New DVC Resale Restrictions and Who is Most Impacted

Filed in Buying DVC, Changes to DVC Resale, Disney Vacation Club, DVC, DVC Resale, DVC Resale Restrictions, RCI

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DVC Classic Collection

What are the DVC Resale Changes?

Effective for resale purchases submitted on or after January 19, 2019: Disney Vacation Club resale contracts purchased for the original 14 DVC resorts will only be able to exchange into those 14 existing resorts in the DVC network. These contracts will not be able to exchange into Disney’s Riviera Resort, Reflections – A Disney Lakeside Lodge and possibly additional future properties in the DVC system. All Members will still be able to exchange with RCI.

Once sales of Disney’s Riviera Resort begin, Members who purchase a resale of Riviera will only be able to stay at Disney’s Riviera Resort in the DVC network. Those Members will still have access to RCI.

Can I Still Buy Resale before the Changes?

YES, but you will Need to Purchase As Soon as Possible!

Any contracts submitted to Disney for right of first refusal (ROFR) prior to January 19, 2019, will be “grandfathered” in. Meaning, if you purchase a resale contract and it is submitted to Disney prior to January 19, 2019, that contract can be used at all original 14 resorts as well as Riviera, Reflections and future resorts.

If you are considering purchasing a DVC resale contract, it is highly recommended you do so prior to January 14, 2019 if you want to best ensure your purchase is submitted to Disney prior to January 19th. Reason being, the deadline is not just that you agreed to buy, but rather the contract has been signed by both parties and submitted to Disney. This is not to say if you purchase after January 14th, but before January 19th it is impossible to get your contract submitted in time. It is still possible, but the risk of the contract not being submitted in time begins to increase considerably in the days leading up to the 19th as both parties need to perform in a very timely manner, and we are anticipating a very busy period for buyers.

Who is Most Impacted by this DVC Resale Change and How?

Certainly, the most ideal option is for potential Members and existing Members to purchase resale prior to January 19, 2019 to ensure they not only get access to the 14 classic resorts, but also access to the upcoming resorts.

What is the best option after January 19th? I would assert buying the classic resorts via resale, but perhaps more so than ever. The 14 resorts currently in the DVC collection are very likely to be the most popular ever. Why? The 3 rules of real estate: location, location and location. The classic 14 resorts surround nearly all the available real estate around the major theme parks.

Disney's Bay lake Tower

Without the addition of new major theme parks, which has been more of a rumor and a dream than a reality since 1998, there really isn’t an opportunity for newer DVC resorts to compete in popularity with existing prominent resorts such as Beach Club, Boardwalk, Grand Floridian, etc. Additionally, based on action or lack thereof, DVC doesn’t seem to be highly interested in locations outside of a theme park. Aulani was the last DVC resort location built outside a Disney theme park. Aulani went up for sale nearly 10 years ago, and based on sales pace may still have several more years to go before it is finally sold out.

Beach Club Pool

Overwhelming, the biggest impact will likely be felt by direct purchasers of Disney’s Riviera Resort and possibly future properties, if and when those owners decide to sell their direct purchased contracts. If you purchase Disney’s Riviera direct, while you own it, the use will be unaffected by these changes. So, if someone purchases Riviera and keeps it until expiration, for roughly the anticipated 50 years it will have on it’s deed, they will not be impacted. However, in reality, the typical time frame for Members to keep DVC contracts is more like 5-15 years.

Disney's Grand Floridian

With that time frame for potentially selling in mind, families have to consider what does my resale value look like? Much like a car, DVC is by no means an investment. However, much like a car, when someone makes a purchase decision in the neighborhood of $20,000 – $40,000 (typical direct DVC purchase), almost everyone wants to know what does it look like if I wanted or needed to sell at some point? Essentially, what is the resale value? To think the resale price of Riviera will be impacted by the restriction of use is only natural.

Could someone purchase Riviera direct for around $40,000 and possibly be living with a resale value a fraction of that amount the next day? While we won’t know the answer to this question until probably sometime late this year when Riviera resale contracts’ are likely first entering the market, it is a scenario direct buyer’s may need to consider.

The potential buyer for a Riviera resale contract has to not only account for the fact they can’t stay in some of the more popular locations, but they also have to consider the possibility of Riviera being booked and having no other Disney Vacation Club option for their family’s vacation. The resale buyer of Riviera will not likely be jaded though, as they will probably be buying it at a resale price that accounts for such restrictions.

Why Would Disney Do This?

Only the decision makers at DVC truly know the answer, but certainly, we can speculate the financial opportunities that may result from this decision. Is this decision to boost more direct sales at the expense of resale? This is possible, but the truth is direct sales starting with the Riviera may become much more difficult given concerns over resale value. Other possible financial benefits could be the following:

  1. Increase in Buy Back margin: if the resale value is much less, and the direct price remains the same or increases, the profit margin when buying back could increase significantly.
  2. Opportunity for obtaining more resorts in foreclosure rather than competing with them in resale: The vast majority of contracts we resale that were purchased direct were financed. If someone is wanting or needing to sell a contract purchased and the market will not bear a price close to what they owe, the Member may have no other alternative than to lose their contract via foreclosure.
  3. More revenue opportunity in the “Breakage Period”: If a unit has not been reserved sixty days prior to a given use day, Disney retains the right to rent that unit to non-members. By restricting use of Member’s points in the DVC network, the opportunity to use or rent those points that may otherwise go unused diminishes. Thus, leaving Disney with more inventory to acquire in the breakage period and more rental income for Disney.

Access all DVC resale listings and learn more about buying and selling with DVC Resale Market.

 

 

Comments

  • Heather
    July 7, 2019

    Is DVC intentionally making the resale value decrease on Riviera Direct to force sellers to deal directly with them instead of being able to wheel and deal on broker sites?

    • Nick Cotton
      July 7, 2019

      Heather – I don’t think the decision was as much as about decreasing the resale value of Riviera as much as it was being able to advertise an advantage buying direct vs. resale. Sellers will still be listing their Riviera contracts with resale brokers, and once sold we will continue to submit them to Disney for ROFR consideration. Typically, Disney direct buy offers are much lower than what sellers can get when selling with a broker.

  • Elva Romero
    March 27, 2019

    Question: if we buy resale at let’s say the Polynesian. Then we turn around and buy 50 pts at Cooper Creek or Rivera giving us 2 home stations direct from DVC will we be able to bank all 250 points for a cruise since a portion are “new”

    • Nick Cotton
      March 27, 2019

      Elva, just the direct points could be used towards the cruise.

  • Frank L
    January 18, 2019

    This is a complicated question and not sure you can answer. If a dvc member has both resale and direct points, would it be possible to transfer points from resale to a direct account and thereby remove the 14 resort limitation for resale purchases made after Jan 19th?

    • Leslie
      February 2, 2019

      Since it’s a legal real estate holding you would have to sell and buy back direct….and pay Disney’s direct price. I actually talked to them about swapping home resorts (I own Grand Flo but would rather be elsewhere). I thought just maybe they’d make a deal because Grand Flo has a waitlist….no deal. They’d buy Grand Flo and sell me back AKL at $70 higher a point. So I’m sticking with what I have.

    • Nick Cotton
      January 18, 2019

      Frank – I can’t say I’ve looked into this, but I would highly doubt it is possible for 2 reasons:
      1. When you traditionally transfer points, the points still retain the Home Resort and UY from where they started, and if retaining the value of origination stays consistent the resale points would still be restricted
      2. This would work to defeat the purpose of what they are doing so even if it were a loophole, it would likely only be temporary until they realize what is going on.

  • Sam
    January 13, 2019

    Sorry if this has already been mentioned in the comments. The announcment from DVC contains no mention whatsoever of what policy will or will not be in place for resale contracts on the new Riviera and Reflections resorts. This article is just speculating on what the resale point limitations on Riviera will be, if any.

    It seems obvious that it becomes much harder for DVC to sell a new, 50-year Riviera contract if the new buyer knows this contract is … literally … 14 times more valuable to them than it is to anybody else they might choose to sell it to down the road. That’s a hard sell. And Disney knows this. The last thing DVC wants to do is decrease demand for their new resorts … which is exactly what will happen if they drastically devalue the resales of those new contracts even before they go on sale.

    So … they won’t do it. Ironically, Disney needs resale markets as part of its sales pitch for new owners. My expectation is that once Riviera sales launch, Disney will clarify that resales of Riviera contracts will continue to enjoy access to all DVC properties. Again, the announcement of last week was completely silent on new resort resale contracts. It goes out of its way not to pronounce new policies on resales in general, but specifically on resales of the 14 current resorts.

    Then what is going on? With this action Disney has just significantly reduced the demand (apart from the flurry of activity resale companies are enjoying this week through all their “buy now!” “buy now!” talk) of all existing resort resales. But, if I have correctly intuited that Riviera resales will not have this limitation, they have just increased the demand for their new DVC resort. Resale costs of the original 14 will go down. Resale values for Riviera will be higher than they otherwise would have been.

    The result is that someone looking to buy in to DVC is much more likely than before to buy new than buy legacy 14 resale. And resale value for Riveria will be much closer to full “retail” since only its resale contracts will give access to all resorts “today and tomorrow.”

    The ones hurt by this are current DVC owners who for some reason need to sell their contracts. After this goes into effect this week, those owners are going to start getting less money. I suppose also hurt are resale buyers these two weeks, who just lost lots of leverage bargaining down those offers.

    • Nick Cotton
      January 13, 2019

      Sam, while the Riviera resale restriction has not been posted, the Cast have been green lighted to speak about it. I suppose it may have not been posted yet, because it probably doesn’t need to be until they begin to sell it, which probably will not be until March. Probably more important to be able to at least retroactively talk it at this point, because once someone hears about the restriction to the Classic 14, the next natural question is what about Riviera and future resorts? Is it possible for them to change their decision about Riviera? I would love it if they would as I’m not a fan of such a strong restriction by any means as it will almost certainly significantly hurt Riviera’s resale value, however, there are financial benefits to them doing such a restriction as mentioned in the blog (i.e, foreclosures, much large margins on ROFR and more “breakage” revenue).

      Unfortunately, from someone who sold direct for many years, I think your assumption of lost direct sales due to the Riviera resale restriction may only be partially true. For the DVC educated consumer such as yourself, you are absolutely correct. However, the well researched consumer only makes up a small percentage of your direct audience. Many Guests you tour have barely heard of DVC or perhaps have heard just a little. And this is the audience where they may believe they can gain incremental sales and enough to offset more lost sales to the well researched audience who likely buys resale anyway.

      Tom Bricker, owner and blogger of Disney Tourist Blog had much of the same theory: “Disney probably has several rationales for implementing this restriction, but my suspicion is they believe that it will make direct sales easier. Right now, when a potential buyer brings up resale, the agent’s retort revolves around perks, ancillary benefits, and using DVC points on things that are a bad use of points, anyway.

      Going forward, the argument is much more clear cut: if you buy resale, you won’t have full access to the Disney Vacation Club resort portfolio. As a scare tactic, there’s certainly value in that.

      DVC guides are masterful salespeople. They will certainly be able to paint a rosy picture of the new resorts, talking up the Riviera and how cool it’ll be to take a gondola from the resort to see Star Wars: Galaxy’s Edge. There will be an emotional appeal in this to some potential buyers.” https://www.disneytouristblog.com/dvc-resale-restrictions/

      • Mike
        January 27, 2019

        I think they would have to apply the same restriction on resale to future resorts…or they will end up with legal issues with current owners. They will likely have to make a new legal entity holding the upcoming resorts (DVC2 if you will), and they will only providing the ability to exchange between “DVC1” and “DVC2” to direct purchasers.

  • Vikki Cerbin
    January 12, 2019

    If we already own a resale contract, will we be allowed to use our points at future DVC resorts?

    • Nick Cotton
      January 12, 2019

      Vikki – yes.

      • Brian
        January 14, 2019

        Nick, if I have a contract in closing status for 100 points already and I purchase another 200 points same resort same use year after deadline how will that contract be affected? Will I be grandfathered in due to my first contract? I should be able to combine contracts correct?

        • Jess
          May 2, 2019

          Thank goodness I found your question, Brian! We currently own a resale contract that was purchased in 2016, and are looking to add another one, same resort, same use year. I’m still confused by this. If all the points are combined in the membership, how is it determined which points are which? If I tried to book Riviera, would it only let me use the total points from the original contract, and know the difference vs if we tried to book it with all the points in the membership including those from the new contact? I would love more info!

          • Nick Cotton
            May 2, 2019

            Jess, if you tried to book Riviera you could only use the points from your resale purchase in 2016 and not the points from resale purchase made now. Disney will have the points flagged accordingly in their system.

        • Nick Cotton
          January 14, 2019

          Brian, your 1st contract will be “grandfathered” into the 1/19/19 change since it was submitted prior to 1/19/19 and those 100 points can be used at all DVC resorts, however, if you purchase another 200 points that is submitted on or after 1/19/19, for DVC stays those points can only be used at the Classic 14 regardless if they are consistent with your use year and current resort.

          • Andrea
            January 25, 2019

            Hi Nick,

            Is the inverse true? In other words, will a direct purchase of at least 75 points still make all a memebr’s points eligible for full membership benefits? (I purchased resale in 2017.) And, after making a direct purchase, will that make subsequent resale points eligible for full membership benefits? I guess a simpler way to ask my question is whether a direct purchase of at least 75 points at one of the Classic 14 resorts will remove restrictions on all of a member’s points (stated differently, make all that member’s points eligible for full membership benefits as if they had been purchased on the resale market prior to 2016 or directly from Disney). Thanks!

          • Nick Cotton
            January 25, 2019

            Andrea – owning 75 points direct will allow you to take advantage of the incidental benefits to Membership such as discounts on merchandise, annual pass discounts if they have them, etc. Owning 75 points direct will have no influence on your ability to use a resale contract purchased after 1/18/19 for use at DVC resorts outside of the classic 14.

  • Chris
    January 10, 2019

    Is there still time to purchase a contact before the 19th?
    On average how long does the process take to get to ROFR?

    • Nick Cotton
      January 10, 2019

      Chris, there is still time to purchase and have your contract submitted to Disney prior to 1/19, however, that window is closing as once terms are agreed upon a contract is created and then we need both parties to review and sign their contracts. Once that is done we then submit the sold contract to Disney. If you are wanting to purchase prior to that deadline I would advise buying on or before 1/14, that way you allow for a couple of days for contract generation and signatures.
      The ROFR period lasts anywhere from a few days to roughly 30 days all dependent on Disney. Closing a DVC resale contract typically takes 50-80 days.

  • chris
    January 9, 2019

    I have a contract at Vero Beach – can I still use it to book at Animal Kingdom after the 19th ?

    • Nick Cotton
      January 9, 2019

      Yes, you will be able to.

  • Chris
    January 9, 2019

    Nick,

    Do you know if they have the ability to restrict new resale buyers who buy original 14 contract to be restricted to only staying at their home resort? When a new contract is purchased it would seem they would have the ability to change the terms going forward but i don’t know for sure.

    Thanks,
    Chris

    • Nick Cotton
      January 9, 2019

      Chris – great question, but given this change to Riviera, I’m sure if they could have done it to the Classic 14 they would have.

  • Jason
    January 8, 2019

    I wonder if the next step will be to lower the 7 month window to 5 months so that home resort is even more important? Does anyone know of the 7 month window is a base part of the program or can that be changed?

    • Sandy
      January 13, 2019

      Correct me someone if I am wrong, but the last day of your stay had to be within the 7 month window when you booked. Now only the beginning day of your stay needs to be in your 7 month window. That doesn’t answer your question, but if that can be modified, maybe the 7 month window can be changed as well.

  • Pam
    January 8, 2019

    I was just reading the actual statement on the DVC Member website and while it does specify that after January 19 resale purchases of the original 14 resorts will be restricted to reservations at the original 14, it does not specify or address what resale purchases of Riviera will be limited to.

    • Nick Cotton
      January 8, 2019

      Pam, yes, I saw the same. The cast is publicly allowed to talk all details, including Riviera, however, I suppose there is not much reason for them to publish the information on Riviera until it actually goes for sale.

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