and what sort of location and accommodations they are looking for.
With that being said, if someone knows based on previous experience that they love the beach club, or the Poly, they are more than welcome to spend more money to buy more points there, as long as they know they are paying a premium to have these as home resorts, and do not mind putting in the extra money (that's where the expensive syrup comment came in. It's not neccesarily better, just different and more expensive).
I don't think anyone should put in tens of thousands of dollars without knowing exactly how they intend to spend it. If they want to just throw extra money into the DVC system, though, I thank them for helping me pay dues and for freeing up rooms at hard to get into resorts.

 

[ziravan]

We'll have to agree to disagree. IMO NO new buyer has enough info without real information, thinking they want something and knowing are 2 different things. To be clear we're talking those without a combination of on property and DVC experience. Some will luck out and hit it but many want. Obviously things and people change over time but that's not the issue here. Certainly someone buying site unseen will not know.

Anybody reading this is already more informed than someone buying whatever the guides are currently pushing.

I bought BCV after about 4 months of research, most of it here. I hadn't stayed there before and my experience with Disney was limited to value and moderates.

Turns out, with much more experience now to evaluate my decision, buying BCV resale for $84/point was a phenomenal decision. I'm glad I didn't spend the time to test if this resort or that was right for me. BCV caught fire in price shortly after we bought.

If we had waited, we probably wouldn't have bought BCV for $100/point or higher. If we'd waited, we'd probably be AKV owners and that would be good. It would be "buy where you don't mind staying." I'm happier with BCV, though.

 

[Dean]

Yes, agreed there. I think it is a poor decision for anyone to look into buying DVC unless they know for a fact that they would be happy going to Disney World every other year for the next 15 years at least, and what sort of location and accommodations they are looking for.
With that being said, if someone knows based on previous experience that they love the beach club, or the Poly, they are more than welcome to spend more money to buy more points there, as long as they know they are paying a premium to have these as home resorts, and do not mind putting in the extra money (that's where the expensive syrup comment came in. It's not neccesarily better, just different and more expensive).
I don't think anyone should put in tens of thousands of dollars without knowing exactly how they intend to spend it. If they want to just throw extra money into the DVC system, though, I thank them for helping me pay dues and for freeing up rooms at hard to get into resorts.

Exactly what I've said, buy based on true knowledge and experience. IMO there are 3 buckets where experience helps, on property, DVC and timeshares in general. IMO one needs a certain amount of at least 2 of the 3 to make an informed decision. Even then they need to spend enough time to get past the hype and emotions. The "I've always wanted to stay there" really isn't enough IMO. Is a higher end worth it for some, certainly, if they can afford it. But make sure you're getting real value for things that are important to you if you do so. Buying resale and using at OKW, SSR or AKV will quickly make being more expensive than just cash with significantly added risk. The problem with most buyers new to DVC is they don't have the knowledge and experience. Certainly someone who's stayed at VGF 10 years in a row then VGF came on board would be in a different place than someone who made a trip, did the tour and got hooked.

 

[Dean]

Anybody reading this is already more informed than someone buying whatever the guides are currently pushing.

I bought BCV after about 4 months of research, most of it here. I hadn't stayed there before and my experience with Disney was limited to value and moderates.

Turns out, with much more experience now to evaluate my decision, buying BCV resale for $84/point was a phenomenal decision. I'm glad I didn't spend the time to test if this resort or that was right for me. BCV caught fire in price shortly after we bought.

If we had waited, we probably wouldn't have bought BCV for $100/point or higher. If we'd waited, we'd probably be AKV owners and that would be good. It would be "buy where you don't mind staying." I'm happier with BCV, though.

Obviously minimal risk in waiting but a lot more benefit. The issue isn't necessarily to make a perfect decision but to make a good one and not a bad one. At some point you just have to "fish or cut bait". We've seen the posts of those who should have bought 10 years ago and just didn't. For your specific situation you at least had sufficient on property experience and admittedly, you feel you'd have likely made a better decision had you waited and gathered more info and experience.

 

[citivas]

To me the question of the relevance of the termination year on the contract is more an issue of resale value than whether I will be alive when it expires. Assuming your circumstances do change in 15 years as others have noted or that you pass and your kids inherent the contract and can't pay the fees. Fifteen years would be 2032. I find it hard to believe that a points contract with only 10 years left on it will hold up on resale as much as one with 30 years left on it. That would defy the logic of how every other depreciating asset market works. If when you buy you assume your entire up-front cost should depreciate over 10-15 years and any residual value is essentially a bonus, then picking a resort completely regardless of termination date makes total sense. But if you're buy assuming you can get a residual value on the investment if you sell in 10-20 years, how could the termination date not be an issue?

BTW, is there any data out there on how long the typical DVC members holds their points? Do most never resale or is eventual resale the norm or is it somewhere in the middle?

 

[ziravan]

To me the question of the relevance of the termination year on the contract is more an issue of resale value than whether I will be alive when it expires. Assuming your circumstances do change in 15 years as others have noted or that you pass and your kids inherent the contract and can't pay the fees. Fifteen years would be 2032. I find it hard to believe that a points contract with only 10 years left on it will hold up on resale as much as one with 30 years left on it. That would defy the logic of how every other depreciating asset market works. If when you buy you assume your entire up-front cost should depreciate over 10-15 years and any residual value is essentially a bonus, then picking a resort completely regardless of termination date makes total sense. But if you're buy assuming you can get a residual value on the investment if you sell in 10-20 years, how could the termination date not be an issue?

BTW, is there any data out there on how long the typical DVC members holds their points? Do most never resale or is eventual resale the norm or is it somewhere in the middle?

Let's say you buy today at $130 and decide to sell in 2032 (10 yrs left assuming bought and sold with current year points avail.)

That's 14 yrs use and selling 10 yrs.

In today's dollars to make it easier (and the nominal values of $17/pt value per one time use cost and let's round up to $7/pt MF):

The nominal value of BCV is $10/pt for 10 yrs, or $100/point. The closer you get to end date, the more the actual value of years remaining will determine price. Deduct $10/pt per year.

So. If you sold in 2032 for $100/point, then you got 14 yrs for $30/point. That's $2.14/point plus $7/point MFs or $9.14/point for use.

In 2037, with 5 years left, BCV would be worth $50 in today's dollars. Your cost would be 80/point for 19 years or $4.20 per year plus $7 MFs or $11.20 per point. Try renting BCV at that price.

That's an amazing deal.

And that doesn't even factor a possible (admittedly not likely) extension. IF an extension is offered, it'll be too late to value add that into a contract. From the day it's announced, BCV would shoot up in value.

 

[Ben E N]

To me the question of the relevance of the termination year on the contract is more an issue of resale value than whether I will be alive when it expires. Assuming your circumstances do change in 15 years as others have noted or that you pass and your kids inherent the contract and can't pay the fees. Fifteen years would be 2032. I find it hard to believe that a points contract with only 10 years left on it will hold up on resale as much as one with 30 years left on it. That would defy the logic of how every other depreciating asset market works. If when you buy you assume your entire up-front cost should depreciate over 10-15 years and any residual value is essentially a bonus, then picking a resort completely regardless of termination date makes total sense. But if you're buy assuming you can get a residual value on the investment if you sell in 10-20 years, how could the termination date not be an issue?

BTW, is there any data out there on how long the typical DVC members holds their points? Do most never resale or is eventual resale the norm or is it somewhere in the middle?

Here is a quote from someone on another discussion site, answering the same question you asked, but back in 2010.

"I'm guessing the lifespan is surprisingly long. If you look at the resale market, less than 5% of the inforce gets sold each year. Which roughly translates into 20+ year ownership averages.

And just eyeballing the resale listings, it doesn't look like the turnover ratio increases with age. If anything, they go down. So once owners get past the first few years, they really hold onto contracts.

If trends continue, the average ownership length for people who own at least 3 years could be 25+ years! Of course, we've never seen what happens once people have owned for 20 years or more. Maybe turnover rates will start to go back up as people get old. We'll see."

It is important to think, though, that some people are less concerned with getting monetary value on their purchase and may want to just enjoy knowing that they can stay at a particular resort during a specific time of year. Something like value put on expiration date is a sliding scale depending on individual preferences. Someone in their 80's, with no children, would probably not care whatsoever when their contract expires. On the other hand, someone who is in their 20's and scraped together their last vacation saving pennies to fulfill their dreams of owning a piece of Disney World is probably going to care a lot more about how long they will get to enjoy its benefits.

 

[ziravan]

(I bought for $84/point in 2014 with essentially points starting in 2015. If I sold in 2032 for $100/point, then I would have gotten 17 years use for neg $15/point or $.88 less than my $7/mf or for $6.15/point)

I know MFs are currently $6.33. I rounded up because over time, MFs will increase faster than inflation.

 

[glamdring269]

While we're on the math topic I have a scenario for everyone. Going to use some roundish numbers to hopefully make it easy.

A contract is listed at $120 but you only want to pay $100. Oct UY 100 points. It's basically full as of today (100/17, 100/18, etc.) but you have no intention of taking a trip until Oct 2018. Seller is paying 2017 fees. (Let's assume this is a 2042 contract due to this thread but maybe it doesn't matter.)

Would you be willing to flex up to $120/pt since you know you could easily sell the 100 points from 2017 and basically get it back down closer to the ~$100/pt you wanted to pay?

 

[citivas]

While we're on the math topic I have a scenario for everyone. Going to use some roundish numbers to hopefully make it easy.

A contract is listed at $120 but you only want to pay $100. Oct UY 100 points. It's basically full as of today (100/17, 100/18, etc.) but you have no intention of taking a trip until Oct 2018. Seller is paying 2017 fees. (Let's assume this is a 2042 contract due to this thread but maybe it doesn't matter.)

Would you be willing to flex up to $120/pt since you know you could easily sell the 100 points from 2017 and basically get it back down closer to the ~$100/pt you wanted to pay?

Looks like you could rent the 2017 points for $13/point ($14 if home resort) on one of the mots popular sites. So the flex up would potentially be worth that. You don't need the 2017 points for your October 2018 trip? In other words, you have enough annual points to do your trip without banking or borrowing? I personally assume a trip every other year so I would want the first year points to bank for the second year trip to stay on track. But if you're planning annual and have enough points for your trip each year, that wouldn't be an issue.

 

[glamdring269]

Looks like you could rent the 2017 points for $13/point ($14 if home resort) on one of the mots popular sites. So the flex up would potentially be worth that. You don't need the 2017 points for your October 2018 trip? In other words, you have enough annual points to do your trip without banking or borrowing? I personally assume a trip every other year so I would want the first year points to bank for the second year trip to stay on track. But if you're planning annual and have enough points for your trip each year, that wouldn't be an issue.

Actually in this case we're already going in December 2017 via our other contract (VWL) so from that perspective we're covered in terms of this year's trip. Any 2017 points on a contract we buy would simply be a bonus.

 

[mustinjourney]

While we're on the math topic I have a scenario for everyone. Going to use some roundish numbers to hopefully make it easy.

A contract is listed at $120 but you only want to pay $100. Oct UY 100 points. It's basically full as of today (100/17, 100/18, etc.) but you have no intention of taking a trip until Oct 2018. Seller is paying 2017 fees. (Let's assume this is a 2042 contract due to this thread but maybe it doesn't matter.)

Would you be willing to flex up to $120/pt since you know you could easily sell the 100 points from 2017 and basically get it back down closer to the ~$100/pt you wanted to pay?

I know it's not the question you asked, but if it's listed at $120 -- then I'd offer $110 and see what happens.

But to answer your question -- the value of the points to you would be about $14 a point since that is what you would get if you rented the points -- so that contract would be the same as one priced at $106 a point that didn't have any 2017 points.

So if you only want to pay $100, then you need to pay $114 per point or less for that contract.