Purchasing a stripped contract and borrowing points

[JessLCH]

If you purchase a stripped contract are you permitted to always be in a state of borrowing the next year's points? If you borrow thenext year's points when do you pay maintenance fees on them?

Thanks.

 

[MoreTravels]

If you purchase a stripped contract are you permitted to always be in a state of borrowing the next year's points? If you borrow thenext year's points when do you pay maintenance fees on them?

Thanks.

Any easy way to remember is that you get a bill for annual fee every January, regardless your point status. So every DVC member will get their next bill in January 2014.

About this past year (ie, 2013), it's between you and the seller... everything is negotiable in a resale contract. You can ask them to pay for everything, annual fees, closing costs, your next few cups of Starbucks coffees for the week, etc. They may say yes or no...but there is no rule since it's a private transaction.

 

[chalee94]

If you purchase a stripped contract are you permitted to always be in a state of borrowing the next year's points?

to this point, there's never been a problem with this but DVC does have the right to suspend banking and borrowing, if necessary. (around the late 2030s, it may become necessary.)

 

[JessLCH]

Any easy way to remember is that you get a bill for annual fee every January, regardless your point status. So every DVC member will get their next bill in January 2014.

About this past year (ie, 2013), it's between you and the seller... everything is negotiable in a resale contract. You can ask them to pay for everything, annual fees, closing costs, your next few cups of Starbucks coffees for the week, etc. They may say yes or no...but there is no rule since it's a private transaction.

I don't think I asked my question clearly. My question is about Disney's rules on borrowing points not about negotiating contract terms. I am asking if I can borrow from the next year every single year if I want to. In essence, can I always be using the following year's points in the current year? I am not sure if that clarified or confused my question.

Thanks again.

 

[JessLCH]

to this point, there's never been a problem with this but DVC does have the right to suspend banking and borrowing, if necessary. (around the late 2030s, it may become necessary.)

Thanks, this is what I was asking about.

 

[JessLCH]

to this point, there's never been a problem with this but DVC does have the right to suspend banking and borrowing, if necessary. (around the late 2030s, it may become necessary.)

And now you've got me curious as to why this might be necessary in the late 2030s.

 

[MoreTravels]

I thought you were asking about maintenance fees.

Many contracts expire worthless in 30 years... there will be a lot of chaos getting closer to that time, when everyone is trying get out or get the last drip of its financial retained value. Nobody knows for sure what will happen.

 

[hydrotony]

And now you've got me curious as to why this might be necessary in the late 2030s.

That's when the time share contracts start to expire and there may not be a next year.

 

[Kidanifan08]

If you purchase a stripped contract are you permitted to always be in a state of borrowing the next year's points? If you borrow thenext year's points when do you pay maintenance fees on them?

Thanks.

There are many on these boards who are in a constant state of borrowing. I'm not one of them, but I can understand how one may get into this cycle. No matter where you stand with your points, dues are due in January for current UY points. DVC doesn't care if you are in a perpetual state of borrowing, as long as you pay your dues. Good luck in your pursuit of a contract that passes ROFR. If you want a sure thing, consider AKV.

 

[Dean]

And now you've got me curious as to why this might be necessary in the late 2030s.

They have to suspend banking the last couple of years as a minimum and may or may not suspend borrowing as well. They'll also have to find a way to decide who can't use all of their points in the last couple of years because there simply are not enough villas to accommodate all points the last 1-2 years of the contracts.

I think buying a stripped contract makes the most sense for one who doesn't need to points for a while for the perfect contract that would be more difficult to get. However, as a rule, a stripped contract costs more according than a loaded one. One will essentially always come out ahead buying a slightly smaller loaded contract than a stripped one. The difference in value can easily be up to $20-25 pp difference all else being equal and $10-15 pp as a min, but the sellers are rarely ready to accept that level of reduced price.

 

[JessLCH]

Thank you so much for all the very helpful info. The next contract I am considering is only partially stripped but we are considering two trips in one year which would put us in a borrowing position. Just wanted to be sure I understood the rules on that.

 

[Dean]

Thank you so much for all the very helpful info. The next contract I am considering is only partially stripped but we are considering two trips in one year which would put us in a borrowing position. Just wanted to be sure I understood the rules on that.

It's not difficult to compare contracts of variables such as UY or points accounting. It is easy to overpay on dues resale though. Ignoring one's personal preferences for UY, when you really need the points, the contract size that works best and the like, here's how I'd adjust between contracts.

We'll ignore differences in maint fees as they don't have a lot of affect in any situation for this purpose and most comparison's will be for the same resort anyway. $10 a point value for a given point net which includes the maint fees (could also use actual fees plus say $5-7 pp). $5 a point maint fees. CALENDAR YEAR pricing for maint fees (we'll do it like DVC does).

• Reduce by your assumed rental price ($10 this example) for any points missing from the current UY AND any missing in future UY.
• Ignore or give significantly reduced credit for any current or future banked points. This is variable, the most credit I'd give for current banked points would be $5 pp but it is likely reasonable to add $10 a point for banked points in future UYs or if you're VERY early in a UY AND can use the points.

Lets look at a couple of examples for comparison say 100 pt SSR contract Dec UY, one totally stripped and the other fully loaded. I'll use the same resort to keep it simple and avoid any MF variables. I'll assume the same starting pp sale price. I chose not to include different UY because it's so variable with the timing of the UY as to whether you can use or bank the points. Assume same closing costs.


Dec UY with no banked 2011 and no 2012, 2013 or 2014 points (maybe they took a cruise) vs the reverse. Compare total price (purchase price plus maint fees). Remember you're going to pay 2 years (23 months MF for points you never had when you have to pay ). MF on the loaded contract prorated from closing date until the start of the UY NOT a full years fees.

Subtract from Dec stripped contract the following.

$500 (no banked 2011 points
$1000 (no 2012 points).
$1000 (no 2013 points)
$1000 (no 2014 points)

Thus, IMO and all else being equal, a 100 point loaded Dec SSR contract is worth maybe $5K total at closing (rounding to $50 pp) and a completely stripped contract as described maybe $1500. OF course there are other variables (matching UY, don't need the points for a while) and it's unusual for contract to be so completely stripped as my extreme example. Or one could look at it another way, one could buy maybe 10% less points for a loaded contract (assuming you'd be able to use the points coming) than a completely stripped one. Adjusting for different UY is far more complicated and must be done individually based on timing of UY and expected completion to where you are combined with how likely you are to be able to use or rent those points.

 

[DebbieB]

If you purchase a stripped contract are you permitted to always be in a state of borrowing the next year's points? If you borrow thenext year's points when do you pay maintenance fees on them?

Thanks.

Maintenance dues are on a calendar basis for the total points in the contract, 1/1 to 12/31. It doesn't matter if they are banked or borrowed into another use year, you pay on the total every year.