Resale Asking Prices Too High

[JHank44]

I've been eyeing the resale market for another contract but I've noticed that asking prices for all the contracts are not even close to where things are going on the ROFR and looking at the OCC website. When I bought my first contract earlier in the year I found a reasonable priced contract and put in a reasonable bid and we ended in the middle. Most contracts are overpriced by 25%+ based on recent sales. Have people had success putting in a reasonable market bid for these super high asks?

I understand from seller perspective you want to ask more willing to settle for less but all the website prices are absurd (perhaps except for www.fidelityresales.com). I don't want to insult sellers with a super low price but I would have to come in 30% below to have some wiggle room to improve in negotiations. Just curious what other people have done or if they have noticed the same thing.

 

[CarolMN]

I would not worry about insulting the sellers. They can counter or just say no. Keep in mind that the ROFR thread may not contain contracts that sold for more than the "going rate" - there are more folks than you might think who don't like to advertise that they didn't get a great deal (or at least an average one). And of course, not all DVC owners post here, either.

My advice would be to just offer what you are willing to pay and move on if it's not acceptable to the seller. If you keep getting rejections and still want to buy, you'll have to reconsider what you are willing to pay. OTOH, you just might get a very good deal from a seller who is motivated to sell.

Good luck!

 

[miTnosnhoJ]

I've been eyeing the resale market for another contract but I've noticed that asking prices for all the contracts are not even close to where things are going on the ROFR and looking at the OCC website. When I bought my first contract earlier in the year I found a reasonable priced contract and put in a reasonable bid and we ended in the middle. Most contracts are overpriced by 25%+ based on recent sales. Have people had success putting in a reasonable market bid for these super high asks?

I understand from seller perspective you want to ask more willing to settle for less but all the website prices are absurd (perhaps except for www.fidelityresales.com). I don't want to insult sellers with a super low price but I would have to come in 30% below to have some wiggle room to improve in negotiations. Just curious what other people have done or if they have noticed the same thing.

I agree that some of the sites seem to have pricing that is way over the top.
My advice:

1. Buy resale when you don't need the points right away. Time is your friend. Your best negotiating posture is the ability to walk away. Say to the broker, "I can't make it work at this price, but give me a call if you get any listings that are closer to the market price."
2. Unless you are looking for something that is rare, you may not get a good deal from the daily newsletters from the brokers advertising new listings. The seller may get lucky and find a buyer at the high price, and in any event, they are unlikely to accept a market offer right away if the broker has led them to believe a high price is the correct price. This gets into emotion and hope on their part. Also, small contracts tend to go quickly.
3. Watch the top 4 brokers sites and look for items at your preferred resort and use year. Specifically, look for the ones that are not selling. Go back again in a week and see if it is still there. Your best deals will be listings that have aged 2-3 months or more. By then, the sellers will be better educated on the market and will be more wiling to deal. One caveat, though. If something isn't selling, make sure that there are not things which could make the transaction much harder. (For example: international seller, delayed closing, contentious divorce where one party refuses to sigh documents, dues or payments way in arrears.) Directly ask the broker if there are any issues like this. If there are issues, you still might want to make an offer, but it certainly should not be a high offer, because you will have to put up with some aggravation along the way.
4. If there are multiple listings with your resort and use year, start with the one with the lowest price per point, all other things being equal. It is easier to negotiate when you start out closer together, as you noted in your original post.
5. When you are negotiating, always run the numbers to see the actual dollars involved. For example, if you are apart by $8 per point, that is $800 on a 100 point contract. $800 is probably minor compared to the enjoyment you and your family will get out of it, and you may be able to negotiate closing costs or dues to get back part of the $800.
6. Beware of listings where the seller says they cannot close until some time next year (presumably because they want one more vacation). If they are not closing until next year, why should they take your low offer now? They can always wait until it gets close to the time they are actually going to sell. And Disney will not waive ROFR until it gets about a month away from closing, anyway.
7. The ROFR thread (see page 1 of the ROFR thread) is a good indication of selling prices, but it is only a sample. It is at best about 10% of the transactions that are going through. The advantage of using this small sample is that it includes the actual number of points (i.e. stripped or loaded) and the closing costs.
8. You can survey the entire market by looking at the Orange County Controller's web site. All DVC (except non-Orlando) must be registered here. You can calculate $ per point for every transaction in the market, and also see those transactions when Disney is the seller. The downside of this method is that you cannot tell from the Orange County Controller data whether the contract is stripped or loaded. If you need help doing this, holler back and I'll post how to do it. (Looks like you are already aware of this.)
9. When you make an offer, don't use a round number like $140 a point. Use a specific number like $138.50 per point. This will send a signal that you have thoroughly researched this, and that this is at the top of your range. A round number is an invitation for them to start making counter offers. For research on this topic, see http://hbswk.hbs.edu/item/when-negotiating-a-price-never-bid-with-a-round-number and https://hbr.org/2016/03/dont-use-round-numbers-in-a-negotiation
10. If the seller is fixated on a high $ per point, make an offer where it is close to their asking $/pt., but the seller pays dues and closing costs. They can feel they "won" and you get your price, out of pocket.
11. When you understand the market dynamics, you can make an offer much lower than the asking price with confidence.
12. Don't fixate on getting a deal at the very bottom of the bell curve. True, some transactions happen 30% lower than the mean, but there is probably a really sad story there somewhere. Also, as an owner, it is in your interest for resale prices in general to hold up, rather than collapse. But at the same time, there is absolutely no reason to pay 30% above the mean.

 

[ColonialMouse]

I would disagree with the suggestion to make a specific offer like $138.50. The last time I bought a contract I figured out what I thought a good price was (I think it was $10 below the asking price) so I offered $20 below. They came back with what I wanted. I'm sure both approaches work, probably depends mostly on the seller.

The key thing you don't know is how realistic the seller is. The seller may know perfectly well (having listened to the broker) that they won't get that price, and is more than willing to negotiate. The seller may also have an unrealistic price in mind (like they bought from Disney two years ago) and not be willing to accept a market price yet. Regardless, as a seller, you don't want to stand out for your low price unless you really want to unload it immediately.

Regardless, it's a business transaction. Don't worry about insulting anyone.

Bruce

 

[davedmaine]

I just sold 2 contracts and received a couple low-ball offers on both of them. I wasn't insulted but I also didn't respond. One ended up selling at my asking price and the other (a 150 pt BWW) sold for over. It's definitely a sellers' market at the moment and it certainly worked in my favor..

 

[BWV Dreamin]

A contract is worth what someone is willing to pay for it. I disagree with the OP's assessment that resale prices are 30% over priced. If the big three brokers have most of their contracts similarly priced, that tells me that that is what people are willing to pay. Lots of factors go into a buyers reasoning when deciding to purchase a contract. It's easy to over analyze. Keep it simple. Put your best offer in if you really want the contract.

 

[Chrisvee]

IMO the point about the real value of the $ is important. On small contracts (below 100 points), even a $10 difference in points between listing and offer isn't much cash -- basically enough to cover closing costs. I was much more concerned about price/pt in my 200 pt contract than my 50 pt contract. I wasn't going to let the UY and resort I wanted go over a $500 negotiation. But everyone's situation is different and there always seem to be enough on the market that time will provide more opportunities.

I bought BWV just two years ago and I could sell it for $20/pt more than I purchased it.

 

[Brian Noble]

Most contracts are overpriced by 25%+ based on recent sales.

Unless you are looking at all transferred deeds, and not just the ROFR thread, you might be mistaken about where the overall market is. That's because Carol is absolutely correct when she writes:

Keep in mind that the ROFR thread may not contain contracts that sold for more than the "going rate" - there are more folks than you might think who don't like to advertise that they didn't get a great deal (or at least an average one).

 

[crisi]

A contract is worth what someone is willing to pay for it. I disagree with the OP's assessment that resale prices are 30% over priced. If the big three brokers have most of their contracts similarly priced, that tells me that that is what people are willing to pay. Lots of factors go into a buyers reasoning when deciding to purchase a contract. It's easy to over analyze. Keep it simple. Put your best offer in if you really want the contract.

I tend to agree. There will be some people who luck into a deal, but if I list my contract for $100 and the first offers I get the first week are $85, I can probably afford to sit on it for a bit and see if it moves. If two months later, its still not selling, I can lower the price. There isn't any reason for me to take a low offer early in the sales process - unless I need to move the contract quickly.

And right now the economy is pretty good - not awesome, but stable and slowly growing - there aren't a lot of people who need to sell and sell quickly - so sellers can afford a little patience.

As a seller, what Disney exercises ROFR on has little bearing on how I value my contract - its simply the lowest price I would have to take if I sold. I'm not even likely to look at the ROFR thread - why would I want to know the floor? I'm going to value my contract against other listings and if my broker says other people are getting $100, I'm not likely to let mine go for less than $95.

The other factor is renters. For many of us, we pay our $5-6 in dues and then pocket the rest in profit if we rent - as long as our contracts are paid off. If we don't need the capital, renting through a broker makes sense. I can make $7 a point in profit - so if I have 200 points and don't need the capital, I can make $1400 a year for pretty much ever, or I can make $15000 in a fell swoop by selling my contract at $85. $1400 a year is a pretty good return on investment on $15000 - not quite 10% with little risk...I don't think I'd sell for $15000. Now $1400 on $20,000 is 7% return - that starts looking like I might be better off in the market.