Contract value?

The original question was "how you all value similar contracts but with differing available points", the question is not how much you would pay for them. As a buyer I always want to pay as little as possible.
If I understand you right, you're trying to create a distinction between how much you value something at, and how much you'd pay for it?
You value a loaded contract at $37 over an equivalent $100 stripped contract. But you wouldn't pay what you value it at?

When making an offer on a loaded contract, I could earn some income by doing the work to rent points for $15, but I would not offer that much to the seller. I would value the points less and offer accordingly. Sellers accept these offers because they get the money up front and don't have to do the work / time with points tied up. Based on actual sales values, most of the world seems to do the same.

Without getting deep into the economics of price vs utility, suffice to say that this thread was about "how much more one should bid or ask for a contract with points vs without points". The answer is not $15. Tho you can rent them out for $15, they are not worth that much on the sale. The buyer should not offer that much, and a seller should not expect that much. $15 is just not what points actually sell for on the resale market.
4-5 years ago there were lots of loaded contracts and very few stripped contracts for sale. Now there are a lot of stripped contracts for sale and not that many loaded contracts. Why do you think that is?
Interesting discussion, but perhaps different thread? This seems like a whole spinoff topic and how you asked it makes me think you already have an answer in mind.
 
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Dean is correct, the contract price should have that much of a spread.
That value is based on the ability to rent the points. But many points, especially banked and current year points, won't have the ability to be used for high-value rentals because they are well within the 11 month timeframe. I can agree with the value in theory, but theory and reality are two different things.
 
Right. But you're saying because you can rent them out, they're worth that much in a sale right now. That's a fallacy. It'd be like saying...
I don't see how it's a fallacy. We're talking about putting you in the exact same position. If you bought the stripped contract or you purchased the loaded in and rented out the points, you've be in the exact same position. The car analogy simply doesn't work because you have extra variables that don't come into play. If we're talking about getting the same contract with the exact same point allocation, buying the loaded and renting them is going to be the better deal. Getting to loaded contract and using those points will likely be a better deal, too.
 
I don't see how it's a fallacy. We're talking about putting you in the exact same position. If you bought the stripped contract or you purchased the loaded in and rented out the points, you've be in the exact same position. The car analogy simply doesn't work because you have extra variables that don't come into play. If we're talking about getting the same contract with the exact same point allocation, buying the loaded and renting them is going to be the better deal. Getting to loaded contract and using those points will likely be a better deal, too.

Something is not worth -- now -- what you could rent it for over time. Points are not "worth" $15 at sale. If they were, we would see prices on loaded contracts go higher and prices on stripped contracts go lower until the gap was Dean's $37. They do not do this in the real world. They gravitate toward a more median value, which means the points are not worth $15.

Look at any rental example. If you could buy an apartment... and rent it out for $1000/mo for 30 years, you would make $360,000. But you would not PAY $360,000 for that apartment. You would have to pay much less (maybe $150,000) for that to be profitable, because why would you pay $360,000 to own something that only makes your money back in 30 years when you could instead put your money in stocks and double it every 20?. If you told someone this $150,000 house is "valued at" $360,000 because you could earn that much by renting it out they would laugh at you. Around half of the profit from renting comes from the act of renting and the power of owning the capital -- not the value of the item being rented. This is why the real contract spread is more like $100-$120, not $100-$137.
 
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Don't you get it?
It's painfully obvious that you still don't get it with your completely off-the-wall examples. A timeshare is effectively an inflation-adjusted annuity with an annual inflation-affected contribution. It is not a place to live. It is not a mode of transportation. Rental rates are variable and contain risk. Worth and value are separate concepts.
 
It's painfully obvious that you still don't get it with your completely off-the-wall examples. A timeshare is effectively an inflation-adjusted annuity with an annual inflation-affected contribution. It is not a place to live. It is not a mode of transportation. Rental rates are variable and contain risk. Worth and value are separate concepts.
Got it. You go on valuing loaded contracts at a $37 premium. I will happily sell you contracts using that valuation.
Rental rates are variable and contain risk.
There ya go. :) Now you're tapping into some of the reason why points rent for $15 but are not valued that high at sale.
 
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I don't recall anyone (myself included) saying they would pay $37 more pp for a loaded contract. But they are saying that's how much they value the difference between 2 similar contracts priced similarly, one being stripped the other fully loaded. Because in reality, its easy to realize that value.

My BLT example is a less extreme example of this. You mentioned you also would've paid the $5 premium to get a basically a years worth of free points. The value I received for my $5 pp premium was worth $14 pp due to being able to rent them and they were free of maintenance fees. So my profit on the transaction was $9 pp if you subtract the premium I paid. In my opinion, the math supports my new out the door price for said contract to be $101 pp (plus closing costs).
 


Sure, that $14pp was for renting them. It's payment for bearing the... as Supersnoop put it, variability and risk. You did not pay $14pp for those points. I think (hope) you would not recommend someone pay $14pp when buying loaded since you didn't do so yourself. For purposes of answering the question, when buying and selling -- and assessing two contracts, one with points, and one without points, how much of a premium should you pay for one or discount the other? You showed you'd value the richer contract by an extra $5pp/yr. This is in line with how I would value them, perhaps a couple dollars lower.
 
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I definitely wouldn't recommend someone pay $14 more, not because the value isn't there (as we both agreed above, it is) but because it's not necessary as in my example, I only paid $5 pp more. And I think that's the point everyone else had as well. That if 2 contracts are on the market similarly priced it's worth a lot (in this case $14 pp) more to pay a little ($5 pp) more for a more loaded contract.

And if a contract is fully loaded vs one that is stripped it's not unfathomable for one to place a value of $30 pp on the fully loaded one. But no one is saying they'd actually pay that much more, because it's not necessary in the market. But when they say that the $5-10 pp "savings" on a stripped contract is in actuality a $20 pp loss due to the potential rental value of a fully loaded one, I would concur.
 
I think we're in agreement and this is just semantics now. Really, this...
If 2 contracts are on the market similarly priced it's worth [it] to pay a little ($5 pp) more for a more loaded contract
...was never in question. The question was how much is "a little more". For you it may be $5. Others may go up to $15. I seem to be in between, as I put this value around $6-$9.
 
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For my example above, $5 was appropriate because it wasn't a fully loaded situation. I got almost one year's worth of free points. Would I have gone to $6-$9? Maybe not as quickly but in the end most likely (especially since it was the resort and use year I wanted), because why not if I knew I could get $14 that easily and I'm willing to rent?

Would I go to $15? Not in my example above of course but if it was a fully loaded situation vs stripped and I knew I wouldn't be losing any points or forced to rent them as distressed then absolutely.

It is interesting how many other factors are at play as well though. I'd actually be willing to take inherent "loss" on a stripped contract to get the resort,use year, or contract size I want if that's all that was there.
 
That value is based on the ability to rent the points. But many points, especially banked and current year points, won't have the ability to be used for high-value rentals because they are well within the 11 month timeframe. I can agree with the value in theory, but theory and reality are two different things.
There ya go. :) Now you're tapping into some of the reason why points rent for $15 but are not valued that high at sale.
I think the theoretical and the actual ability and prices are pretty much the same for points that have a signifiant lead time, somewhat less so for restricted points which is why I stated I'd value them less. Here are some absolutes. A full loaded and a fully stripped contract will be worth the same at some point, approximately 3 years down the road for most. One can potentially rent the points and for many situations, absolutely so and the return can be standardized and quantified. Those are indisputable. If one choses not to rent, that doesn't change the value of the points one cent looked at objectively. Thus this is not a question of renting over time but of renting over a short period of a few months at most. The reason the 2 types of contacts (and variations in between) are prices closer is not related to this issue, it's related to the fact that most buyers simply don't understand what they're missing out on for resorts with reasonable availability and that most sellers are willing to acknowledge the value loss. As long as someone is will to pay, why should they. DVC buyers have long ago proven that this is far more of an emotional purchase than an analytical one case in point every time one sees someone that bought retail "because they were more comfortable with the process".
 
If I understand you right, you're trying to create a distinction between how much you value something at, and how much you'd pay for it?
You value a loaded contract at $37 over an equivalent $100 stripped contract. But you wouldn't pay what you value it at?

When making an offer on a loaded contract, I could earn some income by doing the work to rent points for $15, but I would not offer that much to the seller. I would value the points less and offer accordingly. Sellers accept these offers because they get the money up front and don't have to do the work / time with points tied up. Based on actual sales values, most of the world seems to do the same.

Without getting deep into the economics of price vs utility, suffice to say that this thread was about "how much more one should bid or ask for a contract with points vs without points". The answer is not $15. Tho you can rent them out for $15, they are not worth that much on the sale. The buyer should not offer that much, and a seller should not expect that much. $15 is just not what points actually sell for on the resale market.

Interesting discussion, but perhaps different thread? This seems like a whole spinoff topic and how you asked it makes me think you already have an answer in mind.

As a smart buyer I always want to pay less for something then what I value it at. I always want a good deal which means paying less than what the real value is.

This discussion was all about determining what the real value of different contracts is. What you then offer on a contract is something completely different.
 
That value is based on the ability to rent the points. But many points, especially banked and current year points, won't have the ability to be used for high-value rentals because they are well within the 11 month timeframe. I can agree with the value in theory, but theory and reality are two different things.

Correct that different points will rent at different rates depending on how long till they expire. Hence the formula I use has the three years of points split out and one can plug in the most appropriate rental rate that you are going to get for each years points. The majority of the contracts I purchased had the points banked and hence the points were not distressed. A few contracts did have distressed points which I rented out at cheaper rates.

Costs = # of points * costs per point + closing costs + MF - year1 points * rental rate - year2 points * rental rate - year3 points * rental rate

So in reality it does work fine.
 
I always want a good deal which means paying less than what the real value is.
This discussion was all about determining what the real value of different contracts is.
So, what constitutes a "good deal" when it comes to extra points? They could get you up to $15 as rental income. So, you probably won't pay over $15 for them up front. That wouldn't be a good deal. I presume you would go for them if free or a couple $$. So somewhere in between those two levels is your threshhold. What is that threshhold? At what level would it still be a good deal to you? For me, that value of those points is around $6-$9. If I can get points for $6 or less, I'd take them. If I was going to have to pay $9 or more, that's probably not going to be a good deal to me. You may consider it a good deal if you get them for $14 because you can rent them for $15 and you'd be happy to get $1 profit. Not me. What is your "good deal" value when it comes to buying a contract with extra points?
 
So, what constitutes a "good deal" when it comes to extra points? They could get you up to $15 as rental income. So, you probably won't pay over $15 for them up front. That wouldn't be a good deal. I presume you would go for them if free or a couple $$. So somewhere in between those two levels is your threshhold. What is that threshhold? At what level would it still be a good deal to you? For me, that value of those points is around $6-$9. If I can get points for $6 or less, I'd take them. If I was going to have to pay $9 or more, that's probably not going to be a good deal to me. You may consider it a good deal if you get them for $14 because you can rent them for $15 and you'd be happy to get $1 profit. Not me. What is your "good deal" value when it comes to buying a contract with extra points?
This sentence in bold above speaks to the heart of the issue here. I think the problem comes from your word choice because using the word "value" is confusing for the point you are trying to make. The value of the points is $15. That has been established through a large number of rentals over time. You are willing to pay $6-9 for them, and based on historical sales and listings, rightfully so. You're correct in saying that those points are not worth $15 to the seller, but you are incorrect when you say that they are not worth $15 because they are...to the buyer. Perhaps it would be wise to distinguish between the two.
 
That value is based on the ability to rent the points. But many points, especially banked and current year points, won't have the ability to be used for high-value rentals because they are well within the 11 month timeframe. I can agree with the value in theory, but theory and reality are two different things.
I actually disagree; theory and reality are very similar in this case. The distressed points I referred to earlier were for an AUG UY contract that I closed on in late May. I was still able to get $10 per point with less than 2 months left on those points. The other points I received full market value. I think Dean's valuation of 15/15/7 is conservative, but overall I agree with it.

I understand that this is one example, but in reading I'm sure you have seen that it has been repeated hundreds of times by the users of these boards.
 
This sentence in bold above speaks to the heart of the issue here. I think the problem comes from your word choice because using the word "value" is confusing for the point you are trying to make. The value of the points is $15. That has been established through a large number of rentals over time. You are willing to pay $6-9 for them, and based on historical sales and listings, rightfully so. You're correct in saying that those points are not worth $15 to the seller, but you are incorrect when you say that they are not worth $15 because they are...to the buyer. Perhaps it would be wise to distinguish between the two.
Right. I get your semantics. We've been over this. But the jist of what we're trying to get to is what you would actually pay for those points and you keep beating around the bush to reiterate they're "worth" $15 even tho they sell for more like $6-$9 and you won't say what you'd actually pay for them. What is your threshold? Can you stop the semantics and just say what you'd pay for some extra current points? That is what will help people out here decide on a fair price / value when looking at two contracts that differ by some current points. Would you pay $14 if you could only make $1 profit? Would you pay $12? $6-$9? I don't know why you avoid the question and keep beating that horse. It's not that complicated of a discussion.
 
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Right. I get your semantics. We've been over this. But the jist of what we're trying to get to is what you would actually pay for those points and you keep beating around the bush to reiterate they're "worth" $15 to you but you won't say what you'd actually pay for them. What is your threshold? Can you stop the semantics and just say what you'd pay differently when buying a stripped vs loaded contract? That is what will help people out here decide on a fair price / value when looking at two contracts that differ by some current points. Would you pay $14 if you could only make $1 profit? Would you pay $12? $6-$9? I don't know why you avoid the question and keep beating that horse. It's not that complicated of a discussion but you're belaboring it so.

What you call semantics I call cutting through the fog created by your numerous fallacious examples and incorrect assumptions. I haven't been avoiding the question, I've just spent so much effort trying to correct your inaccuracies that I haven't gotten to the point where it was appropriate to answer your questions. But I will now. I have to warn you, though, that I'm going to give a complicated answer because it's a complicated question. Feel free to accuse me of more semantics.

The question is impossible to answer because I would not buy a stripped contract. I can only think of only two circumstances where I would even consider buying a stripped contract, and they are so highly unlikely to ever occur that it's not worth discussing. But to satisfy you, I will. I do not pay a premium for banked points. So to go back and answer your first question about how much more I would pay for a loaded contract, the answer is zero. So that leaves us with the two circumstances. The first is if the contract were priced such that it reflected fair market value minus the value of at least three years points (missing banked, current, and borrowed). That's not likely to happen. The second circumstance would occur if it were an emotional purchase for me, or if matching a certain resort/UY were that important that I was willing to overlook the math. I'm not. DVC purchases for me are all about math. I get that I'm the exception that proves the rule, and that's fine.

Which brings me to my greater point. DVC is an emotional purchase, and those that make poor mathematical choices (buying stripped, buying direct in certain circumstances*, etc.) should not feel badly if they made the decision that they feel comfortable with. Just because a purchase isn't optimal mathematically speaking, does not make it a bad purchase. But they should also not try to contort the numbers to try to convince others (and themselves) that their decision was a good one mathematically. The numbers don't lie, no matter how one tries to manipulate them.

*Edited to clarify my statement on buying direct. Added "in certain circumstances". There are some circumstances where buying direct is the correct mathematical decision and others where it isn't. I added "in certain circumstances" so as not to imply that all direct purchases were bad mathematical decisions.


BTW, I think you misunderstood the reasoning behind Dean's 15/15/7. He didn't mean that the 7 was because distressed points would only rent for $7. Rather, he devalued the 3rd group because buyers will generally have to reimburse the maint fees on the 3rd year of a triple loaded contract. Thus he was asserting 15/15/15-maint.

I managed to capture this portion of your post despite the fact that you went back and edited it out, as you did to correct many of your other misstatements. But it is a great example of how the things you have said in this post have not been accurate. Go back and read post #9 and you will see that I interpreted Dean's comments correctly.
 
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