Revisiting Stripped Contracts

[HookdonWDW]

A couple of quick notes, some of which have already been made.

1. Your calculations assume that only the person purchasing the stripped contract can negotiate down the asking price for the contract. We negotiated $9/point off the asking price of our last fully loaded resale contract (banked, current, borrowed).

2. We paid no maintenance fees on the current or banked points.

3. We split the closing costs with the seller.

These factors make a significant difference in the end price. I also submit that buyers who wait, hunt and search for fully loaded contracts may be more risk adverse, and prone to bargain down the price of the contract as a whole.

 

[Bing Showei]

A couple of quick notes, some of which have already been made.

1. Your calculations assume that only the person purchasing the stripped contract can negotiate down the asking price for the contract. We negotiated $9/point off the asking price of our last fully loaded resale contract (banked, current, borrowed).

2. We paid no maintenance fees on the current or banked points.

3. We split the closing costs with the seller.

These factors make a significant difference in the end price. I also submit that buyers who wait, hunt and search for fully loaded contracts may be more risk adverse, and prone to bargain down the price of the contract as a whole.

I think if the thrust of the thread was that stripped contracts were better than loaded/fully loaded contracts, you would have several valid points. But that was never my point.

The only assertion I'm making, which I still stand by, is that if someone is looking for a very specific contract; a specific resort/rare resort, a specific UY; and there is dearth of options, then they should revisit a stripped contract that IS available with the right resort and right year. My point is that the value difference (and I fully acknowledge there is a value difference) between a higher priced, fully loaded contract, may not be as insurmountable as it may appear at first glance, or that with a little negotiating, the value gap can be closed.

 

[Dean]

I think if the thrust of the thread was that stripped contracts were better than loaded/fully loaded contracts, you would have several valid points. But that was never my point.

The only assertion I'm making, which I still stand by, is that if someone is looking for a very specific contract; a specific resort/rare resort, a specific UY; and there is dearth of options, then they should revisit a stripped contract that IS available with the right resort and right year. My point is that the value difference (and I fully acknowledge there is a value difference) between a higher priced, fully loaded contract, may not be as insurmountable as it may appear at first glance, or that with a little negotiating, the value gap can be closed.

IMO one should look at all the factors, availability, # of points, UY, home resort and budget included. IMO they should formulate some minimum requirements and some options within a range. That might mean paying somewhat more for a stripped contract at a difficult to find resort that otherwise fits their criteria. Specifically it mainly applies to VGF, VGC & BCV plus smaller contracts where there is sufficient savings to justify resale. IMO it doesn't apply to the bird in the hand idea for easier to find resorts unless it fits within the other criteria. It can be a little like bidding at an auction or gambling where one establishes a maximum then routinely goes over that in the heat of the moment. One has to be able and willing to say no and walk away.

 

[supersnoop]

The only assertion I'm making, which I still stand by, is that if someone is looking for a very specific contract; a specific resort/rare resort, a specific UY; and there is dearth of options,

Yes, I think we can all agree that the best contract you can buy is the one that best meets your needs.

 

[zavandor]

I would add another factor. You value points in the contract by the amount of money they can net if rented. But the majority of buyers would probably use them to book a vacation, especially in the first year. The discount granted on booking a cavation means that points are worth more than the rental value for the people using them (otherwise people wouldn't rent) and there are no taxes to bring the value down. This makes a stripped contract a poorer value for people looking to use it immediately. But I guess we already knew that

 

[Bing Showei]

I would add another factor. You value points in the contract by the amount of money they can net if rented. But the majority of buyers would probably use them to book a vacation, especially in the first year. The discount granted on booking a cavation means that points are worth more than the rental value for the people using them (otherwise people wouldn't rent) and there are no taxes to bring the value down. This makes a stripped contract a poorer value for people looking to use it immediately. But I guess we already knew that

Absolutely. The need for points immediately would negate the applicability of this entire thread to the purchaser. Hence...

Point being, if it’s the right UY, the right home resort, the right number of points, and you don’t immediately need the points, or are willing to borrow, a little negotiation can turn that stripped contract into one of equal value as the loaded one selling for a higher $/pt.

There is a subset of buyers out there who are looking for a very specific contract, which in this market can be frustrating. I was in that position when shopping for a VGF contract. I would pass over stripped contracts because I thought the value wasn't there. But when I revisited how I would use the points and when I would use them (with my UY I would be able to borrow before my next trip, for example), I realized that the difference between a stripped contract and a loaded contract can be bridged if I negotiate the points down accordingly.

 

[Dean]

Absolutely. The need for points immediately would negate the applicability of this entire thread to the purchaser. Hence...



There is a subset of buyers out there who are looking for a very specific contract, which in this market can be frustrating. I was in that position when shopping for a VGF contract. I would pass over stripped contracts because I thought the value wasn't there. But when I revisited how I would use the points and when I would use them (with my UY I would be able to borrow before my next trip, for example), I realized that the difference between a stripped contract and a loaded contract can be bridged if I negotiate the points down accordingly.

It's generally not feasible to get the price down sufficiently to make a stripped contract even remotely comparable financially to a non stripped one much less a loaded one. But again, if it's something specific and difficult to get otherwise, the extra $10-20 a point might be worth it in some situations.

 

[DougEMG]

Yes, I think we can all agree that the best contract you can buy is the one that best meets your needs.

For me, the best contract that met my needs was the one with the lowest short term costs. I can't image myself ever bothering with a stripped contract. The whole point of owning DVC is to save money, so the soon I start saving that money the better.

 

[ELMC]

For me, the best contract that met my needs was the one with the lowest short term costs. I can't image myself ever bothering with a stripped contract. The whole point of owning DVC is to save money, so the soon I start saving that money the better.

Agreed. Cash flow is king. From a financial standpoint, I'm taking the contract that has the lower net out of pocket cost in year one every time. If one wants to pay extra for specific contract size, location, UY, etc. etc. then that's fine. But unless one wants to somehow assign a dollar figure to the satisfaction they get from meeting their needs, they're not likely getting the best financial deal possible. Again, that's ok.

 

[Cyberc1978]

For me, the best contract that met my needs was the one with the lowest short term costs. I can't image myself ever bothering with a stripped contract. The whole point of owning DVC is to save money, so the soon I start saving that money the better.

To me it’s not about stripped or loaded contracts. If the price is right all way around the contract could be stripped. I don’t mind paying extra for a loaded contract. The question is always how much extra. No doubt I prefer a loaded contract but a stripped contract is not necessarily a no-go

So as with everything else in life it depends......

 

[Dean]

To me it’s not about stripped or loaded contracts. If the price is right all way around the contract could be stripped. I don’t mind paying extra for a loaded contract. The question is always how much extra. No doubt I prefer a loaded contract but a stripped contract is not necessarily a no-go

So as with everything else in life it depends......

Absolutely, personally I'd rather have a stripped contract that was appropriately discounted than one that was fully loaded. But the problem is the market doesn't drive the price down sufficiently on the stripped contracts to make them reasonable pricing wise. Sometimes there are other factors like home resort and contract size that may also further increase the price. In theory you're correct, in practice the true dollar value comparatively speaking isn't there and likely wouldn't pass ROFR anyway because DVD doesn't want the perception that the sales price should be lower and drive more people to resale and away from retail. The minimum difference one should consider for lost points is the what one could have rented the points for through a broker minus any dues and taxes one would have paid. That can easily create a spread of $20-25 pp between fully loaded and fully stripped.