The companion piece to this column involved a discussion of a direct Disney Vacation Club purchase, which means buying straight from The Walt Disney Company.
What most consumers fail to realize is that there is a much cheaper Plan B. If you are in a situation where you want to join but cannot justify the expense, the information contained within this article may change your mind. Alternately, if you want to join but your significant other/spouse doesn’t want to spend the cash, use the facts below to persuade them.
1. Understand what resale is
Since the Disney Vacation Club is technically a real estate transaction, state and federal laws governing such purchases apply. As such, Disney cannot prevent anyone from buying the contract of a current DVC member. In fact, it happens all the time. The situation is no different than buying a house from its current owner. And the similarities exist beyond the surface level.
A brand new house generally comes with a non-negotiable price tag. The contractor will only sell for the listed amount, which means that you as a buyer have little to no leverage on the purchase. Conversely, a currently-owned home has an asking price that is not necessarily how much the buyer will pay. In some regions of United as well as (especially) in Canada, the offer price will be lower. In most instances, however, the would-be buyer is expected to offer somewhere between 80 and 90% of the asking price.
Other factors contribute to this amount, as well. A motivated seller may take less in exchange for being out from under the monthly cost of the mortgage payment. The DVC resale market possesses its own quirks, but the underlying mechanics are the same. A DVC resale agent lists a price per point as well as a total transaction cost for a contract. They rarely expect to get the exact listing price. It is merely a starting point for negotiations.
The potential customers evaluate the contract, and then bids are made. The current contract owner accepts or passes, depending upon their key motivations at the time. Those are primarily the offer amount or a driving need to sell. Some people selling DVC contracts need to do so quickly in order to mitigate other expenses such as their actual mortgage or emergency expenses.
Some sellers will not budge off their asking price, but you should never be afraid to lowball with your first offer. The worst that can happen is that the seller rejects it. Also, real estate agents can be loose-lipped about offers they believe the seller will accept, so consider pumping them for information before making a bid.
2. Learn where to look for resale listings
All you need to do is google a term such as “DVC resale” or “DVC resale search” to discover a slew of potential contracts up for grabs. Simply by studying such sites, you will learn a great deal about how the DVC resale market works. The explanation is that the people hosting DVC resale sites have more experience on the topic than anyone else in the world. In order to drum up further business, they have collected a wealth of knowledge and posted it for easy consumption.
Better yet, all of these sites provide a slew of DVC listings, which means that you will have dozens if not hundreds of options when you start looking for a contract. There are even a couple of aggregator websites that compile virtually every available DVC resale listing. Learning to utilize these sites will go a long way toward empowering you as a consumer. Within a few hours, you should have a complete understanding of which DVC property you want to select as your home, how many points you are willing to purchase, and how little you can pay to purchase the contract you desire.
Note that there are even a couple of resources available on Disney message boards that track the recent DVC resale purchases. Users post their DVC transactions in such threads, and the data can be used to provide an even more accurate estimate of the current fair market value of a contract. This information provides further utility in helping would-be buyers to anticipate Disney’s Right of First Refusal behavior. Sometimes, the company goes on spending sprees to buy back contracts, and other times they simply buy some to scare potential customers into purchasing directly through Disney. The more information you possess as a consumer, the better a deal you can attain.
3. Maximize your contract value
Image: Disney
One of the quirks of DVC resale contracts is that they may contain “extra” points. The way that a contract works, a person can bank their points into the following year. This is fairly frequent behavior for some customers who are about to sell, because it indicates a waning interest in DVC membership. If you don’t go for a year and have no plans to go the following year, paying the maintenance fees is simply bad business.
Given the above, it is possible to find contracts that have many more points than should be expected. Let’s use an example of a 100-point membership. If the current owner banks their points into the following Use Year prior to selling, the new owner will start with 200 points instead of the regular 100. Effectively, that means an extra free week of hotel stays.
The corollary to this is that you should avoid stripped contracts. What I mean by stripped is that some DVC owners realize that they will be selling soon, so they not only spend the points in the current year but also borrow the ones from the following Use Year. In this regard, they receive a full complement of additional points prior to selling. Then, the person stuck with the bill is you, the new DVC owner. You are paying for your contract, but you have no points to spend for at least a year. Realistically, it’s no different than offering to pay for someone else’s credit card bill. Again, that’s just bad business.
While shopping around, target contracts with banked points. Even if you will not use them all, you can always use the existing ones then bank the ones from the current Use Year to save for a rainy day. Alternately, a good strategy is to rent your points through a service or on a message board, thereby earning $11 – $14 per DVC point. Such a transaction mitigates the cost of your initial DVC capital outlay.
4. Cheaper is better
Image: Disney
In posting this series of DVC articles, I have noticed that every single one is met with a comment about the sticker shock of DVC ownership. People have claimed that as much as $25,000 is required to join. In performing research for this column, I discovered 15 different resale contracts available right now that cost $5,000 or less. The cheapest one is only $2,100 for 30 points. I would note that you may not be able to visit long with only 60 points every two years, but a purchase like that is a solid choice for customers who want to dip their toes in the water prior to a long swim.
Until you are 100% confident that you love everything about DVC membership, there is no justification for spending a lot of money. Instead, target a small contract featuring a minimal investment. This option is unavailable via direct purchase, which is not accidental. Disney wants you to spend $13,000+ so that you are pot-committed. Be savvier and a bit more frugal initially to make sure that DVC is for you.
5. Understand your financing options
Image: Disney
At the risk of offending the Dave Ramsey fans reading these columns, remember that financing is available. In fact, people who buy directly through Disney do not even receive a hard inquiry on their credit report. Those who seek to purchase via resale have a lot of options as well. Prosper and Lending Club both offer such small loans, and a $5,000 resale purchase could be financed for as little as $154 per month for three years. Note that you will pay about $550 in interest (i.e. 11% over three years) if you choose this option, but it’s a viable alternative for those who want to purchase without having the available capital.
Obviously, as a DVC member, I fully recommend that others join. I am, however, a financial adviser, so I don’t want to mislead anyone about the expense. Even a few thousand dollars is a lot of money to most people. Whether you get what you pay for with DVC membership is in the eye of the beholder. If the main sticking point for you has been the sticker shock, however, you should now realize that an investment of a few thousand dollars could provide a many years of enjoyable vacations for you and your loved ones.
