Buy resale or direct from Disney?

DVC Resale: Most people who first hear about DVC hear directly from Disney, and may not even be aware that there is an active resale market where DVC contracts may be purchased – just like you can purchase a new or used home. Should you buy direct from DVC or buy resale?

Are direct and resale purchasers treated the same by DVC?

In the past, once the resale purchase was completed, new members who purchased via resale received the exact same benefits — including ID cards, website access, discounts, customer service, and travel assistance—provided with purchases directly from Disney. This is no longer the case.

When you purchase an ownership interest in a Disney Vacation Club resort direct from Disney Vacation Development, you also get a set of incidental benefits that DVC refers to as “Membership Extras”. This includes discounts, offers and opportunities made available by DVD to members. These incidental benefits of membership may be modified or terminated at any time by DVC.

In the past, DVD offered these benefits to every DVC member no matter if you purchased direct from Disney or on the resale market. Even though there was no requirement that these incidental benefits were transferrable from the original buyer to the new buyer, DVD allowed that to occur. That is no longer the case.

Restrictions on points purchased via resale

Over the past few years, Disney has implemented some restrictions on the usage of points purchased via the resale market to differentiate the product they sell with what you can purchase resale.

March 21, 2011 Restrictions on Resale Purchases

DVC announced a policy that limits access to certain Member Getaways exchanges for Ownership Interests purchased on the secondary market (also known as the resale market). Under the policy, Members who purchase from anyone other than Disney Vacation Development, Inc., on or after March 21, 2011, will not be eligible to use those Vacation Points to make reservations for the following two collections:

  • “Disney Collection” – Disney Resort Hotels, Disney Cruise Line, Adventures by Disney
  • “Concierge Collection” – a prestigious portfolio of resorts and hotels

Points purchased via the resale market will instead be valid only for reservations at:

  • Disney Vacation Club resorts
  • Exchanges through RCI
  • Club Cordial
  • Club Intrawest

That said, Members who purchased on the secondary market prior to March 21, 2011, may use those Vacation Points for all Member Getaways.

Bear in mind, however, that you get the most “bang for the buck” using your points to stay at DVC resorts, so many view these options that were removed from resale purchasers as a poor use of DVC points and therefore no great loss. Also bear in mind that these programs are not guaranteed to be around and may be discontinued by DVC in the future.

April 4, 2016 Restrictions on Resale Purchases

Effective April 4, 2016, Members who do not purchase their ownership interest directly from Disney Vacation Development will not have access to the incidental benefits (Membership Extras), including discounts on dining, shopping, annual passes, and access to member-exclusive events.

Restrictions on DVC Resale Purchases
Restrictions on DVC Resale Purchases (click for larger)

NOTE: Disney announced new restrictions to resale purchases effective April 4, 2016. Read this.

Purchasing direct from Disney

Buying DVC direct from Disney
Buying DVC direct from Disney (click for larger)

Bottom line: If you are willing to pay more, buying direct is easier, less stressful, faster, and requires less patience than buying resale.

Purchasing Resale

Buying DVC on the resale market
Buying DVC on the resale market (click for larger)

Bottom line: If you are willing to be patient and wait for the right contract to come along, like negotiating a deal, can deal with the anxiety of waiting to hear you pass ROFR, and then wait until you’re finally in the system, buying resale will save you a lot of money than buying direct.

“Stripped” and “loaded” contracts

When purchasing resale, you may hear of “stripped” or “loaded” contracts for sale. If you do decide to buy resale, you should be aware of which category a contract listed for sale falls into.

Broadly, the following terminology is used:

  • Fully loaded: All prior UY points banked, all current UY points available, none borrowed from next UY
  • Loaded: All current UY points available, none borrowed from next UY
  • Stripped: No current UY points available, some points coming from next UY
  • Fully Stripped: No current UY points available, and no points coming in the next UY

Obviously, a loaded contract is more desirable to most people than a stripped contract.

Fees when buying resale

The seller pays the commission to the broker, which is typically 8-10% of the sales price, as well as an Estoppel fee (~$150) and ROFR fee (~$20).

The buyer typically pays the closing costs. Closing costs generally include everything involved to legally transfer the property from the seller to the buyer, including items such as recording the new deed and the title insurance policy. A title search is conducted by the title company to be sure that the title is free and clear, and a title insurance policy is issued to insure the same.

As to who pays annual dues, it is completely negotiable. Most resale brokers will say the buyer is responsible for paying the annual dues on any points they get. Most buyers shouldn’t pay annual dues on banked points from a prior year.

ROFR – Right of First Refusal

When buying resale, one of the potential pitfalls to try to avoid is making an offer that will cause Disney to exercise its Right of First Refusal (ROFR).

Waiting for ROFR

If you find a contract you like and you and the seller agree on a purchase price, the agreement to sell the points is submitted to DVC for review. If the price is too low, Disney will step in and exercise their ROFR, which means DVC will purchase the property themselves at the terms agreed upon by the seller and the original buyer. DVC then becomes the buyer. The seller instead gets its money from Disney and the buyer loses the contract.

If DVC exercises ROFR, the original buyer can’t come back and make a higher offer. There is no second chance; the resale contract is lost to Disney. There is no financial hardship on the potential buyer — they will receive a refund on any down-payment that may have been part of the deal. But the buyer will have to go back to square-one and try to find another deal.

Disney must be given up to 30 days to review the contract and decide whether they will exercise ROFR, but it usually takes less time than that.

DVC Right of First Refusal (ROFR) on the sale of a contract
DVC Right of First Refusal (ROFR) on the sale of a contract (click for larger)

Disney doesn’t disclose the criteria used to determine whether they will exercise ROFR on a DVC resale package, but the price per point is definitely a critical factor. A contract in which the sales price is below the average market value is particularly prone to being purchased by Disney via ROFR.

Falling victim to Disney’s ROFR isn’t the end of the world; it just sets you back about 30 days (the length of Disney’s typical review process), and forces you to pursue a different listing. To avoid this kind of delay, make more competitive offers.

DVC Resale Brokers

Which Resale Broker should I Use?

Similar to a realtor, the broker’s role is to bring buyers and sellers together. All broker fees and commission are typically paid by the seller. I strongly recommend that you work with a broker who is thoroughly experienced in selling DVC contracts. There are several reputable companies out there that list DVC contracts.

How long does it take when buying resale?

Once you have found a resale listing you like, you make an offer on it. Once the price is accepted by the seller, a contract is sent to you for your signature.

After both the buyer and seller sign and return the necessary documents, everything is sent to DVC for ROFR. Disney can take up to 30 days to review the contract and make a decision whether to exercise their Right of First Refusal. Disney generally makes their decision in less than 3 weeks.

Once Disney waives ROFR, the title company will do a title search on the property, order a title insurance policy and request an estoppel report from Disney. The estoppel report is what the title company uses to put together the final closing documents. When the closing documents are ready, the title company will send them to both buyer and seller. They need to be returned along with the final funds due from the buyer.

Once the closing is completed (it can take up to 8 weeks), the title company sends the purchase information to DVC and it then takes Disney 7 to 10 days to put you into their system as the owner of the contract.

It is at that point that you can call Member Services and make your first reservation.

Of course, with all the back and forth, there is ample opportunity for further delays. On the other hand, sometimes the process can take less time.

Owning multiple Use Years or just one?

If you’re already a DVC member and are looking to add-on more points, consider whether you want to add-on points with the same Use Year you already have, or with a different Use Year.

When purchasing additional points via the resale market, you can easily purchase a contract with a different Use Year. If you’re buying an add-on direct from Disney, you will most likely be given no choice but to get the same Use Year you already have – unless you buy the minimum points that a first time purchaser is required to buy-in, in which case you can ask for a different use year.

If you buy the same use year (and the deeds have the exact same names on them), all your contracts can be setup to be treated as one for purpose of reserving, banking and borrowing. If you have separate use years, the two contracts remain separate for all purposes and when you reserve using both you reserve some nights using one contract and other nights using the other and link the two. Or, you can transfer points from one contract to another, but there are limitations.

Having multiple contracts with different Use Years can offer added flexibility in some cases, but certain limitations in other cases, and is just harder to manage. Having the same Use Year on all of your contracts is much easier to manage, as there is less to keep track of and less chance for mistakes.

The main advantage of multiple UY’s is if you go different times of the year you can potentially chose which account to use for a given trip giving a certain amount of protection from cancelation and banking issues. But having multiple contracts with different Use Years does create more accounting, is more complicated and difficult (but not impossible) to make a single reservation from both contracts.

So, some people ask why you should make life harder than it needs to be and recommend sticking with just one UY.

If you were adding on to the same resort, many people recommend you keep the same use year. If you are buying a new home resort, then a different use year isn’t too hard to manage.