Stripped contracts: are they ever a good idea?

es45

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We are looking to purchase a small resale at AKV, probably 50 points. I've been watching quite a while for a resale of such a small contract that isn't stripped and they are indeed few and far between. I've seen tons of posts to avoid them but the price is appealing....

Does it ever make sense to purchase one of these stripped contracts?
 
Well, sure, if the price is right and you don't want to travel this year, a stripped contract can be a fine deal. You just have to remember you aren't comparing apples to apples when the other option is a loaded contract. You also have to make sure you don't pay MF on points that aren't there...in my opinion those should be the responsibility of the seller.
 
The problem is that if the price is so appealing then Disney may very well use their ROFR to secure them for themselves.

Did you consider adding on directly through DVC? Might work out better for you...
 
The problem is that if the price is so appealing then Disney may very well use their ROFR to secure them for themselves.

Did you consider adding on directly through DVC? Might work out better for you...

This would be our first purchase. We don't want to get into a large contract yet as we travel every 2 years, studio-only with another DVC family who own a lot more points. I'm sure that we'll find ourselves adding on but for now, 50 will work well for us.
 

Well, sure, if the price is right and you don't want to travel this year, a stripped contract can be a fine deal. You just have to remember you aren't comparing apples to apples when the other option is a loaded contract. You also have to make sure you don't pay MF on points that aren't there...in my opinion those should be the responsibility of the seller.

Well said.
 
I wouldn't buy something that I couldn't use right away. Personal circumstances could change between now and the time the points become available. MF's could go up the maximum for the resort for the year you begin paying them. IMO you are doing the seller a favor by buying something that has been stripped and I don't see a corresponding benefit for you, the buyer. DVC could just ROFR the contract if the price is really "good."

Bobbi:goodvibes
 
To get an idea of what you're buying, I would run the numbers to find out exactly what you are paying for each point. Use this formula:


(# of points per year) X (# of years left on the contract) = Total # of Points
Remember to take out all of the stripped points.

Take the Total Amount of the contract and divide it by the Total # of Points

That will give you the amount you are paying per point.

For example, a 50 point contract that has no points until 2011 for $84 a point. That's 31 years times 50, which is 1,550 total points. The total for the contract (without closing costs) is $4,200. Now divide $4,200 by 1,550 and you get $2.63 per point.

Compare that per point number to the other contracts out there. The same contract, not stripped of the 2010 points at $88 per point, would be $4,400 divided by 1,600, which would be $2.75.

The last think you need to remember is about the maintenance fees. If you are going to pay $5 (or about that) for the 50 points in 2010, you're adding $250 to the price. Just make sure you're not paying maintenance fees for points you don't get to use.

Hope that helps.
 
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If you want a small contract I would grab whatever I could from resale. I am doing an addon of 50pts from SSR at this moment. I would check constantly and call when a new one ame up and it was already taken. I couldn't believe when I got to bid on this one. It had 27 this year and 50 next year plus they are paying closing IF it makes it through ROFR!
 
As noted, you may not have much options for a smaller contract. You'll likely pay more per point for a stripped AKV 50 pt contract than a larger non stripped one. The closing costs will also eat away at your savings. That size contract can easily cost you $10-20 pp more than a larger one. Still, if it's what you need, it still may be the best option going. It's easy to adjust the price for points availability. I'd take a much different, more short term approach to adjust the value between different contracts that VTNuke. I'd simply look at it as if you were renting out those points what would the value be, what are the dues that are applicable, and what is the Use Year.

For example lets compare a stripped June 50 pt contract to a non stripped one. Assume $10 pp for this years points and adjust as applicable for the dues involved and if there's any difference in closing costs, etc. In this simple example, there is a roughly $250 value difference between the 2 contracts due to the fact you didn't get the points but also didn't have to pay dues.

NOTE: The major DVC resellers charge dues DIFFERENTLY than what DVC does. DVC uses a Calendar year approach while the resellers take the stance that you get the points you pay the dues. Assuming the same approach to both above contracts, it doesn't affect your calculations comparing but does affect your value overall. In this case with either contract you'd lose a value of around $2.50 pp on either contract bought resale.

You can do the same basic adjustment as above for different UY. Just take the value of the number of points, divide by 12 then multiple by the number of months that overall. For example, a June UY with no points this year would have a value of about $125 more than a Dec UY also with no points.

To put it together using a June UY with all 50 points and a Dec UY with no points resale, here's how I'd look at it.

June UY all 50 points
Purchase $80 pp = $4000
Closing - $300
Value of this years points - $500
Cost of this years dues $250
lost value based on incorrect dues calculations - about $125
Total cost - extra value plus overcharged on dues = $4175

Dec UY - no points
Purchase $80 pp = $4000
Closing - $300
Value of this years points - $0
Cost of this years dues $0
lost value based on incorrect dues calculations - about $250 (11 months of dues for 2011)
Total cost - plus overcharged on dues = $4550

Thus given this example, I'd put a difference in value of around $325 between the 2. That's about $6.50 a point difference. However, that same contract is not available through DVC to new members and if it were, the price would be about $6000 with closing though you'd generally get this years points that are bankable plus all of next years points and you'd pay a prorated dues amount. That'd make the effective cost more in the $5400 range for 50 points. If one can go up to the minimum which at times at AKV has been 100, you might be able to get a reduced price on a pp basis but that's true to a degree both resale and retail.

IF you can find a private seller you might be able to cut the costs on closing somewhat depending on specifics. If you could get your friends to do an add on then sell it to you, you could do the transfer yourself for under $50 but you'd have to do a little work but you would likely end up with more points and less dues overall.

As noted, pickings may be slim to you might be just as happy getting a UY that works for you, considering what is a "fair" price and moving on. Good luck in your decisions.
 
Thanks for the replies; you helped me understand this confusing aspect of DVC resales and you helped me understand why that stripped contract may not be the deal that it appears to be!


One question: Does DVC ever offer lower point buy-ins than the current 160? We may be willing to purchase more than 50 points but not 160.
 
I believe only addons come in small contracts from Disney.
 
Thanks for the replies; you helped me understand this confusing aspect of DVC resales and you helped me understand why that stripped contract may not be the deal that it appears to be!


One question: Does DVC ever offer lower point buy-ins than the current 160? We may be willing to purchase more than 50 points but not 160.

DVC has been offering initial buy in's at AKV of 100 pts.
 
I believe only addons come in small contracts from Disney.

We bought in at AKV just a couple of weeks ago and the min buy in was 100 points. I believe the offer was good for SSR too. BLT had 160 point min buy in.
 















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