Tips for purchasing a resale

[bethyg]

Have been diligently reading all threads regarding resale and looking daily at TSS website for new contracts. I would like some helpful advice from those "SEASONED DVC'ers" regarding purchase price.

Hypothetical example:
Say you were looking for 75-100 points at either OKW or SSR and the price was $80/pt. The asking price would be somewhere in the neighborhood of $6000 or $8000. I understand banked points are good. This means if any points are banked from 2004, that is additional points for me to use since they did not use all of their points in 2004. I also understand when I read something along the lines of "100 points coming 5/1/06", that means the points for 2005 have already been used.

Here's the question: Obviously points already used in 2005 means you will not be able to use your points until they come due in 2006. That contract does not sound as good to me since I won't benefit from the DVC membership until mid-2006. My first choice would be to just wait and look for a better offer, however smaller point contracts seem to go very quickly. If you wanted to just "bite the bullet" and purchase, how would you adjust your contract offer to reflect the lost year of points? Also, what about maintenance fees? If they've already been paid for 2005 or have not been paid yet- do you adjust for that as well?

 

[JimMIA]

I understand banked points are good.

Banked points, and also available points are good...IF you can use them or rent them. The goodness depends on the use year. For example, if you look at a contract with a May use year and 100 points banked from '03 to '04, those are probably no use to you at all. You won't close before they expire on April 30, 2005. Similarly, available points which are past the banking deadlines may or may not have value. If you have the option of banking all of them, or if you can use them for a trip you were planning anyway, they're great. If not, then they have value if you can rent them (not everybody wants to get involved in renting). You have to look carefully at each contract and see how the particulars work, because each one is different - as are the needs of each buyer.

I also understand when I read something along the lines of "100 points coming 5/1/06", that means the points for 2005 have already been used.

That's what it means, but before you eliminate a contract from consideration because of that, I would call the realtor and be sure that is accurate. Occasionally there are mistakes in the listings.

Here's the question: Obviously points already used in 2005 means you will not be able to use your points until they come due in 2006. That contract does not sound as good to me since I won't benefit from the DVC membership until mid-2006.

No, actually it does not mean that. In your example, you would be able to use points on May 1, 2005 by borrowing 2006 points.

My first choice would be to just wait and look for a better offer, however smaller point contracts seem to go very quickly.

That is one of the problems with resale. You really need to do exactly what you are doing - research, research, and research - because when you see that contract you like, you really need to be ready to pull the trigger. You can't wait, especially with a small contract.

There is another option, though, and it is probably the best option. Contact the resale brokers and tell them what you are looking for with as much specificity as you can. If you do that, they will call you when they get such a listing and you will get a shot at it before it ever gets advertised.

If you wanted to just "bite the bullet" and purchase, how would you adjust your contract offer to reflect the lost year of points? Also, what about maintenance fees? If they've already been paid for 2005 or have not been paid yet- do you adjust for that as well?

Personally, I would be looking a LOT more at the prospects of clearing ROFR than the nuances of the deal. To the degree that you can discern the level where ROFR comes into play, that would really be the price point I'd look at.

For example, you mention OKW at $80. What do we know about OKW? Passed several times recently (including yours truly) at 73, passed at 74, passed at 75 and 76 - ROFRd at 72 and 70. $80??? Naw. Sure, you might pay 75-76 for a "perfect" contract (for you), but not 80!

Conversely, no matter how stripped a contract is, you still have to pay enough to get by ROFR. For example, I see an SSR contract with no points until October '06! It's selling for $77. Will $77 pass ROFR? We've seen $83 pass, but $77...especially with the new SSR prices increasing in June? I don't know. The resale realtors would have a much better idea on that one.

Long story short, I would try to figure where ROFR was likely to be, and then do whatever gymnastics I could with my offer to ensure that I got past ROFR.

Example: you are looking at a small contract, but you are going to pay a minimum of $350-400 in closing costs, because there is a minimum cost. On a 100 point contract, that is $3.50-4.00 per point in closing costs. So...if you thought the ROFR line was about $80 and you were comfortable with paying that for the right contract, and you saw a nice contract with an asking price of 78...offer $82 and specify that the seller pays the closing costs. In order to make that completely fair for the seller, you would have to get the realtor to agree not to charge any increased commission on the $4 extra you're paying. Commissions are negotiable, and they are still getting the full commission they would have earned at the listing price, so that should not be a problem. The seller is still netting their original asking price of $78, you're really paying a net of $78, but the number Disney has to pay to ROFR is $82. You can do similar things with maintenance fees.

Keep researching, have fun, and try not to get too stressed. Save the stress for your ROFR waiting period! Good luck.

 

[bethyg]

okay, let me make sure I'm understanding the above post:
1. You can borrow points a year in advance (If points available 5/1/06, then I can borrow from them on 5/1/05). So a contract with no points until 2006 isn't so bad.
2. You may not be able to use banked points depending on what the UY is. Say a May UY. If I'm not closing until 4/30/05 then any banked points from 2004 will be forfeited?? I'm still hazy on this one. How long can you bank points and when do you lose them? I'm assuming you can't just keep carrying them over year to year?????
3. I should be focused more about the asking $$ per point and how it relates to the going rate $$ per point of other contracts from that resort and more importantly, making sure it is just above the ROFR margin we've been watching on Beca's thread. I can be creative and increase the $$ per point $2-3 to assure we pass ROFR if it looks close and stipulate in the contract seller pays CC's.

Do I get college credits for all of this???

Thanks for the help!

 

[jarestel]

There are a kazillion ways to figure what you should or shouldn't pay. I prefer the bottom line approach. Since you're looking for a small contract anyway, the difference of a few dollars per point is pretty inconsequential. A 100 point contract selling for $77 per point vs $79 per point is only a difference of $200 overall. If you see a contract that fits your criteria, I wouldn't worry so much about price per point as I would the contract getting snatched up by someone else while you're negotiating for a $200 - $300 savings. Of course, larger contracts can amount to substantial savings by dropping the price a dollar or 2, so I'm only talking about small contracts. Also, any contract without any 2005 points available should have the maintenance fees paid by the seller. They used the points, they should pay the MF. Who pays the closing costs can be negotiated or split, though it has been mentioned that if the seller agrees to pay closing costs, this makes the contract more attractive to Disney. One thing to keep in mind is that the sellers are really only interested in getting their money, so they are not usually concerned whether the money comes from a buyer or from Disney, through ROFR. Another reason to consult with your resale agent about offers that might not make it through ROFR.
Good luck with your decision! Let us know how things work out.

 

[Caskbill]

I strongly suggest you look at everything in THIS THREAD. You'll find a lot of answers there, even answers to questions you didn't know to ask.

Be sure you understand the most equitable method to figure out what is fair to pay in the way of maintenance fees. I think a lot of people misunderstand that and wind up paying more than they should.

Post back here if you have any additional questions.

 

[JimMIA]

Who pays the closing costs can be negotiated or split, though it has been mentioned that if the seller agrees to pay closing costs, this makes the contract more attractive to Disney.

I agree with all of your post except this part. Having the seller pay the closing costs, in return for a higher per-point price to offset that expense, is a way to make the contract less attractive for Disney to ROFR.

 

[bethyg]

Thanks for the helpful advice and additional link. Still have my homework to do.

Now..........just gotta hope my horse comes in for the Derby!
Gotta love living in KY!!!

 

[SpoonfulofSugar]

Having the seller pay the closing costs, in return for a higher per-point price to offset that expense, is a way to make the contract less attractive for Disney to ROFR.

Wouldn't this be a wash? Either Disney pays the closing costs on the contract, or Disney pays a couple bucks more for it and the seller pays the closing costs? It sounds the same to me. And besides, does it matter what they pay for them when they resell them at $89? I don't think anyone will ever figure out what makes them pull the trigger on ROFR. Take this with a grain of salt or whatever though because I'm just bitter over having a contract ROFR'd. Thanks for letting me vent

Good luck with your homework !!!!

 

[JimMIA]

Re: having the seller pay closing in return for a higher per-point price -

Wouldn't this be a wash? Either Disney pays the closing costs on the contract, or Disney pays a couple bucks more for it and the seller pays the closing costs?

No, it's not a wash. Disney is paying $3-4 more per point...period. If they make the seller pay closing costs to an independent title company, Disney doesn't get any of that money - the title company does. If Disney closes it themselves, they couldn't legitimately ask for reimbursement for more than they paid to close - which is nothing more than having their notary sign some papers. They are not providing themselves title insurance, nor do they have the same costs a title company has in transferring a contract from one owner to another. If you think this idea doesn't make sense, ask your resale broker. I think you will find they agree that this is one approach to consider.

 

[SpoonfulofSugar]

Oh, now I get it. Closing costs go a third party Sounds like its worth a shot.
But with Disney able to sell them at $89 (and they can because there are large waiting lists) I guess the only safe way to buy a resale is to pay $85-88 a point, otherwise you're at their mercy. Although it seems the percentages are with you as they don't ROFR as many as they let go through. Sometimes you just gotta take the chance.

 

[T.E. Yeary]

When Disney buys back a contract, the same amount of closing costs mentioned in the contract is paid to Disney, NOT the closing company listed in the contract. Disney does the closing on a ROFR'd contract!

The title company is NOT compensated for whatever expenses or work they may have done on the package prior to the buy back. It's a tough business!

Tom

 

[JeanJoe]

BEWARE: deranged speculation ahead.

When Disney buys back a contract, the same amount of closing costs mentioned in the contract is paid to Disney, NOT the closing company listed in the contract. Disney does the closing on a ROFR'd contract!

The title company is NOT compensated for whatever expenses or work they may have done on the package prior to the buy back. It's a tough business!

Thanks again, Tom, for another detail from an insider's perspective.

This is informative, because it suggests that a lot of our speculation on "buyer pays closing, but offers $3/point less" vs "seller pays closing, but buyer pays $3/point more" (in an e.g., roughly $450 closing, 150 point contract) would have no impact on a contracts attractiveness for Disney to ROFR (assuming also that Disney goes beyond simply looking at price/point, which you'd have to assume a company as large as Disney would be capable of doing).

Now, at risk of sounding ungrateful to The Timeshare Store and Tom (for hosting these forums and offering very helpful information), note that the seller probably pays a commission to the resale broker based on the "purchase price" separate to "closing cost", so if you want your offer to be accepted by the seller you'll have to consider that perspective as well.

But with Disney able to sell them at $89 (and they can because there are large waiting lists) I guess the only safe way to buy a resale is to pay $85-88 a point, otherwise you're at their mercy. Although it seems the percentages are with you as they don't ROFR as many as they let go through. Sometimes you just gotta take the chance.

Even though Disney pockets "the closing costs", it'll still cost them SOMETHING (even if possibly less than the fees of a title company) to do the transfer. Also, Disney probably wants to do better than just breaking even (unless they are seeking the goodwill of people on the waiting list). So, the "safe way" to buy a resale is probably in the "couple of dollars less than what Disney is selling for", but then, why not just go direct through Disney (other than the waiting list occasionally up to a year...)? Save the stress, anxiety, delay, and frustration of the ROFR process...

From a purely academic standpoint, the interaction between buyer / seller / Disney / and resale brokers with respect to the resale market is rather interesting, and I'm sure could be mathematically modeled.

Goal of each

Buyer: minimize price, and still pass ROFR

Seller: maximize price, don't care about ROFR

Resale company: maximize price (to maximize commission), but if price gets too close to Disney selling price, will lose resale market to Disney waiting list. But, wants both buyers and sellers to be happy with the situation, to maintain happy customers and referrals.

Disney: maximize differential between resale market price and the price they can sell to their waiting list on. Disney has a great deal going here, because the resale brokers are putting in all the expense of contact with buyers / sellers, advertising the listings, initiating and completing sales. And after all this effort is put in, Disney can just come in and take it, for a profit on the waiting list market (where they can set whatever price they wish). Gotta love the way Disney set this up for themselves.. Makes me glad, I guess, that I'm a (small) Disney shareholder. (Heh, mostly did it to get my hands on the pretty stock certificate with the characters on it )

Oh, but for Disney to maintain this nice situation, they have to keep the resale brokers in business, because otherwise until or unless they offer contract buy-backs, there would be no other way for them to fulfill a waiting list.

I'm sure an economist / mathematician could get a publication out of this... Maybe even a biologist (commensalism, parasitism, ... I'm being cynical that no one involved is being altruistic.) But, not my line of work.

Sorry to get long-winded. The academic side of me took over for a moment. Too much time on my hands while I await ROFR...

 

[T.E. Yeary]

Why do I feel like I'm sitting in the hot seat?

I do want to make a clarification on the closing costs with reference to ROFR. Only if the seller has agreed to pay closing costs can Disney collect for them. The purchaser has moved on to another contract because of the ROFR.

Disney has the best product on the market. They keep the prices up through forced inflation (constantly raising point prices), and through the ROFR process. This keeps the value increasing to insure the resale value will be there, should you need to sell. Remember, the original purchasers in 1991 paid $51 per point. As long as the Disney rental rates keep going up, the purchase of a DVC contract will continue to make sense as you can get your moneys worth in less than 5 years with a resale contract and staying on Disney property every year, as most do.

Tom

 

[JeanJoe]

Why do I feel like I'm sitting in the hot seat?

My apologies! Never meant offense. I've been much appreciative of your information, and all I've learned from everyone here.

I just sometimes tend to be a combination of bluntly straightforward, and long-winded ranter. Don't mind me.

For the record, my wife and I have been absolutely delighted with our dealings with TTS.

 

[SpoonfulofSugar]

When Disney buys back a contract, the same amount of closing costs mentioned in the contract is paid to Disney, NOT the closing company listed in the contract. Disney does the closing on a ROFR'd contract!

So I was right, it is a wash !!!

but then, why not just go direct through Disney (other than the waiting list occasionally up to a year...)? Save the stress, anxiety, delay, and frustration of the ROFR process...

Yes, I discovered I don't have the will to go through the ROFR process again.
I waited for 33 days for BCV points from Disney, and after getting ROFR'd on an additional resale from TTS, I decided to buy SSR through Disney.

For the record, my wife and I have been absolutely delighted with our dealings with TTS.

I second this, our experience with TTS was wonderful, and even though our contract didn't pass, they were great and I would go back to them if I ever get the nerve to go through the ROFR process again.