Resale Rules Changes to come?

[snoope]

As a potential resale buyer I have a question that to me is very important.

I am thinking of buying into OKW - not my first choice, but pricing and value is swaying me.

I understand that this past spring, Disney changed the resale incentives. New resales after a certain date are only allowed to spend their points at DVC. All the old resales were grandfathered in this rules.

Heres my question: Does your owner contract state that Disney cant change rules on your after you purchase? For example is their anything stopping them from making a new rule that will only allow you to spend your points at your home resort? Or will all changes be grandfathered?

 

[JimMIA]

Heres my question: Does your owner contract state that Disney cant change rules on your after you purchase? For example is their anything stopping them from making a new rule that will only allow you to spend your points at your home resort? Or will all changes be grandfathered?

For ALL purchasers -- resale and direct -- very few things are guaranteed. About all that is guaranteed is:

• The total number of points at a particular resort cannot change, by law. DVC can adjust points costs per night between different size units, days of the week, seasons, etc.
• You are guaranteed to be able to use your points at your home resort for the duration of your contract...subject to availability, of course.
• As long as DVC permits owners to use their points at non-home resorts, you are guaranteed that you will always have at least a ONE month booking advantage over non-home owners. The current booking advantage is 4 months -- 11 months to 7.

Other than that, they can change just about anything they want.

It's also important to understand that the minimal benefits taken away from resale buyers who purchase after 3/20/2011 are NOT GUARANTEED to direct purchasers either. Disney could take those benefits away from ANY owner with one swipe of the Mouse's pen.

Your understanding of the recent resale changes is imperfect as well. For example, resale purchasers can still use DVC points for exchanges through RCI.

 

[drusba]

The change that occurred was that those purchasers of resale after about mid-March can no longer trade out to the Disney collections (Disney hotels, cruise, adventure vacations, concierge hotels). However, you can still trade out to other timeshares through RCI and Club Intrawest. They grandfathered this change but that does not mean a future one will also be.

If you review the official documents, you will find that Disney retains the right to change many things. As to prohibiting you from using a DVC resort other than home resort, they already list a number of things that can cause that to occur such as the resort is removed from DVC system by a vote of the members, the resort is taken over via eminent domain, the resort is partly destroyed and rights are suspended while there is rebuilding. However, it is a matter of some debate as to whether they can just end your ability to reserve non-home resorts except for one of those rare events that are listed. I do not believe they can but others believe otherwise. The legal limit on their power to change anything is that they cannot make material changes to fundamental rights. For example tyhey cannot dilute your ownership interest by selling more points at a resort than it would take to occupy the rooms for a year.

 

[JimMIA]

To me, what was "taken away" on 3/20 is trivial. I can't make any intellectually-honest argument for buying direct, except for very small add-ons by existing owners where suitable resale contracts simply are not available.

The price differences between resale and direct are simply too great.

 

[ajpruett]

I also agree that going resale is the way to go. I bought before 3/20 but will be adding on by resales at some point. It's nice to have the option of using points for other disney resorts and cruises, but you could always rent out points and then pay cash for these places.

 

[XGrumpy1]

OKW is a nice resort. Buy there if you would like to stay there.

When DVC changed things last time, DVC gave plenty of warning. I expect that if DVC makes another change, there will be another warning.

 

[jennypenny]

To me, what was "taken away" on 3/20 is trivial. I can't make any intellectually-honest argument for buying direct, except for very small add-ons by existing owners where suitable resale contracts simply are not available.

The price differences between resale and direct are simply too great.

People go through Disney if they need to finance and can't get financing outside of Disney (Disney will finance almost anyone) and because Disney financing does not show up on credit reports. There are a lot of people right now with damaged credit histories even if their situation has improved. Now, I'd argue that financing DVC doesn't make sense in any case, but many people do and Disney is a sure thing.

Then there are people who only "want to deal with Disney, not some sleazy broker I don't know from Florida." (my FIL) He paid top dollar for his points at SSR. Whatever--it's his money.

We are actually looking at buying BCV through Disney ONLY because we need a third contract that exactly mirrors two of the contracts we own--we have three children and want to give them each a contract when we are done using the points.

 

[JimMIA]

People go through Disney if they need to finance and can't get financing outside of Disney (Disney will finance almost anyone) and because Disney financing does not show up on credit reports. There are a lot of people right now with damaged credit histories even if their situation has improved. Now, I'd argue that financing DVC doesn't make sense in any case, but many people do and Disney is a sure thing.

You'll note that I specified that I could not make an "intellectually-honest argument" for buying direct.

I don't presume to judge whether anyone should finance or not; I don't know their finances. However...for someone to pay $50 per point (or more) more for the privilege of financing at 11-15% interest is NOT an intellectually-honest argument, IMHO. That's pure emotion, and "I WANT" outweighing logic and common sense.

You can't help folks who make large financial decisions like that.

Also, I think there is a great deal of confusion about Disney financing and credit reports. True, Disney does not pull a credit report, and therefore no inquiry will show. However, the mortgage is public record and any prospective creditor who uses even a little due diligence will quickly discover that large financial obligation.

Then there are people who only "want to deal with Disney, not some sleazy broker I don't know from Florida." (my FIL)

Yeah, but they don't take the time to research things very well. That's not "trust," it's just laziness.

And those are exactly the same people who come here on the DIS and post "...but my 'guide' TOLD me...!"

IF they researched, they would learn that Florida has one of the most tightly-regulated real estate industries in the country...and that's especially true with regard to timeshares. They'd also learn that the resale brokers are subject to exactly the same regulatory requirements as Disney, and are regulated by exactly the same state agency as Disney.

 

[Chic]

If you review the official documents, you will find that Disney retains the right to change many things. As to prohibiting you from using a DVC resort other than home resort, they already list a number of things that can cause that to occur such as the resort is removed from DVC system by a vote of the members, the resort is taken over via eminent domain, the resort is partly destroyed and rights are suspended while there is rebuilding. However, it is a matter of some debate as to whether they can just end your ability to reserve non-home resorts except for one of those rare events that are listed. I do not believe they can but others believe otherwise.

I am one who believes Disney cannot end your ability to reserve non-home resorts. They may temporarily suspend your rights, in a rare event, but not permanently. I don't know of any large timeshare organization which only permits use of a single resort. If Disney were allowed to make such a drastic decision, think of the consequences. Owners at the smaller resorts like BCV and VWL would be getting blocked out of vacations during peak travel periods with no options for accommodations, people who purchased where they "don't want to stay" would be selling their contracts dirt cheap which would cause a major change in the caliper of owners or risk the possibility of a buy out from another company, and Disney would be spending tons of money in court battling law suit after law suit with people arguing that they were told differently when purchasing. People in our society tend to look toward the negative side of things and worry about things that cannot happen or take place. I say we smile and enjoy the benefits of our "piece of the magic"!

 

[KPOP]

JimMIA makes a lot of sense, IMO

 

[DMKEDM]

The one thing that I'm uncomfortable with regarding my DVC ownership is the number and rate of changes DVC makes. I've owned for five years (a total of 515 points done by way of one master contract and 4 add-on's--all direct thru Disney, but also all before the fairly recent huge spread in prices between Disney Direct and resale--I paid around $86/point for all my points, except my last 50 at BCV, for which I paid $101/point. I also did not pay closing costs on any contract, including the master--the addition of closing cost charges on Disney Direct sales were changes made after I bought)--

Most of the changes didn't affect me a lot, if at all. Only one "hurt"--the new-ish restrictions on using the wait list. Some were positive (free internet access when staying on points, for example)...

But the rate of change is very quick...there have been lots of them. I don't know that I would have bought had I known so much was going to change, so rapidly. But I'm glad I did buy--I've very much enjoyed the many trips DVC has allowed me to take with family and friends. Sometimes, "ignorance is bliss" is a really true statement!

Anyway, my best advice to any prospective owner--whether direct or by resale--is to be aware that DVC changes, frequently, but that adjustment to those changes is mostly doable (so far, anyway). I'd take a look at the features & elements of DVC ownership that really matter a lot and then post about whether you think those elements might change, and how. For example, a one-month home resort advantage in booking would not be a positive change for me, but it wouldn't be something I couldn't adjust to. However, if DVC decided to eliminate the ability to book at other DVC resorts w/out ownership there, that might be a deal-breaker for me.

Good luck with your decision.

 

[adminjedi]

The one thing that I'm uncomfortable with regarding my DVC ownership is the number and rate of changes DVC makes. I've owned for five years (a total of 515 points done by way of one master contract and 4 add-on's--all direct thru Disney, but also all before the fairly recent huge spread in prices between Disney Direct and resale--I paid around $86/point for all my points, except my last 50 at BCV, for which I paid $101/point. I also did not pay closing costs on any contract, including the master--the addition of closing cost charges on Disney Direct sales were changes made after I bought)--

Most of the changes didn't affect me a lot, if at all. Only one "hurt"--the new-ish restrictions on using the wait list. Some were positive (free internet access when staying on points, for example)...

But the rate of change is very quick...there have been lots of them. I don't know that I would have bought had I known so much was going to change, so rapidly. But I'm glad I did buy--I've very much enjoyed the many trips DVC has allowed me to take with family and friends. Sometimes, "ignorance is bliss" is a really true statement!

Anyway, my best advice to any prospective owner--whether direct or by resale--is to be aware that DVC changes, frequently, but that adjustment to those changes is mostly doable (so far, anyway). I'd take a look at the features & elements of DVC ownership that really matter a lot and then post about whether you think those elements might change, and how. For example, a one-month home resort advantage in booking would not be a positive change for me, but it wouldn't be something I couldn't adjust to. However, if DVC decided to eliminate the ability to book at other DVC resorts w/out ownership there, that might be a deal-breaker for me.

There have been changes, but it was in the contract that those changes could occur. IMHO, if any certain change would be a "deal-breaker" for you later, you should not have bought into DVC after reading the contract and realizing they could change later.

 

[TisBit]

OKW is a nice resort. Buy there if you would like to stay there.

When DVC changed things last time, DVC gave plenty of warning. I expect that if DVC makes another change, there will be another warning.

I do not buy into that argument. If they were to further restrict the use of these resale contracts, DVC will consider the last notice and everyone that has purchased since, that their contract is "restricted" and not a full contract.

The only thing that I could see them treating the same way, is if they were to come up with another class of ownership....otherwise the writing is on the wall, there are two types of contracts and if you knowingly buy a resale, you can only depend on the items that Jim listed above...nothing else.

 

[sweetdana]

To me, what was "taken away" on 3/20 is trivial. I can't make any intellectually-honest argument for buying direct, except for very small add-ons by existing owners where suitable resale contracts simply are not available.

The price differences between resale and direct are simply too great.

Agreed what was taken away was trivial, but the fact that it could be the tip of the iceburg, changes it may not be. They made a line in the sand period, and this means more changes might come. Changing booking window for resale, or not allowing anything but home resort, or adding in 95$ fee to all non-home resort stays. Taking away AP discount, or pool hopping, or ___FILL_IN_BLANK____.
The fact that they made a difference, is more relevant than the actual current change.

 

[DMKEDM]

Yup, reading the contract prior to buying is something all should do (and I would bet few actually do do--and even if they do, it's all pretty overwhelming when you first look into DVC. Even if you read the contract, my guess is lots of details go over the reader's head.)

I'm a lawyer. I read every document before I sign. But I don't do an arms-length legal analysis of every single purchase I make. And I've bought things that cost more than DVC (my car, my house, my son's education).

For those who say "read the contract" and then don't comment if things provided in the contract come to pass (i.e., changes from standard operating procedure at the time of purchase), I say come down from your ivory tower. In the real world, many people (including lawyers who read their contracts!) buy despite the legal language in the contract.

And those people are totally entitled to say "there have been changes and I'm uncomfortable with them."

As noted in my original post, I'm very glad I didn't recognize (altho I'd read the contract) how quickly many things were going to change. I'm not sure I'd have bought had I recognized that (despite reading language that makes it clear, in hindsight, that it could happen). It's something prospective buyers will benefit from knowing before writing their checks, I think.

But I wonder how many people would buy if they truly believed ALL they were going to get is a one-month booking advantage only for their home resort? Yes, that's the worst case scenario--but how likely is that worst case scenario?

 

[disneynutz]

Disney will do what ever they need to do to keep money in the Mouses pocket even at the expense of us owners. If changing the resale rule causes more people to buy direct, they will change it. If buying ROFR contracts makes them more money, they will start buying ROFR contracts again. Apparently buying ROFR contracts isn't as profitable as we think and Disney's change of policy has caused resale prices to fall even more.

Disney has also decided to mimic other timeshare companies and adopt some of their business models. I expect to see additional changes as time goes on.

Bill

 

[jennypenny]

You'll note that I specified that I could not make an "intellectually-honest argument" for buying direct.

You can't help folks who make large financial decisions like that.

I completely agree with you. I was just pointing out why people buy directly through Disney. I tried to explain things to my FIL. I didn't get anywhere. We are the "kids" and he is the "parent" so he must know better (even though we're in our 40s now).

It's the same reason people buy new cars instead of good quality used cars. It makes more financial sense to buy a used car. It's a little more work to find the right car and negotiate the right price. And you usually have to arrange the financing yourself or save up the money first. It's much easier to just show up at the dealer, pick a car, sign papers, and drive off.

 

[JimMIA]

The one thing that I'm uncomfortable with regarding my DVC ownership is the number and rate of changes DVC makes.

...Anyway, my best advice to any prospective owner--whether direct or by resale--is to be aware that DVC changes, frequently, but that adjustment to those changes is mostly doable (so far, anyway).

Good observations, and great advice, Dani.

But another observation I've had for a long time here is that we often focus a microscope on trivial changes and features of DVC while ignoring the big, important trends.

To me, the little changes (point reallocations, valet parking, AP discounts, free internet) have been more positive than negative overall. But the BIG trends have all been detrimental to the owners' interests (not to DVC's interests, but to the owners' -- they are not the same thing!).

I have three main trends that I think are negative, and they all are part of what Brian aptly described as a "maturation" of the DVC program.

SIZE: While the growth of DVC does provide additional options, it also greatly reduces some options. For example, when there were only a couple hundred thousand DVC owners, you stood a pretty good chance of getting into non-home resorts at seven months. Today, with a much larger membership base, the 11-month booking advantage has become much more important and the non-home options have become more difficult. In addition, the likelihood of booking your own home resort inside 7 months has gotten more iffy. This is a trend that's not going away.

BOTTOM-LINE ORIENTATION: We often hear that DVC is not like it used to be, and that is both true and a natural effect of the maturation process. Originally, the main focus of DVC was to create a superior product...and they succeeded. Today, not so much -- and you see it in everything from room cleanliness to valet parking to cheap furniture falling apart at BLT to the lack of basic 20th Century online booking availability. The focus has shifted from product and owner value to Disney profit, and that is also probably a permanent change.

I think DVC will always remain in the upper tier of timeshares, but it will increasingly look more and more like the other good ones.

COST OF OWNERSHIP: The cost of ownership has several components: initial outlay minus any recovery you have if you sell; annual dues; interest costs if you finance; and points costs per night.

DVC owners who bought in the early 90's and sold before 2009 probably made profits from their initial buyin...and DVC timeshare salesmen still use that historical factoid out of context as a selling point. It's not technically LYING, but it's a historical fact that is no longer true.

The reason was, and is, ROFR. For the first 15 years or so, DVC used ROFR to keep resale prices pretty close to direct prices to assist their sales. For the vast majority of transactions today, however, Disney is no longer using ROFR at all. The obvious result has been a huge decline in resale prices. When I first purchased DVC, I saved about $12 per point buying resale. Today, resale prices are $40 or more below direct.

To the prospective DVC buyer, this trend should dramatically affect the math. I think this downward trend will continue, because I don't think it really hurts DVD direct sales enough to worry about.

Sensible "traditional" timeshare buyers buy resale for very low entry costs and count on zero return when they sell. If they get anything back at all, they're thrilled. That's just a clear-headed recognition of reality.

I don't think DVC will ever reach the point where you can buy a 200-point contract on eBay for $1 plus closing. But I think anyone in the market for DVC today who is counting on recovering more than 20-25% of their original buyin price is either uneducated to this trend or living in a dream world. And that's for buyers paying cash -- for those financing, the math is even worse.

The long-story-short of these trends is that DVC is rapidly maturing into a "traditional timeshare."

I don't think that's necessarily a bad thing, but it's certainly NOT what a lot of DVC owners thought they were buying.

 

[mjc2003]

Apparently buying ROFR contracts isn't as profitable as we think and Disney's change of policy has caused resale prices to fall even more.

Actually, this isn't quite true. According to Donald's thread, albeit a relatively miniscule sample size, the resale prices have stayed pretty much the same at basically all locations with the exception of BLT, where the last few have fallen into the $80's. However, at most locations the prices continue to fluctuate but the trend line is not down.

 

[JimMIA]

However, at most locations the prices continue to fluctuate but the trend line is not down.

Depends on where you start the line!

I bought an SSR contract in 2005 for $83 and sold it in 2010 for $64. Just at first glance, that looks down to me...roughly 23% down in five years.

And most of that decline happened in the last year I owned it. Just looking quickly at the ROFR thread, the most common SSR price I see clearing ROFR is $50 per point. Even if you figure $55 as an average, that's still down an additional 14% from where I sold...less than a year ago.