I was missing a golden opportunity. In my quest to acquire as many points as quickly as I could, I was looking only at resale contracts that were ‘front-loaded’, meaning they had points available as soon as the contract closed. Of course, those are the ones everyone wants, and those are the ones everyone buys. But, as I’ve done more and more research, I’m realizing that might not always be the best route. The funny thing is, I discovered this without even knowing it.
As I mentioned in a previous article, my first resale contract was 250 points at Boulder Ridge for a stunning $89/point. That’s like 2003 prices for DVC. However, the contract was stripped – meaning that the previous owner either used or rented all the current years points, and no new points would come on line until next year. At the time I put an offer in on that contract, I wasn’t thinking about that. I just saw the numbers ‘250’ and ‘89’. Also, as I mentioned in a previous article, I’m of the belief that instant gratification takes too long, so when I realized that I’d have to borrow against next years points in order to do anything with that contract, I began looking for those sexy, beefy, point-heavy contracts. Beach Club Villas with 540 points at closing -SCORE! Bay Lake Tower with 320 points at closing – SCORE! But, add-on-itis….
So I kept looking for more ‘front loaded’ contracts, but that price I paid for Boulder Ridge kept gnawing at me. Then it hit me – I don’t need a TON OF POINTS RIGHT NOW. I have points to work with. I kept having to remind myself “I’m playing a long game here” – “it’s a marathon, not a sprint” – and any other bumper sticker slogan I could tell myself to stop from buying every contract I saw.
It made more sense for me, financially, to look for a stripped contract with a long closing than it did for a more expensive contract with immediate points. Here’s why:
- Stripped contracts are cheaper than front-loaded contracts. If you’re diligent and take your time to shop around, you can find some deals – like 250 points at Boulder Ridge for $89 a point.
- Long closings give you more time to put together the money. I’d much rather buy a contract outright than finance it, and longer closings make that a little easier to do. (Note: by ‘longer closing’ I’m referring to contracts that can’t close before a certain date. You’ll see this listed from time to time ‘Can’t close until October 1, 2019’)
- If it’s a larger contract (300 points or more), you might benefit from making an offer at a lower price per point. Sellers are often very agreeable to lower offers. You can negotiate these things the same way you would any real estate deal. That was a surprise to me. Of course, if the price negotiated is too low, Disney will take the contract during the right of first refusal. There’s a great post on our DVC forums at DISboards.com that tracks contracts and shows which ones have been taken and which ones have passed. While it’s not a sure-shot guide to what price will work, it’s a good barometer
- If the contract is being sold by an international seller, chances are stronger that it will pass RofR. There are additional tax hurdles that need to be cleared when a non-US citizen is selling a real estate transaction. Historically, Disney doesn’t like dealing with these so they tend to clear RofR more easily. It’s something to keep in mind when you see “International Seller” on a listing.
There are some downsides to this approach however – the biggest one being that lately, Disney seems to be buying back stripped contracts during the RofR period at a faster rate than other contracts.
Of course, all this is a lot of extra work, and assumes that you’re not looking for ‘instant points’. It certainly requires a bit of patience – especially if you’re looking for contracts in a particular use year. But, if you know what you’re looking for and you’re diligent about it, you’ll find the right contract and maybe save a few $$ in the process.
You make a solid argument for looking for “stripped” contracts. We’re planning to add on next year, so this information is very helpful!
Broken link to the rofr post on the boards. I got SSR last year for 91/pt and it was front loaded. Just wondering if that was still a good deal.
Yes SSR is now at the 102 to 104 price per point.
We purchased our 3 GCV contracts as stripped and made a substantial saving.
How funny. I was just looking at the DVC store and thinking about this. Its that struggle against do I pay less and wait for my points or get the immediate flow of points? There’s a real financial benefit to waiting if you can stand to wait. Waiting is so hard though….
It is always nice to have as many points as possible. While I am looking at resale I get discouraged with contracts that have zero points but after thinking about it the points will be available before I will be going back to Disney anyways. Good article Pete.
I just made an offer myself a stripped contract is which does not have dues until 2021. To top that off, the seller is selling the points lower than that resort has ever been sold on the resell market so I’m 99.9% sure that Disney will take it back.
It comes back to always doing the math! Just like those points that are cheaper now are not cheaper in the long run if the maintenance fees are higher.
When I bought my two resale contracts stripped contracts were often not sold cheap enough to make them attractive vs a loaded one.
Even if you don’t need the points you can rent them for $14 per point. This could help defray the purchase price somewhat.
I think this can become addictive. Fun, but addictive Like playing with monopoly .
When I first started reading this, I was convinced I must have stumbled upon a years-old blog post.
I see little to no evidence in today’s resale market that “stripped” contracts sell at anywhere near an appropriate discount compared to “loaded” contracts.
Anyone who is a DVC owner knows how easy it is to rent out their points at $15 per point or so. How much does that “loaded” contract cost compared to the “stripped” one if you sell off the first years’ points for $15 per point?
The other issue is ROFR. Disney seems much more interested in taking stripped contracts in ROFR, even when they’re not selling at a particular discount.
My recommendation would be to always try to buy contracts that have double points in their current use year because the points were banked from the previous use year. These usually don’t add a single penny to the cost of the contract to you, and you don’t have to pay maintenance fees on them!
I’ve purchased 7 resale contracts in the last few months, and there has been a measurable difference in price between front-loaded contracts and stripped contracts. To say that loaded contracts “don’t add a single penny” is just materially false.